Chapter 2: Literature Review

UNDERSTANDING ONLINE FOOD DELIVERY SYSTEM

The platform of online delivering meals to households is undergoing a rapid change. As new
online platforms thrive to capture markets and customers across the Americas, Asia, Europe,
and the Middle East. Although these new online portals are attracting heavy investment and
high valuations with already five being valued at more than $1 billion-dollar Thorough study
about market dynamics, growth potential, or customer behaviour exists. Research from
various ends, based on a six-month study covering 16 countries around the globe, provides
insight into this fast-changing market.

The shape of the market currently, the market for food delivery stands at €83 billion, or 1
percent of the total food market and 4 percent of food sold through restaurants and fast-food
chains. It has already matured in most countries, with an overall annual growth rate estimated
at just 3.5 percent for the next five years.

By far, the most common form of delivery is the traditional model, in which the consumer
places an order with the local pizza parlour or Chinese restaurant (although many other kinds
of restaurants, particularly in urban areas, now offer delivery) and waits for the restaurant to
bring the food to the door. This traditional category has a 90 percent market share, and most
of those orders—almost three-quarters—are still placed by phone.

However, as in so many other sectors, the rise of digital technology is reshaping the market.
Consumers accustomed to shopping online through apps or websites, with maximum
convenience and transparency, increasingly expect the same experience when it comes to
ordering dinner.

The restaurant offers an additional inlet of revenue and a higher utilization rate of existing
dining experience, so the chance to build relationships with a new set of users. The platforms
provide easy and hassle-free marketing and a logistics connectivity for restaurants that
previously were not able to deliver meals. According with an estimated 1 percent of on-
premises customers will migrate to home delivery, total restaurant spending by high income
households will increase by an estimated 10 percent. However, there is potential for greater
disruption if more high-end customers opt to consume restaurant meals at home. Another
downside: the restaurant has little control over the customer experience. (McKinsey &
company,2018)

The customer has an advantage of greater choice, convenience, ease, and more restaurants
than previously are available for food delivery. This is especially attractive to users looking
for healthy options against a pizza. The customer also benefits from the accessibility to track
delivery in real time.
Here are some other key demographics of UAE region:

 More consumers found placing orders for food delivery in the past six months of
current year, 47% vs. 44% over the same period last year.
 43% of consumers who ordered food for delivery say it replaced a meal at a
restaurant, up from 38% in 2018.
 Consumer interest in food delivery is up year over year, and across restaurant brands
tested, with the greatest incremental interest in coffee and burger chains.
 Share of orders placed online through a delivery service website or app increased to
18%, vs. 15% last year.
 UAE specific: 21,000 listings of restaurants
 2.1 Million unique users per month, 350,000 covers booked per month
 950000 app downloads, 260,000 Gold(dine-out) redemptions, 950,000 Online orders
per month.
 80% of users make dining decisions on the app, 20% on desktop, 47% Male and 53%
Female use this app. Source – Zomato
UNDERSTANDING ZOMATO BUSINESS MODEL

Zomato acquire a lot of revenue from the following.

Displaying Advertising on their app and website Zomato’s advertising is very centric, so
when users search for specific keywords, ads of any restaurant, those displayed for that
specific keyword. This makes it highly targeted.

Consulting services with data

Zomato is build and structured on pile of database and information still there are chances
where 98 percent of restaurants fail within the first year and zomato still helps, since they
acquire an inbuilt analysation platform where they test run and resolve lots of queries and
pull-out valuable information. For example, if a person wants to open a new restaurant, they
get connected with the restaurant and builds up structure and gather data regarding user’s
choice and preference of food in that region thus understanding the need and preference of
the users and providing complimentary service that could help build the business.

Zomato Events

Zomato has entered into the events market by partnering with restaurants and creating events.
They make a sale through selling tickets.

Online Food Ordering

Zomato started their online delivery service. Standing apart from other competition like
Deliveroo, uber eats. Zomato do not have their own delivery system, they let customers order
directly on the website or the app and the restaurant fulfil that order on their own.
Zomato White label

Zomato is looking to expand its power over the restaurants and keep control. Zomato white
label is an online platform that let restaurant construct their own native apps which provide
service. Thus, enabling users to book table online via a mobile application.so which lets
restaurant send notification directly to the user and like this zomato is looking forward to
expanding their power over restaurant and keep control on it.

Zomato Helps People Discover Great Places Around Them.

Zomato collects data from every restaurant on a regular basis to make sure the data acquired
is up to date or latest to be more precise. Zomato’s vast community of food lovers share their
reviews regarding food and their experience, so you have all that you need to make an
informed choice.

Building amazing experiences around dining.

Starting with information for over 1 million restaurants (and counting) globally, we're making
dining smoother and more enjoyable with services like online ordering and table reservations.

Enabling restaurants to create amazing experiences.

