Food Delivery Putting Traditional Stores on the Line
Back in the day, online food delivery services were limited to pizza, fried chicken and burgers from large international chains. Thanks to the advancement of technology and the rapid global penetration of e-commerce, consumers nowadays are able and willing to pay extra for their favourite food from their go-to food places or from trendy new restaurants delivered to their doorsteps via online food delivery applications.
Online food delivery has proven to be a successful business model around the world. According to Euromonitor International, the share of online orders to total foodservice sales worldwide has almost tripled from 2.6% in 2014 to 6.9% in 2019, as online food delivery platforms flourish.
In Thailand, to avoid traffic jams and the scorching weather, not to mention high PM2.5 levels, ordering food online is clearly a convenient solution Thai diners love. Major food retailers have reported drops in total sales revenue and a negative same-store sales growth in 2019. Kasikorn Research Center, meanwhile, shows there was a 14% growth Y-o-Y in 2019 in the Thai food delivery business, which accounted for 8% of Thailand's total restaurant business value in the same year.
Online food delivery aggregators such as GrabFood, LINE MAN, Foodpanda and GET FOOD offer applications with maximum convenience and transparency in ordering food. These apps not only enable users to quickly browse through menus, prices and reviews, but also allow them to track the progress of their food deliveries in real time. Moreover, online delivery platforms benefit users in enabling them to conveniently explore many food choices offered by local restaurants which they may have never even knew existed. As claimed by GET FOOD, the latest player to enter the Thai online food delivery market, only 30% of its orders come from major name brand restaurants while 70% are from SME and street food stalls. This proves that major restaurant chains need to concoct a strategy to steal the market back from smaller players who are more adaptive to change in demand.
While local restaurants and street food stalls are busy partnering up with those aggregators, major name brand restaurants stayed active in both their online and offline platforms. For example, Minor Group, the owner of major restaurant chains such as The Pizza Company, Swensen’s, Sizzler, Dairy Queen, Burger King and The Coffee Club offers direct delivery services with lower fees to stay competitive. Some restaurants have even decreased prices on dine-in menus to attract customers.
Aggregators are also competing aggressively among themselves with many marketing strategies such as promotions, flat delivery fees, and reducing delivery time to target consumers wanting a quick bite. To create a new bridge connecting consumer demand and reducing the time needed to deliver food, Grab developed “GrabKitchen” at Samyan Market to be a food-prepping hub facilitating 12 popular restaurants in Bangkok. Foodpanda rolled out its cloud kitchen concept under “Krua by Foodpanda” to provide 17 popular restaurants in Sukhumvit Soi 77 dedicated kitchen space to cook their food under a shared roof and to assist them in quickly delivering their food to consumers. GET FOOD is also preparing to launch its own cloud kitchen in 2020.
While delivery services today are limited to only large cities, major players like GrabFood and LINE MAN have been competing to steal market share outside Bangkok. Grab is now providing ride-hailing service in 20 cities across 18 provinces. The company aims to expand capabilities to more second-tier cities with a high number of tourists. LINE MAN, which claimed that more than 100,000 restaurants in Bangkok, Samut Prakan and Nonthaburi and 3,000 shops in Pattaya have been associated with them, is also targeting to cover 25% of Thailand by 2020.
An article written by Mayurachat Tipparat, a Research and Consulting Manager at CBRE Thailand for Bangkok Post dated 29 January 2020.