‘Shopify’ but for restaurants
An interesting theme emerging amidst the pandemic in the Indian food space seems to be ‘Shopify’ for restaurants. The lack of alternatives to food-delivery players like Swiggy / Zomato and their increasing take rates (c.20-25%) have long harboured discontent in the restaurant ecosystem.
For restaurants significant enough to have brand pull in excess of the platform (think Bbq Nation), the need for food-delivery platforms stops at delivery infrastructure. Discovery, a big attraction for smaller joints, is already well addressed by the big brand’s pull and app-based catalogs.
For non-QSR restaurants that differentiate themselves on food quality, the need to curate the landing page and overall experience for a customer is more pronounced. In retail parlance, this would be akin to ‘high-value’ commerce (experience, quality) v. the local wraps and rolls guy representing ‘low-value’ commerce (low cost, convenience).
For ‘high value’ transactions, solely relying on the standardisation which an aggregator platform operates on is hugely detrimental. To draw a parallel, think of Nike’s decision to stop selling on Amazon. The brand dilution by uncontrolled massification and appearing alongside fakes or counterfeits was thought to outweigh the benefits of penetration via a third party e-commerce channel ie. Amazon.
Moreover, alignment of incentives is key in the situation. For Zomato, which restaurant makes money doesn’t matter as long as one of them is good enough for a hungry customer. For a ‘Shopify’ like service provider, a restaurant’s success contributes directly to higher revenues for itself through transaction fees.
Most restaurants are a classic case of something which the customer loves but the investor doesn’t. QSRs and their assembly line efficiencies are an exception in this case. However, non QSR restaurants that depend on premiumizing the food experience with lesser regard for cost efficiencies have not fared well in the recent past. That is the space which has potential for solving.
However, retail and food are two different experiences. While most retail tends to have a long lasting use / impact (Eg. a Nike shoe), food experiences lasts a few hours, no matter the restaurant. This has made the decision for restaurants tougher. Hence, at this point, restaurants, in spite of their current hardships, must decide what they value more - long term exclusivity + ownership of the experience or short term penetration + demand.
For restaurants choosing the former, Indian start ups like Dotpe are paving the way. Founded by the former CEO of PayU India in early 2020, the company seems to be seeing robust demand since the pandemic’s onset. As was with Shopify users during the pandemic, exclusive and curated online presence has gone from a ‘good to have’ to a ‘must have’. Analytics around menu pricing (greatly influenced by behavioural psychology as explained by Dan Ariely in Predictably Irrational), inventory management and demand forecasting are likely to have been early value adds to the core product.
Where does this leave the food delivery players? Just as high up in the food chain as they were. For every restaurant choosing to go omni channel via its own digital setup, others (relatively smaller outlets) will rush to be relevant in the eyes of the customer acquired by the aggregator. It seems similar to the conundrum faced by D2C brands - choosing between diversifying its channels to strengthen the brand and customer relationships, lest one of the channels chooses to exert unreasonable force, on one side, and driving penetration leveraging the aggregator’s distribution prowess on the other.
While most other functions can be digitised with relative ease and initiative, who solves for the last mile delivery? Hyper local players like Shadowfax and Gowithdot. These are companies providing flexible supply to Zomato / Swiggy in times of high demand, as a third party. Going ahead, Zomato / Swiggy could also deploy a DaaS solution (Delivery as a service) as a plug and play tool for restaurants charting their own path.
If this theme gathers momentum, a strong case can also be made for a Shopify POS like product which integrates the online and offline experience. A restaurant experience could be transformed with digital touch points across, such as ordering and payments, among others. In conclusion, it is clear that an aggregator platform’s long term success is hinged on customer satisfaction as well as utility for vendors. At this moment, the second part of the equation seems to be unsettled. And there in lies the opportunity.