UAE yet to develop an appetite for online food

Despite a high level of internet penetration, UAE residents still prefer ordering their food the old fashioned way via telephone.

United Arab Emirates - Aug. 21 - 2008:  A delivery man drives down Salam Street.  (Galen Clarke/The National) *** Local Caption ***  GCDelivery10.jpg
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DUBAI // Despite a high level of internet penetration, UAE residents still prefer ordering their food the old fashioned way - that is, via telephone - than with a few simple clicks of a mouse. While food delivery websites are popping up in the region, and the potential for demand seems immense, the industry has nowhere reached its potential compared to other regions. Though a variety of factors are holding back growth, industry insiders say restaurants and entrepreneurs who have waded onto the web have not learned how to properly advertise and market their products.

"These businesses don't market as much as they should, so that is one of the major challenges," said Ahmed bin Shabib, the co-founder of Brown Bag, an online delivery company. "We are volume-based businesses, so if you are not hitting a certain cap, your business tanks." One of the biggest barriers to online food orders has to be the lack of a functional address system in most urban areas. But even this is not an insurmountable obstacle considering the tools modern technology makes available. For example, Brown Bag uses maps drawn from Google Earth to point drivers to delivery locations.

"[The online industry] is a lot more developed than it used to be," he said. "We have developed our own solutions to this." Egypt is currently leading the way regionally since the launch of Otlob.com, a portal that serves as an intermediary between customers and restaurants offering food delivery. Individuals are provided a choice of restaurants spanning from Western fast food chains like McDonalds, KFC and Hardees, to top end local restaurants such as Abul Sid and Tabouleh. The bill includes a small commission fee which the food retailer then transfers to Otlob.

Officials with the Egyptian ISP-giant LinkdotNet, which owns Otlob, attribute their success to the rapid increase of Internet penetration in Egypt, which stands at a massive 12 million people, as well as friendly navigation and strategic marketing. Otlob.com launched portals in Dubai, Riyadh, Jeddah and Manama in 2007, which it hopes will be just as successful as its Cairo counterpart. "It is now in the introduction phase and each new brand has to pass by each stage of the product life cycle," explained Sherif Farahat, a spokesman for LinkdotNet in Cairo. "We are currently working on increasing the number of restaurants in UAE, KSA and Bahrain and will make a lot of marketing activities to increase brand awareness."

Still, entrepreneurs admit that one delay in the UAE seems to stem from an innate conservatism when it comes to online activity, particularly commerce, despite a high level of Internet penetration. Western expatriates are the most likely to log onto online delivery portals, website administrators say, although the number of Emiratis using these sites is slowly increasing. Internet penetration in the UAE is currently 67 per cent with 55 per cent of the population using it on a daily basis, according to a recent study by Middle East consumer research firm 6th Dimension TNS.

E-commerce between businesses and consumers in the UAE is expected to reach US$400 million (Dh1.46bn) by the end of this year, according to the Dubai International Financial Centre (DIFC), more than double $161m in 2003. And data from Madar Research, a knowledge economy research firm, shows the emirates could see online business reach $36bn per year by the end of the decade. Despite the rapid growth of e-commerce, however, many online delivery services struggle to meet the bare minimum of 100 orders a day needed to keep their businesses alive because of limited marketing avenues for their services, industry official say.

Internet advertising and other media, such as campus journals, flyers and newspaper advertisements are the most efficient way to promote online delivery services and boost revenues, experts say, but they are also the most expensive. "Am I going to pay Dh25,000 (US$6,800) a month to advertise? How does that work?" said Mr Shabib, who added that Brown Bag saw profits of around Dh1m last year. "There is no real advertisement of promotion in this country that allows small and medium size businesses to sustain ourselves."

He said some websites have been forced to set their delivery prices "unreasonably high" at Dh 30 or Dh40. "It is discouraging people from getting involved in the industry," said Mr Shabib, "which means that the business unsustainable." Other websites, such as Room Service, an online food delivery company that charges an average of Dh30 to fetch food from high-end restaurants, have relied on aggressive street tactics such as menu distribution at malls and office buildings.

"At the moment, we are focusing more on the distribution of our menus, since the more distribution we do, the more orders we get," said Abdulla Mizra, sales and marketing manager for Room Service. "We wouldn't just depend on one way of promoting our business." While officials concede that the situation will not change overnight, they say that investment in better website technology, methods of transport and customer service training and website technology would help the industry come of age.

vsalama@thenational.ae