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Bangkok’s coronavirus lockdown fueled food-delivery wars. Will players survive?

When people stayed home, business boomed for the established firms while also creating irresistible incentives for new players.

Gojek

When Thailand closed shopping malls, banned eat-in dining, and told residents to stay indoors at the height of the coronavirus pandemic in March, restaurants in Bangkok—where many people forgo cooking altogether for takeaway (glap baan in Thai)—turned to food delivery services.

Orders surged and business boomed for the four established firms, but soaring demand also fueled the rise of at least four other new players. Now, even as lockdown restrictions are eased, competition in the increasingly lucrative food delivery sector shows no signs of cooling.

“It may be a little bit slower [than during the height of the lockdown], but demand is higher than before COVID-19,” said Pawoot Pom Pongvitayapanu, CEO of Thai e-commerce group Tarad, adding that even in an increasingly crowded market “there is still room to play.”

Companies were reluctant to share specific turnover figures, but all reported a sharp increase in delivery orders. Alexander Felde, CEO of Berlin-based Foodpanda, said delivery orders increased “20 times” from the same time last year.

Before the lockdown, it could take a food outlet weeks to sign up with a delivery provider. For example, LineMan, a service run by Thailand’s most used messaging app Line with 45 million users, added 15,000 restaurants to its platform in 10 days, a process which in the past could take months.

The Tokyo-based, Korean-owned platform had previously partnered with 100,000 restaurants, linked to a user-generated review site called Wongnai.

Pinya Nittayakasetwat, CEO and co-founder of Get, the Thai unit of Indonesian delivery and ride-hailing firm Gojek, said experience in other markets had provided his firm with the “platform technology and know-how” to adapt to changing conditions while others had to rely on “trial and error.”

“Gojek enjoys over 30 million orders a month in Indonesia,” he said. “That is a huge amount of data that we can learn from.”

Redundancies in other industries ensured there was no problem finding new drivers to make the extra deliveries. Line reported taking on between 3,000 and 5,000 new drivers a week, Get registered 40,000 drivers over the course of the six-week lockdown, while Grab hired 64,000.

Across the board, avoiding delays in vetting and training became a priority: drivers were no longer required to appear in person, training videos were uploaded, and staff offered support for new hires via online messaging.

New players

Despite the crowded market, new entrants have not been deterred. Siam Commercial Bank (SCB) will launch its Robinhood app next month, cast as a homegrown alternative to existing services owned by or partnered with international brands.

Robinhood has been promoted as a “Thai food delivery service for the Thai people” which aims “to help society,” due to lower fees and faster payouts through the bank’s online payment system.

“If we talk about a horizontal market, it’s a bit of a challenge [for latecomers like Robinhood],” said Pongvitayapanu, although he added that they could be viable in the long run if the services generated monetizable data and positive results for SCB.

Even companies that were once wary of entering the delivery industry have decided to go all in. Michael Cluzel, the CEO and co-founder of restaurant-reservation platform Eatigo, earlier this year rejected the delivery model as antithetical to his core business interests and promised to be “ruthless” in offering discounted dine-in bookings. Now, though, Eatigo is poised to offer its own delivery service.

“We are launching full takeaway service with purchase of items on our platform. . . and users will be able to choose a delivery option on top of that a few weeks later,” he said.

Read this: Gojek lays off 430 people to refocus on payments, transport, and food delivery

Arrif Ziaudeen, CEO of Singapore-based reservation service Chope, has identified fine dining as an expanding niche.

“I think an entirely new segment of delivery is now emerging, where high-end restaurants are thinking about how to convey their ethos and brand in the delivery experience, [including] nicer packaging and à la minute prep,” he said.

In Thailand, Chope has a webpage dedicated to its partner restaurants that deliver, although Ziaudeen described it as “our way to support the Bangkok F&B industry. There isn’t any revenue in it.”

Still, Chope will be launching its own delivery service in the coming weeks.

Built to last?

Lockdown restrictions have now been eased, allowing customers to return to restaurants in limited numbers, raising questions over the fate of food-delivery services.

“I think that in the next six months they will keep fighting,” Pongvitayapanu said. “If we are talking about two to three years, we could see some of them merge or going out of the market.”

Anantaporn Lapsakkarn, a senior researcher at market research firm K-Research, said, “Only a few players can survive this cash-burning game.”

Xinming Zhao, head of operations at LineMan, said: “We are competing in a market that is intense. We see this as an opportunity to develop a sustainable business plan and an overall healthy business.”

Lapsakkarn said the variety of food-delivery options meant consumers were benefiting, but if demand for delivery outstripped that of dine-in services, commissions paid to the platforms could affect small businesses.

In this regard, a community-run initiative can be an instructive model for sustainability.

Locall Thailand was initially designed to help local businesses in the Bangkok neighborhood of Pratu Phi, on the edge of Bangkok’s historic city center. Three months later, the demand during lockdown has propelled a dramatic expansion: the network now covers a dozen hubs around the capital and in the provinces.

According to co-founder Peangploy Jitiyatham, the business model connects local people “to build sustainable economic development of that community.”

The customer, not the merchant, pays a single delivery fee and can combine purchases from different shops in the same area.

The company assists merchants who may not have the skills to sell online, sparing them the prohibitive commission fees of corporate platforms—sometimes more than 30%. It also provides drivers from the community with another source of income.

“Our model is to build a hub that comes from the community,” said Peangploy, who plans to add shopping and travel services while still emphasizing local connections.

“We do not want to compete with Grab or Line, as we don’t position ourselves as a delivery platform. We are tools for a small community to work together and communicate with customers.”

This article was originally published by the South China Morning Post