With dedicated engagement and management tools, we're enabling restaurants to spend more
time focusing on food itself, which translates directly to better dining experiences.
SWOT Analysis -:
Strengths -:
 Innovative culture of the firm
 Financial leverage
 Cost advantage held by the firm
 Technological advancement
Opportunities -:
 Online market
 Emerging markets all over the world
 New service industry openings
 International expansions
 New technology
Weakness -:
 Dish database
 Working inefficiencies
 High staff turnover
 Wrong acquisitions
Threats -:
 Strong local competition (TALABAT)
 Substitute products
Reasons for Strength, Weakness, Opportunity and Threat -:

Strengths -:

 Creation of unique features and services to match the customer needs. (1+1 deals,
offers, points that can be redeemed on orders, etc..)
 Financial leverages when used correctly can be the greatest contributing factors to a
firms strength.
 Lower costs provided with them provide them with the greatest of profits.
 Superior technology when compared to competition is one of their greatest plays, the
user friendly experience catering to every need of the customer is one of their biggest
strengths.
Weakness -:

 A Dish database is a platform where all the dishes along with easy recipes are
enlisted, and Zomato still lacks that aspect, while there are many apps coming up to
cater that need of the customer, and hence remains an untapped market for the firm
and is one of the biggest weaknesses the firm has.
 The goods and services of Zomato aren’t being used properly and to 100% efficiency,
which is a huge drawback for the firm.
 Their ability to retain staff is very low, and recruiting and training new staff is a huge
cost for the firm.
 Number of bad acquisitions have hurt the reputation and balance sheet of the firm
time and time again.
Opportunity -:

 The firm can cater to much wider audience with a relatively low cost of expansion.
 Emerging markets are the best place where the firm should focus to expand and gain
profits.
 New technology can help them cater to the customers in a better manner.
 Emerging countries inviting the firm to setup the business in their country is also one
of the best opportunities up for grabs.
Threats -:

 International competitors and intensive local competitors are a huge threat to the
brand.
 Price wars on the platform leading to losses
 Availability of substitute apps as soon as Zomato raises prices is one of the greatest
threats.
PORTER’S FIVE FORCES ANALYSIS

 Competition - There are several online food delivery platforms all over the world
emerging and receiving investments and globalizing.
 Barriers to Entry – Barriers to entry are very high as there are already major players
established in the food delivery space.
 Bargaining power of buyers - Presence of various competitor apps in the market
makes it is easy for the buyers to switch to other applications. With platforms
providing improving features and upgrades such a people may switch to other apps
offering better features.
 Bargaining power of suppliers – Due to the existence of various vendors in the
market, and a lot of outsourced delivery systems, the firm faces a huge threat from
suppliers as they can increase or decrease the prices when so ever they want on the
basis of their convenience
 Threat from substitutes – There are other firms that do not cater to every field like
Zomato but focus on specific fields of service which are great threats to Zomato
directly as when Zomato fails to attend to a customer’s needs in any of the domain,
the customer has a choice of switching to other specialised apps for the same purpose.

Current Industry Challenges

 Unpredictable pricing model

Extreme competition in the Online food delivery segment, has led to tedious
adaptation of the pricing model that does is not subjected to fluctuation and one that
would push sales continuously. Already the ones in the smaller level have lower
margins and capital, lowering the prices would force them to leave the business.
Although the ones that have set up their brand and name, there is no assurance that
reduction in prices would lead to higher number of customers.

 Logistics dilemma
Would the delivery be available for a specific location or should be available for the
whole city? The number of vehicles to be allotted and where should they be allotted
to? Which area or location in the city would there be more number of orders? How far
along the city can a particular food stay fresh and hot? The restaurants and Delivery
services need to factor in all the above details before making a decision on the Last
Mile Logistics Model. Customers demand to be delivered on time and making them
unhappy can lead to lose in customers.

 Unreliable delivery and logistics staff

With the increasing number of e-commerce services the demand for the delivery and
logistics jobs have increased. But at the same time there is a lot of job losses and
poaching and absconding, Poor training, Lower advantages for employees, less
opportunities for the future and unsafe work conditions in all sorts of weather and odd
 timings etc. Hence there are high chances of delivery staff not functioning properly
due to several reasons.

 Inconsistency in food quality

It is known that the food cooked in the kitchen of a gourmet restaurant is nowhere
compared to food served in boxes at the place of our work. However quality and
carefully packed food can be delivered there would for sure be less quality
somewhere in the product. The pizza can be cold, there would be spills in the boxes,
the noodles would get extra soft and would stick to the boxes and many more. Hence
the customers compare the quality of the food to the quality in the way they have
received the food.

 Inability to cope with volume

There are a couple of restaurants which lack the number of staff and the amount of
space to make huge amounts of food. And if the delivery app would receive orders
from that particular restaurant, although the application is good, the restaurant won’t
be able to handle the force of orders.

 Time is critical:
The customers demand quick delivery these days, the average time being 30 minutes.

 Meals ate at home:

Most of the customer’s order food from their home rather than their work place.
Hence the quantity of food always creates a problem.

 Order spike on weekends:

There are days when the sales on the application would spike up, mostly during the
weekend. The rest of the days they would receive an order with great difficulty.

 Retaining Customers:
It is very difficult to retain a customer these days as they need something new every
day. And with new start-ups emerging every other day, people would be expecting
new quite often. Hence it is a difficult task to retain the customer.

 Pricing:
Allotting price to the product has become really difficult as the consumer demands
lower prices these days.

 Earning Higher Profits:

This industry although has a lot of complications but it yields equal and more number
of profits.

 Managing Logistics:
This segment of the industry requires high and efficient logistics. It is a difficult task
to handle the food on a bike without spilling or damaging it and travel far distances
whilst keeping the food fresh. It is quite important to have transparency between the
customer and the restaurant/application customer service to handle any queries.

 The freshness of Food:

Fresh food is always the best. Hence, during the point of delivery and before it is
utmost important to take care of the food quality to ensure that the customer receives
the best food that the restaurant can offer. Which is a challenge that the restaurant and
delivery services must ensure.
 (Carsten Hirschberg, Alexander Rajko, Thomas Schumacher, and Martin Wrulich,
November 2016)