Crouch­ing panda, hid­den roo: get­ting the hop on De­liv­ery

Sin­ga­pore’s food de­liv­ery firms bat­tle for long-term sus­tain­abil­ity.

Singapore Business Review - - CONTENTS -

Sin­ga­pore’s love for home de­liv­ered food is grow­ing fast, with an es­ti­mated $250m a year dis­patched to hun­gry din­ers’ homes and could grow to $600m by 2021. Amidst the growth, there are still a few cau­tion­ary tales and ques­tions on the long-term sus­tain­abil­ity of home de­liv­ered meals. Take food de­liv­ery com­pany­day for ex­am­ple.

When the firm de­liv­ered its first or­der in late 2015, it be­came an in­stant hit, grow­ing 400% month-on­month and em­ploy­ing eight full-time em­ploy­ees with 60 de­liv­ery rid­ers.

Yet eight months af­ter its launch,­day shut down, a vic­tim of a pric­ing fail­ure that founder Jonathan Faynop said was due to de­liv­ery charges that Sin­ga­pore­ans ul­ti­mately were not pre­pared to stom­ach. When it launched, the firm had a de­liv­ery charge of $4.50 for a min­i­mum or­der of $8. This fee was then amended with a sur­charge of $3 for or­ders un­der $12, mean­ing that an or­der un­der $12 would at­tract a $7 sur­charge. The firm felt the fees were nec­es­sary to pay the rid­ers, who of­ten had to ride a long dis­tance, but cus­tomer feed­back was that the de­liv­ery fees were too ex­pen­sive.

“Like any startup, we had fundrais­ing mile­stones, we had a very great in­vest­ment deal on the ta­ble, but was un­for­tu­nately lost af­ter a dead­lock,” he said, also cit­ing dif­fer­ences be­tween the founders.

Now Faynop is back at it again, re­brand­ing the busi­ness to Yi­hawker hop­ing to rise like a sweet and sour braised phoenix out of the ashes and left­overs of his last busi­ness. This time his con­cept is e-hawker cen­tre and han­dles de­liv­er­ies from Be­dok 85 hawker cen­tre in East Zone, cov­er­ing Pasir Ris all the way to Paya Le­bar. In April it launched part­ner­ships with over 30 hawker stalls avail­able for Cen­tral Busi­ness Dis­trict and em­ployed 20 rid­ers. Around 90% of its hawker stalls are ex­clu­sive. Yi­hawker is just one of sev­eral niche play­ers up against the two dom­i­nant play­ers, Food­panda and De­liv­eroo.

Food­panda started in Sin­ga­pore in 2012 and de­liv­ers from more than 3,000 food out­lets with its fleet of 2,500 rid­ers de­liv­er­ing up to 20,000 or­ders a day. Food­panda Sin­ga­pore man­ag­ing di­rec­tor Aspa Lekka cited sat­u­ra­tion as a con­cern for the years to come, given the large shift to­wards e-com­merce from tra­di­tional re­tail, but it has not reached that point yet. “As food de­liv­ery is still a nascent mar­ket, even in Sin­ga­pore, and new cus­tomer ac­qui­si­tion cost re­mains high, hav­ing our com­peti­tors spend­ing in build­ing up our mar­ket is in our long-term in­ter­est,” said Lekka.

De­liv­ery gi­ants

Food­panda uses a pro­pri­etary dis­patch­ing soft­ware in pro­cess­ing or­ders which is par­tic­u­larly use­ful in seg­re­gat­ing or­ders from ha­lal and non-ha­lal restau­rants, Lekka ex­plained. It has also jumped on the drone-de­liv­ery band­wagon, test­ing out de­liv­er­ies through un­manned air­craft in Sin­ga­pore. The goal is to re­duce de­liv­ery time to un­der 30 min­utes. De­liv­eroo is the other big in­ter­na­tional de­liv­ery boy on the block and has been in Sin­ga­pore since mid-2015.

Mean­while, De­liv­eroo is help­ing well-known restau­rants es­tab­lish sep­a­rate “dark kitchens” in dif­fer­ent lo­ca­tions which ex­ist solely to cook for the de­liv­ery mar­ket, with no walk-in cus­tomers or din­ing room. The firm pi­o­neered this con­cept dubbed as De­liv­eroo Edi­tions in Lon­don and now has its own pop up kitchen in Ka­tong, where it houses four restau­rants un­der one roof in­clud­ing Mucha­chos, Sacha & Sons, Blu Kouz­ina, and Pho Stop. Th­ese four do not have a phys­i­cal store in Ka­tong but they still re­ceive a high de­mand for de­liv­ery or­ders.

“It’s a com­bi­na­tion of lo­gis­tics, tech­nol­ogy, and data. Based on data we are able to pre­dict what cus­tomers in a cer­tain area will like, which restau­rants will mostly do well in an area. We are able to un­der­stand what kind of cui­sine gaps are there. With all th­ese in­for­ma­tion we are able to hand-pick restau­rants,” De­liv­eroo Sin­ga­pore gen­eral man­ager Sid­dharth Shanker ex­plained, not­ing that their big­gest as­set is their col­lec­tion of cus­tomer data.

