Since my last post on restaurant delivery services in London (2016Q1), uberEATS have launched. There are still a plethora of players in the market (including Quiqup and Henchman clones like Bring It), but it’s really becoming a three-horse race now.
The 800-pound gorilla just entered the room. Deliveroo has long been fearful of UBER launching the UK and now they have. Although they are not as ubiquitous as Deliveroo (yet) they offer a very efficient iPad-based ordering system and free delivery on new orders which they are funding.
One missing piece of the puzzle at the moment is a kitchen printer which is “coming soon.” This will make the process of producing orders more efficient for the chefs (since they already use printed tickets for other orders, both internal and from other delivery companies). It also means you will be able to tag the delivery bag so it’s easy to know which order to give which driver.
Free delivery is an easy way to grab market share, and since many Londoners already use UBER, adding a link to uberEATS within the UBER app is simplicity itself.
The first delivery company to achieve Series A funding is now a global phenomenon, and a big city like London, which is also its home turf, is a key market. uberEATS’ free delivery option was matched in August by Deliveroo, but they insisted the restaurant fund this and would not fund it themselves.
We declined the offer as we thought it would lead to smaller orders, and with already thin margins and the high commission Deliveroo take this would mean we pay customers to eat our food. We based this assumption on the trend when Deliveroo first reduced their delivery fees to compete with new companies like Jinn and Quiqup last year. When they did this, the average order value dropped, though overall order numbers have steadily increased. They used this argument for free delivery (that of a loss-lead) to attract new customers who may then go on to order more regularly, and so increase our revenue.
A friend of ours runs a restaurant in Richmond and he decided to run the free delivery promotion with Deliveroo. After a couple of weeks, he noticed the average order value had dropped and many people were ordering ridiculous orders like ‘one portion of rice’ or ‘one portion of hummus’. After deducting the commission and paying the fixed delivery charge on behalf of Deliveroo, he was paying the customer to eat his food (as we had surmised). These new customers also started complaining that the food was more expensive than the supermarket and took 30-40 minutes to arrive (the standard delivery time). He naturally replied that if the person wanted something quick from the supermarket, they should pop out and pick it up themselves and not order from a restaurant which has a completely different cost profile.
He cancelled Deliveroo’s offer and went back to receiving normal orders from them and happy customers.
The barrier to entry (the delivery price) makes a big difference to the customer. A high delivery charge means the customer won’t place a small order. On the flip side, a low delivery cost means you also attract the lower value customers looking for a quick bite who are not long-term prospects. The takeaway is that your pricing needs to reflect the type of restaurant you are and the customers you want.
Deliveroo is understandably worried and has asked for a conference call with us to try to convince us to become an exclusive partner because of the ‘significant benefits’ of doing so. In a meeting with them earlier in the year on this very topic, the ‘significant benefits’ amounted to not being bumped to an even higher commission fee for being non-exclusive and actually getting the marketing you would expect for paying the commission fee in the first place.
The subtext was that by being non-exclusive you actually had a downgraded marketing experience: we were told that Deliveroo had to be ‘cautious’ how they marketed non-exclusive restaurants. Immediately after our meeting where we declined the ‘offer’ our sales did drop around 40%. We complained about this apparent differential treatment and sales volumes resumed. This proves that their ‘caution’ is generally unfounded and while they may lose a few customers to other platforms, they will still retain the majority which is a win-win.
As a restaurateur and business owner, we need to partner with effective companies who deliver on their promises. Since Deliveroo could not guarantee exclusive access to all of London’s customers this would mean we exclude the availability of our product to a larger market than we gain by being exclusive. This makes no sense for a business and, in the long run, is also limiting for Deliveroo as they will only gain potentially 20% on each exclusive restaurant but lose revenue on non-exclusive restaurants especially when they onboard with companies like uberEATS.
The other horse in the three-horse race. Just Eat are very much associated with the 2-for-1 pizza, burger, chicken and kebab take away restaurants and generally operate at the lower end of the market, and very successfully too.
We have tried them and get almost zero orders, even with competitive delivery pricing. The customers of Just Eat just don’t want to spend money on good food and really just want a quick stomach filler. As a fast-fine offering, you can’t compete with a takeaway shack that offers free delivery, free coke, free this and free that with every order.
The restaurant control panel is also very limited and, even though Just Eat now offers orders within a certain radius of the restaurant, you still have to manually specify the actual postcodes you want to receive orders from and the delivery cost for each. You cannot simply say ‘all addresses within 2 miles at £1.50 per mile’ (for example) which would make life easier than working out the 21 postcodes that intersect the 2-mile radius and working out the relative distances of the closest and furthest points to set realistic delivery costs. This system is flawed because 2 addresses on the same street but in different postcodes can result in different delivery prices due to the shape of the postcode as you have to factor the relative volume and shape of the zone.
Just Eat are promising new ordering tablets, some form of delivery service (though they are piloting delivery robots which I think is a recipe for disaster, even with secure codes for the customer – think vagrant with a hammer). They have been promising this for some time, but their heavy-handed approach to restaurant partners (which may be justified with some of the cheaper operators who try it on) leaves a bad taste in the mouth. For example, we received a ‘first warning’ because two items on our very long menu had a slightly different price on our website than on Just Eat. It was simply human error but they categorically refused to accept this. So their ordering terminal (an antiquated GPS credit-card-like terminal from last century with an appalling UI) is now in a drawer.
In my view, if you are a good restaurant delivering fast-fine food you’ll need to talk to Deliveroo and uberEATS. These are the key players who will create revenue for your delivery business. If you offer cheap food or are exclusively take away, then you need to talk to Just Eat.
If you are in certain ‘hot spots’ that work for companies like Jinn, Quiqup, Henchman, etc then, by all means, talk to them. Even in SW5 where we are, none of these other companies has really delivered on the promise of reaching the local market. I think the competition is too strong from Deliveroo and uberEATS.
Henchman has tech problems with their tablets which they withdrew from our restaurant recently as orders sometimes don’t come through. Jinn works, but orders are rare (and usually small) in SW5. Quiqup is focusing on the delivery aspect (like Stuart) and has partnered with large chains to offer an on-demand delivery fleet, though still offer food ordering. Take Eat Easy closed a couple of months back, which wasn’t a surprise with their insistence on company-approved imagery and refusing to list any menu items without a photo (very impractical as a small business to make 90 dishes in one sitting just for the sake of photography). We haven’t tried other services as the return on investment (mainly the time and extra work for chefs) seems limited.
So, we’ll stick with the elephants in the room for the foreseeable future.