It was certainly one of the more forthright comment pieces Arabian Business has carried in recent months.
In the February 11 magazine issue, Ian Ohan, the founder and CEO of Freedom Pizza, delivered a fierce attack on the business practices of so-called third-party delivery aggregators – the companies who offer deals, discounts and delivery solutions to restaurants, usually via an app, in the promise of helping them compete in an increasingly congested market.
Ohan argued that their practices are aggressive, unethical and, at worst, “parasitic”. They are, he claimed, an outsourced tech layer than is inserted between the restaurant and their customer that charges too much, withholds key data and often works to the benefit of a restaurant’s rivals by targeting promotions on the app itself.
It was a rather large charge sheet – and one that prompted Freedom Pizza’s owner to launch his own propriety software solution.
In the interest of balance, we put some of those accusations to the general manager of the Middle East division of perhaps the prime mover in the restaurant delivery space, Deliveroo, the British-born company that launched in the UAE in late 2015.
Anis Harb is quick to highlight some of the key differences between his company and some others in the space.
“Firstly, there are two types of aggregator: the 1.0 and the 2.0,” he says. “The 1.0 are the likes of Talabat and Zomato, which cater to restaurants with existing fleets of drivers and infrastructure who will benefit from the audience that the aggregator has gathered over time.
"Then there’s the 2.0, like Deliveroo, who are logistics-enabled marketplaces. A restaurant can come to us and we will offer the whole home delivery solution. This includes the logistics of the order collection, the drivers, the delivery, everything – all for zero overhead.”
Deliveroo works by charging the diner a flat AED7 for an order of any size with the restaurant paying a commission-based fee that, Harb says, depends on the size of the basket and the scope of the service they take.
“We also don’t have any stipulations on our contract, although we do have expectations of food quality and service levels – don’t keep our drivers waiting, etc.
"We also advise on pricing, packaging and combo meals to deliver the best deal for customers. We then offer our own thermo-packs to ensure it reaches the customer in the best quality possible. We are trying to create mutually beneficial outcomes.”
What this means is that restaurants that don’t traditionally have a delivery offering, the kind of bricks-and-mortar, book-ahead-to-avoid-disappointment places that fill out the city’s “best of” lists every year, are now able to access diners across the city who want to sample high-quality, often award-winning food in their own home.
As a result the likes of DIFC staple Gaucho or Burger and Lobster have a means of widening their customer base without employing a squadron of dispatch riders or creating a tech solution to collect and fulfil orders.
Harb believes, then, that Deliveroo has made restaurants in Dubai and Abu Dhabi “experts in home delivery”, all while allowing them to focus on the creation of superior meals. As a result, more than 500 restaurants in the UAE now offer a delivery solution that was either beyond them or not a consideration when they first launched.
The retention rates certainly suggest they’re doing something right. “The restaurants who have left the platform are negligible,” says Harb. “Less than five, I’d say – and that’s out of 2,000. Ultimately, we are trying to create a mutually beneficial partnership and we’ve seen the revenues of some partners increase by 30 to 40 percent. If things were so bad, the drop-out rate would be much higher than that.”
One area where Ohan and Harb no doubt agree is on the importance of reacting to customer demand – and that means efficient, good quality home delivery.
Ohan’s piece cited figures from McKinsey & Company that stated the global food delivery market is now valued at $100bn and is set to grow at a rate 3.5 percent per year until 2020. In the GCC, the food delivery market is estimated to be around $350m. Last year, some 42 percent of all delivery orders were made online which is expected to increase to 58 percent by 2020.
The bottom line is that restaurants need to provide an answer otherwise they risk losing considerable revenues. An order-to-front-door solution such as Deliveroo obviously makes sense for many outlets.
“The average order frequency is definitely trending upwards in the UAE,” says Harb. “And that’s both in terms of frequency and in volume. There are a couple of reasons for that: you can get a high quality meal in 29 minutes, which changes the game compared to driving to the grocery store or waiting up to an hour on other platforms here. Secondly, it’s food type.
"The most ordered food on Deliveroo in the UAE, for instance, is healthy food, which differs from London, which is mainly weekend treats like burgers. So here is about day-to-day eating. Delivery is now embedded into people’s lifestyles.”
Deliveroo has also added another layer to its service, which has not only helped restaurants offer a home delivery component but access to parts of Dubai beyond their reach.
Launched in October last year, Deliveroo Editions provides a fully fitted-out kitchen space in Jumeirah Lakes Towers, which is used by the staff of eight restaurants in the Downtown and Jumeirah area. This means that the likes of American-style diner Clinton Street Baking Company, pizza company Pinza and health-food café Wild & the Moon can expand their reach into communities such as Dubai Marina, the Greens and the Springs – all for no capex or any rent.
The project has been so popular that it has another on the way in H1 2018 to reverse the process – offering restaurants in JLT, Barsha and the Marina access to customers further up Sheikh Zayed Road. “Our goal for 2018 is to add another four or five of these,” says Harb.
Also under development is a regional expansion plan, which will be steered from the Dubai office that Harb oversees. The company raised $385m late last year to grow into more cities and although Harb won’t be drawn on specifics, the principal cities in Saudi Arabia are natural targets.
“We’re looking across the Gulf,” he says. “We evaluate any city by looking at the population, the density and the quality of food on offer. So, yes, Jeddah and Riyadh are obvious contenders. I’d expect one more city to be added reasonably soon.”
In the meantime, the focus, says Harb, is on refining the tech to ensure shorter delivery times – “Editions is 26 minutes right now, Deliveroo is 30 but Talabat is 50” – and the thorny issue that Ohan mentioned of turning profit.
“We’ll get there soon,” says Harb. “We’re confident in the model and we’re excited about our growth, but in a highly competitive market, now is the time to invest in order to capitalise on opportunities. The idea is to be profitable within two years, but the focus is on growth.
“Ultimately, the winners in this environment are those who can best adapt to changing customer habits.”For all the latest retail news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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