Dheeraj Gupta, Managing Director, Jumboking

Dheeraj Gupta is an Indian business owner and fitness enthusiast. He is the founder and MD of JUMBOKING Foods, India’s largest homegrown brand of vegetarian burgers. He has played a key role in the large-scale acceptance of franchising as a framework for doing business for the QSR industry. He believes in establishing a strong and symbiotic partnership with a cohort of numerous motivated individual entrepreneurs who want to benefit from the 10X advantages that a well-developed franchising system provides. His belief that such a model potentially creates a very inclusive and resilient growth engine, if coupled with a cohesive focused, and disciplined team of professionals, has made him a young business icon of 21st century India.

 

The win-win equation between digital platforms and QSRs is yet to be explored fully in India. The demand for delivery is driven by a ‘consumer need’- that of convenience. Hence, it is based on ‘pull’ not push. Logically speaking- brands and delivery partners should both stand to benefit, provided they are able to craft a three-way win-win-win, in which the end consumer is the third win. 

But here is where I’m seeing the disconnect

When the delivery partner focuses on deep discounting at the expense of brands, the brands will retaliate. Any and all money spent to fund discounting is highly myopic, it will only lead to short-term growth as was seen in the case of very good delivery brands like Food Panda, Uber Eats, etc which could not sustain.

The AOV (average order values) in India is very low. Consequently, the % commission that the online partners’ charge seems disproportionately high. This is a waiting game, and this equation will stabilize over the next decade as the AOV’s increase. Brands are also cognisant that this problem does not exist in western countries because each of the values of their orders is high.

Let me outline a vision that serves the brands and the delivery partners.

Here’s what the success of the Zomato IPO means for brands

  1. QSRs in India have been bullish about replicating the kind of growth that the industry saw during the 1960s and 70s in the west. The time has come. Indians are choosing brands, a natural outcome of economic progress. There will be QSRs that are built around specializations- such as Biryani, North Indian, South Indian, chaats, etc. The success of the Zomato IPO opens up a blue ocean for brands in various categories to reach consumers and become available at the click of a button.
  2. These brands will invest in multiple areas- such as product development, system creation, marketing, etc to establish category leadership. The more focused players will win. Extra-wide menus that add layers to the cost of operations, offset by a ‘buy one get one free’ offer are not the way forward. Neither is trying to set up their own delivery- because, in the long run, it’s the specialists who will win. Brands must start valuing themselves through a sensible shift to margin protection to remain sustainable. At the back end, efficiency improvements & cost-cutting in one form or the other, are now the dominant themes. 
  3. Swiggy and Zomato both provide a service to the restaurants. They will welcome the creation of large brands with a national footprint and recall value- that customers can order from and they will deliver to.  The creation of a market benefits the entire ecosystem of customers, brands, and delivery partners.

On the other hand, one must acknowledge that delivery-based companies have focussed and become specialists. Right now, the market is a two-horse race between Swiggy and Zomato, but the customers are often not clear about markups and fees. TechCrunch captured this beautifully, “while consumers have signed on to pay a premium for convenience, the food delivery ecosystem suffers from a lack of differentiation, compounded by an opaque and confusing web of markups and fees. Consumers expect to pay a premium for the convenience of the service, but it turns out there can be a very significant difference between both the price you would pay when ordering directly from a restaurant, as well as what each of the delivery apps charges for the exact same item.”

Here’s the gap that delivery companies need to plug-

  1. The race of the future is data- perhaps the biggest ask of brands is that shared customer data will help brands re-market better and help them craft better value propositions for their customers. Value travels farther than discounts.  Online partners currently don’t share any data which is a pain point for brands.
  2. Getting millions of meals delivered quickly, accurately, and still warm from restaurants to consumers each day is no easy feat. Continually improving the core logistics associated with this undertaking requires massive funding and ongoing investment. Further, building the ecosystems, supply chains, and consumer confidence will enable everyone to ‘grow’ the market. This is something brands will appreciate greatly. Incremental sales are the magic potion for every restaurant- not sales substitution- by consumers who have transitioned from in-store to online. How can restaurants and online delivery-based companies work together to increase revenue?
  3. They are already helping innumerable brands reach their audiences; they must enable every restaurant to add a delivery charge. Their communication to customers must highlight the convenience aspect so that they are willing to shell out a little extra.

The investor fraternity has taken note that convenience will continue to be an important element of the consumer’s interactions with restaurants.  Yet, human beings are social by nature. The culture to ‘celebrate with food’ is ingrained into our tradition. The stickiness of new habits is yet to be tested- and while some might be here to stay, many communities and friendship-based behavioural patterns will return back to normal.

As the battle for market share and profitability heats up in the food space, consumers have demonstrated they are willing to accept the implicit trade-off of paying a premium for convenience. But as this industry pushes forward toward profitability and sustainable operations, we believe that the companies that embrace transparency and innovate on the core product and service — not on pricing markups and services fees — will emerge as the winners in the new food economy. Likewise, it’s the restaurants that embrace their own uniqueness and offer value that will thrive.

In the next decade, we see the twain settle into a symbiotic relationship where brands will value the delivery part of the business as adding to their profitability and the online partners will value the brands once they realise that they need brands as much as brands need them.

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