Changing Market for Food Business

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 Changing Market for Food Business

The emergence of e-commerce has brought lucrative oppurtunities for food business in Nepal.
 
--BY SHRINKHAL RAJ SHRESTHA AND YESHASWEE SHRESTHA
 
Time-starved and convenience seeking Nepali consumers, mostly led by generations X and Y who are accustomed to online shopping,have started to expect the same experience when it comes to food. In a report titled “Is the Kitchen Dead?” published a few months back, global investment bank UBS echoed many other studies and made a bullish case for increase in global online food ordering sales. UBS mentioned that online business models which have disrupted sectors from retail to taxi industries are now doing the same to supermarkets and restaurants. 
 
In order to understand customers’ perception towards the online food delivery business in Nepal, Kalithia Investment and Research conducted a study. The research was exploratory where a set of questionnaires was developed and posted on various social media platforms for response. Within a period of a week, more than 95 responses were received. The respondents were familiar with online food delivery platforms inside the Kathmandu Valley with 88 percent of them aged between 18 and 30. Currently, companies usually target three types of opportunities in the online food business. The first type is a directory of restaurants, with revenues coming in from advertisements. Here, users log in to the platforms to check out restaurants, menus, ratings and reviews. The most common platforms found in Nepal are Scootout and Fymo. Among the respondents who preferred to directly contact restaurants, 64 percent used such restaurant directory platforms in order to check reviews and menus which indicate a high level of customer awareness when it comes to dining experience.
 
The second type comprises of online food delivery is one of the online food business models that connect the users to restaurants and food outlets by showcasing them on their websites and apps followed by delivering them to the customers. This is the most common and successful model currently running in Nepal, with revenues coming in from commissions on sales.
 
Nearly 54 percent of the respondents preferred checking online food delivery platforms to directly contacting the restaurants. There are a lot of companies currently operating in Nepal under this model. Established in 2010, Foodmandu is one such company which users have mostly used and can recall with ease. In a span of just three years, Bhoj has successfully been able to breathe down the neck of its older counterparts and comes second to Foodmandu in terms of brand recall.
 
Another model of online food business is known as cloud kitchen where a company owns the food and delivery part of the business. This is a budding concept in Nepal which has been brought into the market by Foodmario. This concept gives better margins and control but the challenge is to build scalability which will require an army of chefs and manpower.
 
It was found that users preferred to order food online during gatherings at home and 46 percent of the respondents still preferred to directly contact the restaurants. Convenience and variety of cuisines is the most important factor when it comes to ordering food online.
 
Users don’t see prices and delivery charges as the most decisive factors. This can mean companies need to focus on linking their users to maximum restaurants. It was also found that pizza and continental food are by far the most popular delivery meal. For specific cuisines like Newari, Japanese and Korean, respondents preferred an authentic feel and would rather visit the restaurants. In this new era, customers are seeking for instant gratification while expectations are soaring high. A new mobile phone purchased online can be delivered in two or more days and it won’t bother people. But in the food business, fulfillment has to be within 30-40 minutes otherwise companies risk losing their customers.
 
As acquiring new customers can be ten times costlier, throwing money at the problem (of acquiring customers) won’t help and they have to focus on unit economics and great service delivery.
 
Key Takeaways:
● Convenience and easy accessibility: a major market driver.
● Foodmandu and Bhoj are the leading players in the market.
● Cloud Kitchen food business model is highly being adopted by new entrants.
* The results obtained from a small group of sample and time constraints may not represent the perception of whole population.

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