The online food delivery market in the UAE has rocketed in recent years, spurred on by a surge in demand for fine dining at home.
The UAE food and beverage industry is expected to reach close to Dh47.7 billion by 2018-end while the market size of Quick Service Restaurants is expected to be over Dh14.7bn by 2018, according to estimates by the business researcher Marmore.
The KPMG UAE Food & Beverage report Ready to Serve released in November last year, showed six out of 10 consumers use food apps, primarily to order food.
As more food-tech services enter the market, companies are looking to innovate to get ahead of the competition.
For Deliveroo, a company started in the UK by American entrepreneur Will Shu, this comes in the form of Editions kitchens, where multiple brands operate under one roof, making food specifically for Deliveroo's riders to take to hungry customers.
Last month the firm expanded the kitchens to Dubai’s Jumeriah Lakes Towers. The 3,837 square foot site will host 19 restaurant brands, operating between 9am and 12am, hosting brands like Hippy Deli, Hoku Poke and Go! Greek.
The absence of walk-in customers keeps the overhead costs of waiting staff and inefficient seating space down, allowing chefs to focus on making food for orders being collected by riders.
Expansion of Editions kitchens has improved customer experience, Anis Harb, general manager for the GCC, told The National.
“We’re bringing clients into areas where we know customers are wanting them, and we’re delivering meals 20 to 30 per cent faster than the average Deliveroo time.”
Anurag Bajpai, partner and head of retail, KPMG Lower Gulf, said the Editions allow new food concepts to enter the market and better reach their audience. “It addresses an important pain point for the industry around outlet rentals. Restaurants no longer need a physical presence in a particular district, allowing for a leaner business model.”
It is too early to tell how quickly Deliveroo will see a return on their investment, but Dawn Gribble, chief strategist at DigiHub, a specialist digital marketing agency, predicts it will be profitable because “you don’t have the overheads [of a restaurant] ... and if something isn’t working, that [kitchen] space can go to somebody else.”
Mr Harb, agrees. “These are profitable endeavours where we and our partners expect to make profitable returns,” he said.
Deliveroo's move into brick and mortar for what is nominally a technology company could be seen as a digging of trenches - investing capital in physical space to making it harder for small competitors with less mighty resources to compete.
KPMG's report revealed that 57 per cent of F&B operators in the UAE cited competition as their most pressing concern. Mr Harb, however, says Deliveroo's approach is not adversarial, and it is more focused on customers than competitors.
“The way we do business is more like a partnership ... it’s all about doing what’s best for the customer and getting a win-win situation for us and the restaurants we work with,” he said.
But competition in the UAE is strong. Zomato, UBER Eats, and Talabat are all competing for the same ground as Deliveroo.
Toon Gyssels, the chief operating officer of Talabat, a Kuwaiti online food delivery service owned by Delivery Hero, which operates across the Arabian Gulf, does not see the Deliveroo’s editions as a big threat.
“This is something we have been doing for a long time in the [Delivery Hero] group ... We have a different model, Deliveroo literally runs the kitchens themselves, we don’t believe that’s the best way to do it.”
Mr Gyssels told The National that Talabat is the largest operator in the UAE "in everything, in number of customers, number of orders, number of restaurants". It has over 6,000 restaurants in the UAE, at least three times that of other operators.
“These kitchens will be important because you will be able to fill cuisine gaps, and you will be able to bring really popular brands to more areas without having to do significant investment," said Mr Gyssels. "We also see the value and we believe in it, but I don’t see it as a total game changer, because in the end it’s just like opening up a new branch.”
He said the key to success in the food-tech market is getting “the best and the most restaurants, if you have all the restaurants that people want to order from you are off to a good start, and this is where Talabat is far ahead of the competition, and where we’ll continue to invest.”
Yet despite Deliveroo’s move in to the physical space, Mr Bajpai believes innovation in the online food delivery market will be via technology.
“Competition, in the form of both other food-tech companies as well as operators, is resulting in the introduction of new models and solutions to improve efficiencies and enhance customer experience,” he said.
Mr Gyssels said good customer experience is key to success, such as delivery within 30 minutes, and consumers being able to track their order.
“The transparency aspect is key for the customer, you want to know what’s happening and we have tackled that,” Mr Gyssels said. Talabat has invested in integrating delivery tracking systems with a restaurant’s point of sale technology, so even when it is not providing the delivery service, the customer always knows where their food is.
The proliferation of online food-delivery services has increased customer choice. For many businesses it has enabled them to reach new markets, or new areas of the city. But the fees the service providers charge, however, have cut into profits, hitting independent food outlets hardest.
“[Restaurants] feel like they have to be using these services if they want to get into the market because it is so saturated.” Ms Gribble said.
And it is costly with commission often around 20 per cent. "A lot of these restaurants are slaves to it, and they’re losing more and more of their income. The cost of delivery is mainly born by the restaurant.”
There is an alternative. ChatFood, a UAE start-up which creates artificial intelligence chatbots to order food through, says its mission is to help restaurants take back control from the aggregators. Benjamin Mouflard, co-founder and CEO of ChatFood, says restaurants are losing the relationship they used to have with their customers.
“It is very hard for restaurants to make money when they receive an order from, let’s say, Deliveroo, because the margin and the fee that they charge are very high.
“This is acceptable if it is a new client but what more restaurants are seeing is their existing and loyal clients moving away from ordering from the restaurants to go on aggregators,” he says.
Deliveroo Editions kitchens should set of alarm bells for restaurateurs Mr Mouflard says. If all of the orders are coming through Deliveroo and restaurants are losing the ability to generate orders independently, they will be slaves to the aggregators.
ChatFood uses the apps customers use every day - Facebook messenger, Instagram, and WhatsApp - to design AI chatbots through which customers can order food. This means they don’t need to download an additional app, or sign up to yet another service.
The start-up helps clients with their customer service and marketing. It has more than 4,000 questions it can program answers to, alerting the restaurant if there is a query it has not programmed.
Since it launched in March, ChatFood has signed up 40 restaurants including KCAL, 800 degrees pizza, and Cali Poke. Initial set up for the service is free, and monthly prices for the service start from Dh299. In addition, the firm offers customer card payment services.
One client, Vietnamese Foodies, experienced a 400 per cent order increase rate, two-thirds of whom ordered from them again. It put all of its marketing efforts into promoting one of ChatFood's AI chatbots, called Mai, capitalising on a feature allowing the restaurant to create a short video for social media.
Some restaurants have found the service so useful they have stopped using aggregators like Deliveroo and Zomato altogether, while many use both services.
Although ChatFood provides an alternative to ordering platforms, it doesn't provide a delivery solution - a logistical barrier the aggregators help small businesses to overcome.
Whether Deliveroo’s Editions investment will pay off, or if a so-far unknown food-tech disruptor is waiting in the wings, is yet to be seen but as demand for quality food at home reaches boiling-point, you can be sure companies will be fighting for a bigger slice of the pie.