16 Feb 2018

Delivery 2.0

Autor: Alberto José Aguirre

Delivery and applications through platforms, are the new game tool in a retail reinvention world where the carts are being distributed to serve known or unknown customers. So entering in this channel is a shot in the air if you do not have a clear strategy or a learning predetermined objective, also in some cases it can be seen as a Russian roulette with a loaded weapon where there is only an empty space called luck.

In Colombia, we are addicted to deliveries because since we were born at our home door arrived the pharmacy order for the sick, the roasted chicken to share with family, the liquor to continue the party with friends, just to mention some examples. But the main obstacle for companies to enter homes was the cost of the motorcycle, the driver, the contract with the driver, other contract charges (health, pension, etc.) and how to solve a problem in case of a traffic accident with your brand, which we solved a decade ago with a service contract with the motorized (assumes all charges) and a subsidy rolling, which is canceled based on the sale. Pizzerias, chicken grills, drugstores, independent supermarkets and everything you can imagine adopted this scheme of contracts that we will call delivery 1.0.

Under this strategy the sales volume step to second level, because the provided service through a third party scale is no longer relevant and 10% of the bill in an equation that is only by results makes sense for all parties, the restaurant ended with an average 15% cost, counting the packaging and a good bank negotiation for different payment means. Not to mention that some models charged a surcharge for delivery service and / or tip.

But with the rapid growth of third-party services through platforms applications such as Domicilios.com, Rappi, UberEats, Mensajeros Urbanos, Cabify and many others, the financial equation has changed drastically. These services provide an online ordering system, as well as couriers and vehicles per order, charging a fee that varies according to the volume. If an entrepreneur at this moment wants to enter this channel with the whole service package, some of these allies will begin a negotiation at 30% of the invoice, independent of the final client payment form and will have to take into account an additional cost of packaging that is around 2%. We will call this service delivery 2.0 and they are possible because of the service contracts created by delivery 1.0.

The restaurant industry is entering increasingly challenging times with increases in taxes, decreased people purchasing power, changes in the way clients consume, the need for local suppliers, suppliers with lower exchange rate volatility exposure, high leases, friendlier environment solutions and in general higher costs. Entrepreneurs are looking for ways to generate more income with the same infrastructure, which is why delivery naturally adjusts to this idea.

Hamburgers the most important market category and chips do not usually travel well, but there are competitors who have managed to do it correctly. Clients decide and understand enough to know that their deliveries will be different from what is obtained directly from the grill; they know what comes to them, even so it is important to make sure that the product is presented as well as possible, with the correct and visually pleasing smell.

Taking all of the above, it is important to note that clients are interacting with brands in a very different way than they did in the past and it is valid to be totally subject ignorant, because something new can be learned. For example, the first thing I learned is that there are people who are customers of the platform first, before they come to one of my restaurant-clients and that’s fine, the interesting thing was what was done with that information because a higher value (commission) was giving exposure to buyers who did not know the brand; in fact they had never entered any of the physical restaurants of these entrepreneurs.

In a case where the restaurant billing volume had fallen this solution allowed us to increase sales and stop the negative income trend, but we realized that this is a competition for physical restaurants and to continue being relevant, these two Sales are measured separately because in the dining room you compete with yourself through selling a better experience and in these platforms you are competing against many, because their business is to add the largest buyers number with the greatest profitable options to achieve the maximum volume for their large-scale business.

That said not all platforms are the same, they do not have the same clients, they do not provide the same service or they give the maximum capture index to a brand. One disadvantage is that restaurants lose the ability to supervise 100% of the products between collection and delivery through the messenger, so selecting a quality partner for this task is essential.

How to choose the partner?

Due to the rapid growth of new options, new platforms and the pressure not to stay out of the dance, everyone wants to enter. It is a frantic feeling, similar to the one that companies had a couple of decades ago when yellow pages publication date was getting close and one could not stay outside, but it seems that they forgot everything they learned. Remember there are brands that were never in the yellow pages and still sold.

This means asking intelligent questions such as: How do they hire their people and what is their standard? How do they remunerate them and how do they motivate them? Does it make sense to negotiate with more than one company? What is the difference between paying a commission (fee) of 30% and one of 15%? What information will they share about the buyer of their platform? What will be the position and how will the buyer see me when searching by category? How does a buyer navigate on their platform and what are the most popular filters? Can the restaurant team handle a new order channel and sales? Delivery through this platform has any brand risk? This society will represent me new clients? Outside of making the delivery that brings more to the negotiation table?  Many of these answers will help you identify the benefits and weaknesses before you begin.

The test

The test is not the same as the tip, with the tip they are already inside. Before putting yourself in a situation with someone you can investigate the possible platforms on your own and as a client. Putting yourself in the client shoes always yields very interesting results, because a frustrating or positive experience are indications of the challenges you will face through this society and for this it is not yet necessary to live the experience with your own brand.

Even after doing a previous investigation with another restaurant on the market, in the same neighborhoods where you operates, you will have specific issues to resolve. For example, a vital control and very simple is when you decide to go live to review the orders before leaving the restaurant, because once you shit the hand you literally shit all your arm. In many of these platforms customers register through Facebook accounts or similar, the errors are easily community shareable, so the children bulling is silly over the brand trolling that you will receive.

Here everything is haggling.

Some delivery services are flexible, where the rate depends on the action radius, the city or the Bogotá locality. Other entrepreneurs manage to lower the value with some platforms by having a brand delivery widget on the restaurant’s website and exclusivity or by reducing the restaurant’s marketing expense because through these options they are also managing to attract and retain customers.

Most platforms prefer that customers place orders directly from their site, because this is their business add value and not having to integrate into restaurant ordering system, and restaurants that include the widget on their website give more visibility to the platform brand.

But everything that glitters is not gold. While established brands with a large follower’s number may benefit from a discount on the web location, new concepts that seek to increase their customer base may be affected by accepting a lower place on the platform’s website when negotiating a minor commission.

Some entrepreneurs translate almost half of the service cost to the final customer through a higher price, which is a way to turn around a 30% high commission, but this in the future can play against the restaurant and the platform because people every day compare more price and if the increase is very high a client with low or limited purchase value, can easily look to the side or elsewhere as Tostao.

What else?

Always be vigilant of new players who can adapt in real time to changing circumstances, as well as current and future customers who change their way of consuming every day. Delivery exist at all socioeconomic levels in Colombia, but restaurant delivery through platforms are not used by all socio-economic levels and most of the current restaurants are designed for people with high income levels or at least for people with more than two minimum wages that represent 7% of the population or 3.5 million inhabitants. A change of trend is that many new gastronomic proposals are being designed for clients with a lower purchase value, translation for people who earn between 1 and 2 minimum wages representing 15% of the population or 7.5 million inhabitants.

So my final question is: why your restaurant is really gone down in sales in recent years?

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