THE
86
Where Humans and Food Connect
A FoodSheikh Food Journal
A Disconnected Industry & A New Dawn
Issue 3 A Covid-19 Special *Complimentary / Not for Resale
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Welcome to a special edition of The 86. We are all reeling from this devastating pandemic that has decimated the F&B industry. There are countless challenges restaurants are facing, from rent deferments to payroll costs, and everything in between, but I’m not here to talk about them. Covid-19 overnight closed down dine-in restaurants. Home delivery is the only oxygen left for the restaurants. This issue takes a short, sharp look at what this means, how it developed and more importantly its impact on the future
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There was something bubbling long before Covid-19 changed our lives. There were murmurings of discontent and frustration across the industry as start-up food tech companies started to challenge the status quo and become a larger, more disruptive element of the landscape.
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Discounts were becoming the norm. Restaurant P&L accounts strained under the weight of commission charges. Restaurants started to push back, and eventually the National Restaurant Association of India started a movement called
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Back in August 2019, this NRAI initiative was backed by more than 2,000 restaurants accusing food tech companies of “Predatory Pricing” and “Deep Discounting,” and they were “logging out” of these programmes.
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There was a growing concern that restaurants and their products were being commoditised and led to an unsustainable business model.
“
The addiction of deep-discounts have crippled the industry. Discounting is a privilege and not a right. The idea of receiving a discount should make guests feel special and not give them a sense of beating the system.” Rahul Singh, President, NRAI
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There seemed to be a positive response from the aggregators
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Tweet by Deepinder Goyal, CEO Zomato.
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But that positivity quickly went from bad to
worse.
The irony is that res with the internet ag seemed to fall on de
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Tweet by Deepinder Goyal, CEO Zomato.
staurants had been wanting a collaborative discussion ggregators for quite some time, but their requests eaf ears.
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So what is th
#LOGOUT really about
Logout out was a catalyst for a larger conversatio have on the relationship between guest and resta aggregators who have distorted a vibrant market
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he movement
t?
on about disruptors and the impact they aurant. It was about gaining freedom from tplace.
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These food tech companies thrived because communication between restaurants and their customers had changed so much, they were almost speaking two different languages. 14 ¡ DISCONNECTED ¡ THE 86
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As consumers moved onto mobile devices and the digital revolution gained speed and popularity, restaurants & F&B largely struggled to adapt and keep up with these significant technological changes. They were ripe for disruption.
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For many operators, this was the customer loyalty technology they were used to using
“FoodTech”
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So, when third party developers and aggregators and disruptors provided easy solutions to table reservations, ordering, delivery, marketing, loyalty programmes, and payment options, it seemed like a no brainer for restaurants to sign up.
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However, these lo that were offered a heavy price
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ow cost solutions would come with in the future.
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And that future is now -
Covid-19 has decimated the restaurant landscape medical insurance, rent or income. Warehouses a restaurant kitchens around the world. The only lif been classified as a “vital service.” With this lifeline perhaps outsourced too much and given away mo 20 · DISCONNECTED · THE 86
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as we know it. Workers find themselves without are full of rotting food that was destined for feline restaurants have is home delivery, which has e comes the ugly realisation that restaurants have ore than they should. THE 86 ¡ A Covid-19 Special ¡ 21
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As restaurants lean more heavily on these third party disruptors, one major risk that is often overlooked is that of losing ownership over sources of value. A restaurant wouldn’t consider handing over their recipes, or supply chain details, or training manuals.
Yet, restaurants are in danger of losing their most valuable asset - their direct relationship with their customers. This is in addition to the crippling commissions and marketing discounts imposed on the restaurants by these aggregators. 22 ¡ DISCONNECTED ¡ THE 86
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Restaurants might of their cu
TOD
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t have a clear sight ustomers
DAY
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But tom 26 · DISCONNECTED · THE 86
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morrow? THE 86 · A Covid-19 Special · 27
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And the d
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day after? Pretty dramatic, right?
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The industry’s response
Although fragmented and un-orga
They want to take back control of an industry that reduce delivery commissions and order direct ring what they can - offering deferments or minor reduc slipped, and restaurants finally have their eyes wid restaurants, it feels anything but that. 30 · DISCONNECTED · THE 86
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anised, their message is clear.
t is slipping away from them. Calls to log out, g out across the city. So the aggregators are doing ctions to minor charges. But the curtain has de open. This has been a partnership, but to many THE 86 ¡ A Covid-19 Special ¡ 31
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Because at least with the old school coffee card, you had direct contact with your audience.
The danger is, the more restaurants rely on third party
Restaurants & F&B Businesses
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aggregators the more they lose touch with their customers.
