Eateries ease outsourcing deliveries in customer race
Pizza Inn’s transition to delivering exclusively via dial-a delivery and Pizza Inn platforms in Kenya has seen a fall in deliveries via third-party aggregators. FILE PHOTO | NMG
Restaurants are moving away from outsourcing delivery services from third parties in favour of their in-house deliveries as they move to cut out middlemen in a shift that could affect established players like Bolt and Uber.
Eateries have been missing out on the advantages of having direct access to their customers and collecting data used to make investment decisions for third-party players.
The strategy change comes at a time when consumers are increasingly making orders online, in a trend that was hastened by the Covid-19 pandemic.
The Covid-19 pandemic changed the way the world eats drastically, with the global food delivery market estimated at $150 billion in 2021, according to a McKinsey report.
Restaurants are now battling it out with delivery service providers for customer data in a bid to increase sales while cutting on commission spent on third parties in the splitting of thin margins.
Simbisa Brands Limited, which operates fast food restaurants including Chicken Inn, Pizza Inn, Bakers Inn, Creamy Inn, Galito’s Kenya, and RocoMamas, says while releasing its end-year results that Pizza Inn’s transition to delivering exclusively via dial-a delivery and Pizza Inn platforms in Kenya has seen a fall in deliveries via third-party aggregators.
Pizza Inn franchise owner reported its transition to an exclusive in-house delivery platform, cutting out third-party merchants like Uber Eats, Bolt, Jumia Foods and Glovo.
Although third-party aggregators did not come out to show their numbers, most restaurants are exclusively delivering in-house, while others are relying on sit-ins, third parties or a blend of all the channels.
“In-house deliveries and average revenue per delivery increasing 27 percent and seven percent, respectively, year-on-year,” said Mr Basil Dionisio, the chief executive at Simbisa Brands, in a trading statement.
“At the beginning of the financial period under review [year ended June], under one-third of orders were made through mobile applications, with customers favouring call-centre dial-ins— by the close of the period, more than half of orders were made through mobile applications, and we have seen this trend continue into the first quarter of 2024.”
Some restaurants in Nairobi have started their deliveries in a bid to phase out drivers or outsource to third-party providers like Uber Eats, Jumia or Bolt, which charge a fee that cuts into their razor-thin margins.
“Competition is always a good thing for us, because it means the sector is live, and our advantage is we have economies of scale on our side when an individual restaurant has to hire five couriers for just their orders it becomes expensive and although welcome this move it is not cost-effective,” said Linda Ndung’u Bolt’s country manager.
The move to cut out third-party merchants in Pizza Inn deliveries has seen an overall decline in deliveries in the market by 18 percent year on year, according to data from Simbisa.
“On the downside, deliveries through third-party aggregators fell 55 percent year-on-year due to the aforementioned transition to Pizza Inn delivery exclusivity on Simbisa’s in-house platforms, as well as the third-party aggregators not being as aggressive with marketing and promotions as they were in the prior year when precipitating a recovery from the Covid pandemic,” read Simbisa’s statement in part.
On mitigating increased competition Uber Eats told the Business Daily:
“Uber Eats has partnered with brands like Coca-Cola, KFC, Chandarana, Artcaffe Market, and Java Mart to launch various products on Uber Eats to help drive demand. Uber Eats also provides access to partnership opportunities in the form of providing delivery services, demand services, bring-your-own courier services and Pick Up as additional value addition options for merchants.”
Uber also noted it is getting into new delivery verticals, “scaling the next strategic leg of our 10-plus year growth, with huge demand for delivery in new verticals like grocery and convenience.”
Glovo did not respond to Business Daily queries on the issue in time.
Simbisa Kenya saw its earnings fall significantly in the year ended June, which its parent firm has attributed to the current economic woes.
Simbisa Brands, the Victoria Falls Stock Exchange-listed company, a wholly-owned subsidiary of the Zimbabwe Stock Exchange, blamed increased taxes and high cost of living, which piled pressure on consumer spending, for revenue losses.
“These economic headwinds have significantly increased the cost of living, and consumers are feeling the pressure. Social unrest and protests, led by opposition politicians in response to the rising cost of living and alleged fraud during the August 2022 election, resulted in trading disruptions in [second half of 2023 full year],” said the statement.
The firm operates in nine African countries, including Zimbabwe, Zambia, Ghana, Mauritius and the Democratic Republic of Congo.
Simbisa opened 34 additional counters in the country between June 2022 and June 2023 bringing the total outlets to 240.
This saw the growth in customer counts by 3.7 per cent in the financial year under review.
The company reported increased menu prices to tackle inflation and exchange rate devaluation of the currencies in all its markets except in Ghana.
Simbisa plans to roll out mobile delivery applications in 2024 for its other markets after the success of Pizza Inn, Chicken Inn, Galito's and Grill Shack in Kenya.
