The arrival of Amazon Restaurants in the UK this month has seen the ‘disruptors’ disrupted. What was a fledgling market just a few years ago is now an increasingly important part of the make-up of the eating and drinking-out sector as a whole. But what does it mean for the wider market and at what point does cannibalisation of trade become a concern?
The interest of two global brands – Amazon and Uber – which have never shown any propensity for slow and steady growth coupled with Deliveroo’s announcement last month that it had raised more than £200m for expansion, show the kind of potential that is perceived in the delivery market and how quickly it is changing.
The jostling of the big players has already seen one casualty with healthy fast-food delivery concept Pronto chaining up its bikes for the last time this month – despite raising £2m in crowdfunding over the past year.
For Robin Rowland, YO! Sushi chief executive, there is nothing revolutionary about what is happening in delivery. He told MCA: “I’ve spent a lot of time in New York and there it’s the way people live their lives. I don’t think it’s a game-changer, I think it’s just us catching up with the States.”
Delivery currently represents 10% of YO! Sushi’s revenue and Rowland is clear that there is a limit to how far that should grow, adding: “We’re not a slave to take out and delivery. It will grow but it’s not our core business. I don’t want it to grow past 15% because then I think it changes the kind of business you’re running.”
Karen Forrester, chief executive of TGI Friday’s, takes a similar view. She told MCA: “For some time I have had a concern over the commoditisation of some brands. Just selling a product or a theme is not enough. I would worry about the brands that are more product-led, because why would consumers bother to load the kids in the car and leave the house if they can get that product delivered to the house? People come to TGI Friday’s for the experience, for the celebration.
“It has always taken a lot of hard work to get people to come out and spend money, but getting that sweet spot for consumers will get more important. It is about providing that experience but also being aware that the generation we are now targeting have no patience. They want what they want, when they want it.”
The rapid pace of change on the delivery front is exemplified by 19-strong Vietnamese chain, Pho, which has seen delivery’s share of its overall revenue double over the past year.
Co-founder Stephen Wall describes the approach to delivery as the “million-dollar question” for groups like his, adding: “It’s not going away so we need to realise that and accept that customer behaviour is changing so we will closely manage how we integrate delivery into the business. Costs are the main challenge.”
Wall, who currently uses both UberEats and Deliveroo, said that while delivery had the potential to increase sales and widen the brand’s customer base, there were a number of concerns.
He explained: “Does it cannabilise restaurant sales? Potentially. Costs are another concern – margins are nowhere near as good due to the big commissions payable. There’s also the fact that a chunk of revenue is in the hands of a third party.”
For Richard Bigg, at tapas chain Camino, where delivery accounts for 2% of sales, there are different concerns. He said: “Tapas are best eaten as soon as possible after preparation, so fast delivery is essential. We can’t have a separate section in the kitchen so we have to close sessions during busy periods, which makes it less available for customers, especially for lunch.”
Daniel Spinath, of Crepeaffaire, told MCA that delivery currently accounts for 10% of the business and is handled by both Deliveroo and UberEats.
He said the increasing importance of delivery could lead the company to develop delivery-only hot spots and expand beyond its immediate catchment area. But he admitted that the key challenge – as for many operators – is the potential for “cannibalisation of our brick and mortar business”.
Research by MCA earlier this year showed that more than half of casual-dining chains were using more than one delivery operator, and when the list of brands signed up to Amazon was released, there were several names that will be familiar to both Deliveroo and Uber.
It will be interesting to see if operators continue to be promiscuous in their dealings with delivery agents and when the inevitable bidding war begins as the latter try to woo the former into exclusive deals.
With the rise of the trendy disruptors, where does that leave the more established Just Eat? Last week, the company unveiled a brand refresh and a new ‘value proposition’ for its restaurant partners. The group remains in healthy growth – with like-for-like orders up 40% in its first half of the year and total orders up 55% for the period. However, the brand remains – perhaps unfairly – linked with independent kebab shops rather than fashionable multiple operators.
The group’s fresh look and attempt to shore up its relationships with its existing partners shows that businesses on all sides of the delivery debate appreciate the need to up their game in readiness for the battle ahead
