On A Platter – Food Delivery Landscape in Southeast Asia: Your Questions Answered (1/2)

On a Platter – Food Delivery Landscape in Southeast Asia concluded last Friday with great success. Jianggan Li and Crystal Yu gave the lowdown on the food delivery landscape and the strategies of key F&B players in the region.

We received a lot of interesting questions which we didn’t have enough time to answer during the briefing. We have laid down the answers to your many questions below.

 Competition

1. What do you think about the prospects of new players like Traveloka Eats and AirAsia Food in Indonesia? Can they take a portion of the market in the country?

General food delivery platforms will need volume and density to succeed. For Traveloka Eats and AirAsia Food, the question is how committed they will still be in food delivery when travel resumes post-Omicron. 

Ultimately travel is their core business, and the investments there will probably give better returns compared to food delivery. They will also be able to attract better talent in their core business.
 

2. What are the main causes for the market share shift in the various regions over the last year? Why has Gojek lost its share in Indonesia (their home region) for example? Is the main increase in Shopee market share a result of their acquisition or their marketing tactics?

Many reasons are causing the market share shift, including players’ strategies, execution, market dynamics as well as specific issues/events such as Thailand’s government subsidies on food delivery consumers and Vietnam’s strict lockdowns.

In Indonesia, we do see that ShopeeFood took more market share from Gojek than Grab. Similarly, we see ShopeePay taking more share (and talent) from GoPay.
 

3. What has been the main difference between Shopee (which has demonstrated better customer retention) and ShopeeFood (which has not) despite both ostensibly using similar tactics of aggressive sales promotions, social commerce etc.?
Shopee is much more mature than ShopeeFood, with wide selections and much-improved fulfilment levels, whilst ShopeeFood is new in most countries.
We would not be surprised if Shopee had bad customer retention in 2015/2016.

 

4. What will be the barriers of entry for new players in the SEA market? For example, the Philippines only has Grab and FoodPanda competing in the market.

The question is will the new player be able to achieve (much) better economies of scale and operational efficiency than incumbent regional/global players. Not saying that it can’t be done but it requires more than just investment.

 

Vietnam

5. Why is Vietnam’s food delivery market small relative to its population size? I know 2021 was an outlier here but even in 2020, it was much smaller than Thailand, Indonesia, and even Malaysia?
In terms of GDP per capita, demographics and spending power of its megacities, Vietnam is actually behind the other five key countries in the region. In correlation, the regional/global players have not invested as much in Vietnam to grow the market as they did in Singapore, Indonesia and Thailand.

 

6. How did Vietnam’s lockdown – which saw grocery deliveries return before restaurant deliveries – impact grocery experimentation?

It sure does. One thing to note is that online grocery is still in experimentation stage across the region, so the true effect will probably not be obvious until much later. 

 

Business model

7. Can you share some thoughts on the efficiency (indicated by unit economics, etc.), execution capability of those players?

The players have undertaken different strategies, which means that it is probably hard to compare execution capability in an apple to apple way. We need to look at customer retention in conjunction with sector contribution margin. It is also worth taking a look at who is leading the food delivery operations for each platform.

 

8. From a unit economics standpoint, what’s the average delivery cost per order at the moment and how has it decreased? (if at all)

It differs by country (or more precisely, city) and is impacted by many factors. 

 

9. How has the average basket size evolved in the last three years for food delivery in Southeast Asia?

It is a matter of market evolution but also the strategy of key players. Average basket size has to be viewed in conjunction with order frequency and active transacting users (e.g. MTU) to understand how players are doing.

The average basket size has improved for Grab and Gojek and has started to improve for Foodpanda. ShopeeFood, in order to rapidly ramp up volume (and eventually get a seat on the table), has deliberately focused on low basket size at this stage.

 

10. May I know more about the rationalization plan of Grab and Gojek? Are they focusing on consumers, merchants or driver-partners in their monetization plan (commission rate or delivery fees charged)?
In Q4 2019, with the shift of public equity market sentiment, both Grab and Gojek started working on the path to profitability. They reduced subsidies and started to focus more on increasing customer value. It is a combination of metrics they are looking at and not just at any part of the 3-sided marketplace alone. 

 

11. What do you think of merchants who have their own delivery platform since the fee is getting higher and eats up merchant’s margins?
It depends.
– For restaurants that have loyal customers (and high basket size), it makes sense for them to take orders directly with customers and leverage the likes of Lalamove, GrabExpress and Pandago to handle the delivery.

– For restaurants with a good brand name and high order volume, the rational strategic approach is probably to have a combination of own delivery services and platform usage.

As we illustrated in the Food Delivery Platforms in Southeast Asia report, running physical restaurants has a different cost structure than virtual restaurants but often arrives at the same bottom line. 

 

12. Do you have any data around the percentage of food delivery orders delivered to home addresses vs work addresses vs non-home/non-work addresses for the different platforms?

No, we have not included that in this particular study.
We believe the exercise is probably more worthwhile when we are back to the Post-Covid “new normal”. Otherwise, the data will not be very useful in evaluating the companies and their business model.

We do know that pre-pandemic, work address demand was higher than home demand in most if not all megacities in Southeast Asia. 

 

You can check out the answers to the remaining questions here.