What niche play­ers lack in tech­nol­ogy and mus­cle, they are try­ing to make up for with ser­vice and prod­uct dif­fer­en­ti­a­tion. Take the on­line plat­form Al­co­hol

Amidst the growth, there are still a few cau­tion­ary tales and ques­tions on the long-term sus­tain­abil­ity of home de­liv­ered meals.

De­liv­ery which is one of the best ex­am­ples of firms who found their place in the busi­ness. A brain­child of sib­lings Travis and Suzanne Chia, this firm of­fers al­co­hol and bev­er­age de­liv­ery and has just turned prof­itable af­ter grow­ing rev­enues five-fold since 2012 with six full-time and four part­time driv­ers. Its ser­vices are cur­rently avail­able via an on­line plat­form, which lets cus­tomers pick from over 600 items rang­ing from cock­tails pack­ages that come with bar tools to snacks and drink­ing games. Or­ders above $50 waive de­liv­ery charges. Its stan­dard de­liv­ery fee for or­ders be­low $50 is $10.

“To date, we have been re­ceiv­ing a steady flow of or­ders and on a daily ba­sis and we find our­selves de­liv­er­ing to homes and of­fices and the prod­ucts range from cans of beer, bot­tles of wine as well as var­i­ous spir­its,” said Travis, adding that 95% of their or­ders are de­liv­ered within just one hour.

Tech and de­liv­ery

Al­co­hol De­liv­ery is at the early stage of ramp­ing up its tech but is push­ing ef­forts to au­to­mate more of their in­ter­nal pro­cesses. “This sys­tem will also be able to track the real-time lo­ca­tion of the de­liv­ery progress and ca­pa­ble of for­mu­lat­ing the to­tal time and dis­tance into a mon­e­tary value for salary cal­cu­la­tion. As long as you’re in a tech-based in­dus­try, you will al­ways have to keep up with the evolv­ing tech­nol­ogy. Food ven­dors have an in­trin­sic role to play when it comes to the qual­ity of the food, which is half of the bat­tle it­self. If de­liv­ery com­pa­nies do not keep up and keep their plat­forms fresh and rel­e­vant, not even a Miche­lin-starred ven­dor can save the plat­form and like­wise, no state-of-the-art plat­form can do well with­out a qual­ity ven­dor,” said Travis of Al­co­hol De­liv­ery.

It is this type of tech­nol­ogy power that smaller food de­liv­ery star­tups have to con­tend with. Yi­hawker’s Faynop said he is dif­fer­en­ti­at­ing his com­pany from its com­peti­tors as Go-jek did with Uber in In­done­sia. Right now, Yi­hawker utilises Google Fire­base tech which al­lows them to it­er­ate and make changes, back to front end in real-time. “I think the fu­ture of sus­tain­able and im­pact­ful busi­nesses is not in the sin­gle or lin­ear ap­proach. It’s go­ing to be dy­namic, un­pre­dictable and com­pli­cated. I think Yi­hawker is in a very sweet spot for in­no­va­tion that can value add to the dy­nam­ics of South­east Asia.”

Ex­clu­sive deals

Tech­nol­ogy is not the only is­sue fac­ing food de­liv­ery com­pa­nies as they strug­gle to com­pete for cus­tomers. Last year sev­eral food de­liv­ery com­pa­nies drew the at­ten­tion of reg­u­la­tors when it was re­vealed they had signed ex­clu­sive de­liv­ery ar­range­ments with restau­rants, some­thing which could breach com­pe­ti­tion laws. Af­ter an in­ves­ti­ga­tion, Com­pe­ti­tion Com­mis­sion of Sin­ga­pore chief ex­ec­u­tive Toh Han Li said the use of ex­clu­sive agree­ments with on­line food de­liv­ery providers is just one method to at­tain mar­ket shares, and not as an­ti­com­pet­i­tive oth­ers deemed them to be.

“In the event that the on­line food de­liv­ery provider be­comes dom­i­nant, the pres­ence of such ex­clu­sive agree­ments risk in­fring­ing com­pe­ti­tion law as it would af­fect the com­pet­i­tive state of the mar­ket. In­stead of re­ly­ing on ex­clu­sive busi­ness prac­tices, busi­nesses should com­pete on merit, lead­ing to a more vi­brant mar­ket with more choices for restau­rants and con­sumers,” Toh said.

Food­panda’s Lekka said, “We do not en­force any ex­clu­siv­ity con­tracts on our ven­dors. As a player in the in­dus­try, we see that it’s very un­fair to ex­pect restau­rant part­ners to limit their busi­ness in or­der to ben­e­fit our­selves.” But De­liv­eroo has a dif­fer­ent take on this. Shanker noted that restau­rants have a choice to take on such deals or not. “No­body can and no­body is forc­ing restau­rants to take on ex­clu­siv­ity deals. The restau­rants choose to do so be­cause they feel that cer­tain ser­vice providers can give them bet­ter ser­vice.”

As the de­liv­ery whales bat­tle it out and the niche min­nows try to grow with­out be­ing eaten, the one sure win­ner is Sin­ga­pore’s din­ers who con­tinue to en­joy al­most any food or drink de­liv­ered to their homes.

Is the de­liv­ery busi­ness sus­tain­able in Sin­ga­pore?

Se­shan Ra­maswami

Sid­dharth Shanker

Aspa lekka

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