Over the last year, the rise of home delivery services grew exponentially and opened up avenues for traditional players to digitise their operations in order to reach their customers. Within this space, restaurants, QSRs, and cloud kitchens are leading the way for the delivery market. In fact, a recent report by Kotak Institutional Equities pegged India’s organised food services market to grow at about 10.5% CAGR to touch USD 37 billion between FY20-25.
As we take stock of the potential the organised food services market holds, we also need to ascertain the sustainability of the industry. Will the food delivery boom continue to grow well after the pandemic? Or will it reverse as things get back to normal and people start to dine out again?
Here are some factors at play:
High commissions charged by delivery platforms
Food delivery aggregators charge restaurants anywhere between 10-35%, which has sparked a huge debate on the need to cap or regulate the amount being charged. At the same time, the on-ground reality shows that for many newly established restaurants, there is a clear dichotomy. While the commissions are on the higher side, delivery platforms play a major role in ensuring their survival.
Availability of delivery partners
While it is true that delivery partners are independent workers, for all practical purposes, these fleets are owned by the delivery platforms. Hence, if a newly established or a small restaurant wants to hire its own fleet to manage deliveries, it can be an expensive affair, and thus costly.
Owning logistics
In the case of larger, more established QSRs who own their fleet, deliveries are a core function of their operations. Hence, there is a strong need for them to be able to optimise deliveries to save on costs. At the same time, there is also a need for them to be present on 3rd party delivery apps, which have a massive digital reach, while also working towards owning the customer by owning deliveries.
Rise of the dark kitchens and dark stores
Dark kitchens and stores are those that sell only via 3rd party aggregators. For brands and restaurants, this trend needs to be closely monitored as the entire premise of starting a restaurant may be shaken. In such cases, owning logistics will greatly help brands enjoy control over their operations.
For upcoming QSR chains or retail businesses considering their strategy, the pandemic must have posed this question- should we shut down or focus on deliveries more? Here’s where they need to shift their focus to:
With the use of technology-powered solutions, allow companies to get a birds’ eye view of their deliveries with tracking capabilities and a great end-customer experience so that they can deliver at a lower cost and focus growth of the business.
These technologies are a one-time investment and have several features that have helped QSR chains improve their delivery business. Some of these include:
Delivery Associate Management
Owning deliveries has the biggest piece of taking decisions on should one hire full-time delivery associates or work with 3PLs or have a hybrid model. Once you’ve decided on this- such as how should you optimise order allocation? Or is there a way to assign orders to riders while they’re on way back to the restaurant instead of waiting for them to arrive and then assign orders? The answers are clear as transportation automation platforms allow you to do this.
Improved end customer experience
With the use of in-house SaaS based technologies, brands can truly own the experience that their customer enjoys. Through the use of special updates and offers, they can share their own communications (delivery updates, offers, notifications), which help build a direct bond with the customer.
Precise data analytics for better logistics management
Dashboards, which are a part of these solutions offer accurate analytics on driver resource utilisation, and the percentage of SLA met, which is particularly useful if the brand owns its own fleet or uses third-party logistics. These dashboards also offer recommendations on how to use resources in a more efficient manner and alert the user in case of any anomalies.
AI & ML power for a smooth supply chain
Artificial Intelligence and Machine Learning have made their way into every operational aspect today. Route optimisation solutions, auto allocation engine for deliveries and analytics pieces use artificial intelligence to deliver solid business insights to help you run the business more efficiently.
Manish Porwal
Founding Member and VP of Global Sales Enablement, LogiNext
