Lockdown a boon for online food delivery services

The demand for online delivery of food is on the rise amid the lockdown as restaurants are only allowed to provide home delivery or takeaway services during this period. 

Online food delivery services such as Foodpanda and Pathao are currently witnessing a moderate jump in their businesses when compared to the pre-lockdown times, industry insiders told The Business Standard.

A number of restaurant owners, however, claimed that the online delivery of food covers barely 5% of their total business, and the profit margin is poor as they pay 20%-30% commission to the delivery companies.

This is why some restaurants have launched their own delivery services to lessen dependency on online food delivery companies. These restaurants are also reaching out to their customers and urging them to order food directly, insiders said.

Commenting on the jump in demand for food deliveries, Managing Director of 138 East in Gulshan Ashfaq Rahman Asif said, "The number of online deliveries has doubled in the last one week amid lockdown. 

"But it is not enough to survive amid the pandemic as dining in-person is closed." Asif also mentioned that he has contracts with all popular delivery companies including Foodpanda, Pathao, Shohoz, HungryNaki, and e-Food.

Tahsin Rob, founder of Fatty Bun burger restaurant at Dhanmondi, said, "Online sale is not more than 5% of my total business. But after the declaration of the new lockdown on April 5, the demand for food deliveries has almost doubled.

"We have launched our own home delivery services and cancelled the contract with a few delivery companies for their high commission rate. Now, we have contract with only two delivery companies – HungryNaki and Shohoz Food."

Tahsin further added that during the last week her restaurant could provide food delivery services after 10pm due to restrictions from the local administration.

But usually, 20%-25% sales occur after 10pm.

According to a new government directive issued on Monday, restaurants will be allowed only to provide takeaway and online delivery services from 12pm to 7pm and 12am to 6am between April 14 and April 21. 

The new directive came after Bangladesh Restaurant Owners Association (Broa) had urged the government to give them an opportunity to provide Iftar and Sehri delivery services during the holy Ramadan. 

A Broa leader on condition of anonymity said, "The burden of the high commission rate ultimately puts pressure on the customers, as restaurants are bound to compromise with the quality of food to stay afloat."

Meanwhile, Broa's Organising Secretary Syed Mohammad Andalib said, "It is a matter of great hope that now a days people are very familiar with the online food order and delivery services. 

"The delivery companies and the restaurant association should work hand-in-hand so that the industry can grow together."

There are around 60,000 restaurants across the country and 8,000 of them are in Dhaka, Broa sources said, adding that the number of restaurants currently providing online delivery services is not more than 10% of total establishments.
 
Delivery companies' business jumps

As more and more people are opting for home delivery of food and groceries during the countrywide lockdown because of the Covid-19 crisis, delivery service providers acknowledged that their business is growing.

Ambareen Reza, managing director and co-founder of Foodpanda Bangladesh, said, "The demand for online food delivery has increased amid the lockdown. However, it is too early to calculate the percentage of growth rate as only one week has passed since this lockdown."

Foodpanda Bangladesh – the top market player of delivery services – is currently operating in 64 districts. They have around 40,000 delivery personnel.
Speaking about the high commission rate imposed on the restaurants, she said, "Globally, commission rates on online food delivery average between 30%-35%. In Bangladesh, it is lower than the global average, though we provide the same level of service. 

"We are a food technology company and our main costs are technology, logistics and marketing. Foodpanda's technology including the app is world class, and it requires huge investment for operation and maintenance."

She added that Foodpanda has been continuously investing in this market for the last seven years, which has benefitted all stakeholders including customers, riders and restaurant partners.

Fahim Ahmed, president of Pathao, said, "We have seen strong order volumes in our food business. 

"Pathao has been working with the e-Commerce Association of Bangladesh (e-CAB) and the Ministry of Commerce, to ensure that our restaurants and food delivery agents do not face any disruptions in course of their operations during this pandemic."

Regarding a query, delivery company Shohoz said compared to the pre-Covid period, the volume of orders has increased slightly across the industry.

Addressing the commission issue, Shohoz added, "Although there are instances of taking high commissions within the industry, Shohoz Food has always tried to do right by its partners, providers, and consumers. 

"We have always tried to keep the commission fair through partnership by having an open dialogue with the restaurant owners and with proper case studies. It will be no exception in the future."

Head of business development at eFood Shahnewaz said, "Our online deliveries have increased 15%-20% during this period."
 
Limited time of operation a hurdle

Some restaurant owners claimed that they are not getting the expected number of online orders due to the limited time of operation amid lockdown and customers' concerns over the possibility of Covid-19 infection. 

Taufiq Rahman, owner of KFD Banani, said his online delivery and sales have dropped to one-fourth amid the lockdown, compared to the pre-lockdown times.

Ifaz Khan, the owner of Café Milano, Chattogram, said, "The sale in my five restaurants in the city has decreased. People are concerned about ordering online. Besides, the purchasing power of people has decreased too.

"My usual sales were Tk2-3 lakh per day in a restaurant just before the second wave when dining was open. But the sales dropped to Tk70,000 just before the lockdown. Now, it is not more than Tk30,000-35,000 per day through online and takeaway."

He mentioned that Chattogram has around 1,000 restaurants and at least 50% are providing online delivery services.