COMPETITION is heating up between food delivery players in Malaysia as plans are afoot by restaurants to shrink and rationalise its store space due to the Covid-19 pandemic.
As food delivery services become more popular as a result of the movement control order and strict social distancing rules implemented by the government, retail experts say restaurant dine-ins have shown a decline in sales.
The two leading food delivery players in the country are both foreign owned – Grab and Foodpanda – but there is competition on the horizon.
The latest to join the fray is Malaysia’s first local tripartite partnership – Cuscapi Bhd, Presto and Hungry – that have co-developed a fully integrated digitalised “order to delivery” solution named Custory.
The three main components that make up this new solution are food ordering, cashless payment and delivery service, each of which is the specialisation of Cuscapi and its strategic partners.
The new local food delivery solution, which will be rolled out next month, would pose a competition to Singapore-based technology company Grab Holdings Inc and German-owned last-mile delivery provider, Foodpanda.How will these new local players compete with big established players in the market?
Cuscapi Bhd chief executive officer Anthony Gerald tells StarBizWeek that a key strategy is to charge lower commission fees to restaurants and delivery charges.
“The commission that we will charge F&B operators is much lower than that of international players in the market.
“We will allow the operators to use their own delivery riders which will also reduce delivery charges. In the end, customers will pay less for the purchases of food and beverages, ” he points out.
According to restaurateurs, commission charged to the F&B operators by Grab’s food delivery service, GrabFood, hovers around 20% to 30% of each order.
Skippys Pizza chef and director Fay Lippert says Foodpanda charges commissions to restaurants for delivery services as high as 35% for each order.
Retail specialist Alan Soo says small restaurant players suffered the most, losing as much as 90% of its sales due to the pandemic. More restaurants are expected to close down in the coming months due to the economic fallout from Covid-19.
“More mom and pop restaurants are expected to close down in the coming months because of declining volume of dine-in sales given the fixed cost of paying rent and employees’ salaries.
“Bigger restaurants with many outlets are expected to shrink as well, ” he says.
With the remodelling of business strategies to reduce restaurant space and rationalising outlets, Alan points out that there will be an increase in online food deliveries and takeaways going forward as restaurants consider taking up smaller-sized shops such as kiosks as consumers cut back on going out.
According to research firm Statista, Malaysia’s revenue in the online food delivery segment is expected to hit US$211mil (RM904.7mil) in 2020.
Notably, there is still a lot of room for the online delivery segment to grow.
Global market intelligence and consulting services company Acumen Research and Consulting reported that Malaysia’s online food delivery market is expected to grow at a compound annual growth rate of 19.2%, and be worth over US$319.1mil by 2026.
Last month, Transport Minister Datuk Seri Dr Wee Ka Siong disclosed that restaurant operators in the country were being charged a commission rate of between 20% and 32%.
He urged food delivery players in the country to cut commissions on deliveries following complaints that delivery service firms charged high merchant commission rates.
However, Wee confided that food delivery players imposed such rates in order to give some of the fees back to their delivery partners.
Since the pandemic, many restaurants have balked at high commission rates charged by existing food delivery players around the world.
Criticism has heightened because of the Covid-19 pandemic, with F&B operators being hard hit by business suspensions, staff exodus and a slower global growth.
Given the intense competition between food delivery players, they have struggled to make a profit due to high rates of cash burn due to investment in technologies and promotions and steep discounts.
Despite the high commission margins in the food delivery space, Anthony has an ambitious goal for Cascupi to break even in the next two years for the technology solution. He says break-even can be achieved faster because its technology solution compared to its peers provide end-to-end seamless solution to F&B operators from “technology to point of sales system and delivery partners”.
“We believe our F&B technology adoption will be faster which will give Cascupi and its strategic partners incremental revenue and help it to achieve break-even in the next 24 months.
“Customers will also be able to make table reservations, drive-through, take-out or have their food delivered via this new solution, ” Anthony explains.
Cascupi forked out around RM10mil for developing the technology solution, that will be used for food-delivery service.
Anthony confided that the company and its local partners will split its profits from transaction fee for payments and delivery charges.
He acknowledges that the revenue contribution would be “small” with the split between three player. However, their key strategy is to increase the number of F&B operators on the Custory platform.
By year-end, Cascupi targets to have 1,000 F&B operators on board.
As the local partners starts to roll out its food delivery services next month, Anthony says the food delivery operations will start with three pilot stores including an F&B player that has over 50 restaurants.
“There will be faster adoption of our technology with these three customers coming on board, ” he says.
Anthony plans to expand its food delivery services in Singapore, Thailand, Vietnam, Indonesia and the Philippines, the latest by September of this year.
On the outlook for this year, Anthony expects the food delivery segment to grow around 30% due to Covid-19 pandemic and social distancing rules.
With this new partnership on the food delivery services, he sees Cuscapi’s revenue contribution to be “substantial” in the food delivery space.
Did you find this article insightful?