Delivering the future • Focus: Food delivery apps
As Saudi Arabia navigates the myriad impacts of COVID-19, one area of the economy that has seen explosive growth is food delivery apps.
ONCE A TOOL RESERVED FOR THOSE LIVING on the edge of technological advancement, food delivery apps have propelled into the mainstream in a serious way as a result of COVID-19. While technology has been changing the food and beverage landscape for a long time in the GCC, concerns and considerations surrounding in-person dining and in-store shopping have introduced large segments of the market to digital food services and delivery tools.
In the past few years, restaurants have been steadily expanding their foothold in digital spaces, with many operators enjoying double-digit growth as consumers availed themselves to these novel solutions. In 2020, when many restaurants were forced to temporarily close their doors, these solutions became lifesavers. As more restaurants began emphasizing their online presence, consumers embraced this safety-conscious approach to dining. Grocery stores have also been a major source of growth in the food delivery space. As public health restrictions on movement took greater effect, grocery stores and markets pivoted to online sales and deliveries as a means of getting food to people. According to the Communications and Information Technology Commission (CITC), new apps in food services have now completed more than 12 million orders in 200 cities.
The explosive growth has also pushed the government to rethink its regulatory stance. Near the end of 2020, CITC announced the launch of a regulatory sandbox designed to support, enable, and sustain growth in the nation’s growing delivery-app ecosystem. Government officials hope the new initiative will reduce the amount of time necessary for apps to make it to market, thereby making the entire landscape more competitive and giving developers an environment where they can innovate and gain easier access to financing. According to CITC, the Kingdom saw 500% growth in orders and 400% growth in online payments in the first month of the general lockdown. Given this extraordinary evolution, regulators have taken a long-term position and are working to ensure that new entrants into the delivery app ecosystem have the support and framework necessary to be successful.
The transition to online delivery and ordering apps has also dovetailed nicely with the Kingdom’s more general policy aim of transitioning toward a digital payments ecosystem. One of the key goals of the nation’s Financial Sector Development Program (FSDP), which constitutes one of 13 initiatives developed by the Council of Economic and Development Affairs to successfully implement Vision 2030, is to steadily reduce the number of transactions conducted in cash via the development of a national e-payments ecosystem. According to the Media and Banking Awareness Committee for Saudi Banks, digital payments transactions exploded by 75% in 2020, totaling approximately 2.8 billion, while cash withdrawals from ATMS fell 30%. The nation’s 2.8 billion digital payments transactions had a cumulative value of nearly SAR349 billion, and the number of POS devices in service jumped by an impressive 70%, or 700,000 units. As consumers of all stripes jettisoned cash and began to rely on digital payments during the COVID-19 crisis, businesses across the Kingdom pivoted toward digital solutions, with observers expecting this to remain well into the future. With 60% of Saudis aged 30 or younger, the nation’s tech-savvy youth is expected to spur sustained growth in this part of the economy.
The growth in food delivery apps has also been a lifeline for restaurant workers displaced by the closure of in-person dining venues. As these businesses have been forced to shutter, delivery apps have allowed restaurants to retain segments of their workforce that would have otherwise been lost to the slowdown. The apps themselves are also catalyzing employment, as their explosive growth translates into larger workforces. The government has also stepped in to ensure these essential workers are being adequately supported. In an initiative aimed at getting more Saudi youth involved in the sector, the Human Resources Development Fund (Hadaf) distributed SAR1.6 million to Saudis working in the sector.
Additionally, according to the USDA’s Foreign Agricultural Service, Saudi efforts have translated into a more than 500% increase in employment. Hadaf has also worked to make interest-free loans available to Saudis so they can buy and operate delivery transport.
Restaurants, however, have not been the only ones that have benefited from the advent of delivery apps. Grocery stores now also rely on these new technologies, including social media, to remain connected to their customers. While some major retailers saw significant delivery hiccups and delays in the early days of the nation’s virus response, many stores have since invested heavily in improvements and are enjoying significantly smoother operations.