The more reliance they have on these third party disruptors, the more they are at the
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mercy of their policy changes, price increases and algorithm updates. Back in August 2019, the online audience belonged to the third party aggregators, and now, because of Covid-19, they now
effectively own the entire marketplace. The tech companies have become kings in this dystopian world, and restaurants are grossly exposed and virtually helpless.
CUSTOMER, AUDIENCE & MARKETPLACE
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Thanks to the tech companies, restaurants have become hyper connected, yet at the same time, they’ve become horribly disconnected. Many restaurants are unable to connect directly with their only means of survival - their customers. In a Covid-19 world of self isolation, social distancing and quarantine, the biggest lesson to take from this is that, both as humans and businesses, communication and closeness of your loved and cherished ones is paramount.
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So how do resta audience, in tod and technology
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aurants reconnect with their day’s landscape of convenience y? How do they start to reintroduce themselves after Covid-19? All restaurants, regardless of their business model, need to rediscover their audiences and make a commitment to never give them away so easily in the future.
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Covid-19 will be contained and the vaccine will be developed eventually. Restaurants and cafes and bars will re-open again and to quote Queen Elizabeth II,
“We will meet again.” The industry needs to be planning for life after Covid-19 and many lessons need to be learnt here. The industry became lazy, didn’t evolve with their customers, and didn’t stay connected with their audience. However, some outliers have always been ahead of the curve and worked hard to stay connected. So, who has always done it well, who has found a way to stay connected and engage directly with their customers, meeting them where they “live” and using the aggregators as an enhancement to their business, not the reason for their business? Let’s take a look at some real world examples as inspiration for how disconnected restaurants could reconnect with their communities. 38 · DISCONNECTED · THE 86
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Some companies are fighting with in order to re-engage with their audience.
TECH
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Arguably, the best in class is Starbucks. Founder Howard Shultz was ahead of the game in many ways. In the years before his retirement, he called out the disruption of bricks and mortar retail before others, and he implemented a best in class digital rewards program and invested heavily in digital app and mobile order and pay features before it was popular. Seeing the need to be a techsavvy company, he even picked a former tech executive to succeed him as CEO Kevin Johnson.
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20+ million Membership has grown 14% in the past year members
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The Starbucks app is largely accepted to be the gold standard in the customer loyalty programme space. A recent study has shown that Starbucks has the most regularly used loyalty app among all the major restaurant operators.
Not only is it a gift card, loyalty program and mobile payment, it is also heavily integrated into the user’s lifestyle. They have partnered with Twitter, Lyft, Apple watch and even integrated into Ford cars with Google’s Alexa.. And the results are staggering In Q1 of 2019, Starbucks’ customers loaded more than $1.2 billion onto the app – that’s more money than some banks. The loyalty program accounted for 42% of U.S. sales during the 1st quarter of 2019. Starbucks loyalty members’ average ticket size is three times that of the average customer
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The Chipotle App has around 3 million users.
Since they launched their rewards and loyalty programme back in March 2019, they have averaged about 15,000 app downloads daily. That’s a 480% increase over YTD downloads. Digital sales more than doubled and now account for about 16% of total revenue. Amazing what a free burrito will do!
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Moving locally
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Ian from Big Dwarf also leverages technology to ensure his businesses stay connected to his customers. Even incentivising Deliveroo users to register directly with his apps for Wild Flower and Freedom Pizza. Gates Hospitality with their portfolio of popular restaurants have also launched an exclusive app that focuses on rewarding their loyal customers directly.
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Fighting
digital with analogue
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Not everyone is as tech savvy as Ian, not everyone has the resources of Starbucks and not everyone has the cult following of Chipotle. So, some companies are taking a more analogue approach when it comes to connecting with their community.
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How are restaurants connecting with their community? Learn from this Milan bar, Portineria14,
in the Navigli neighbourhood in Milan. They act as the community’s “doorman”, or Portinai, offering services like accepting parcels, looking after a set of keys, recommending handymen and acting as a meeting point for the area. By offering a little bit of humanity and trust, Portineria14 have found their place in society.
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How are they finding ways to become a central part of their community’s world?
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Bringing it local again Thai restaurant, Sticky Rice also decided to keep it analogue - they logged out of all 3rd party delivery apps and will only accept dine in and direct ordering through their own channels. Their profit margins are healthier and they keep the community spirit that is part of their DNA, front and center of their strategy.
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Their profit margins are healthier and they keep the community spirit that is part of their DNA, front and center of their strategy.
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A relationship must be “we” Cactus gets this
Luxembourg’s largest and oldest supermarket chain has been a household name for generations of residents. They have a deep commitment to staff and community. Creating a connection between customer and brand is rooted in the spirit of the company. For example, they provide staff with language lessons, etiquette classes and external workshops in fishmongers and cheesemaking. Employees stay on average for 15 years. They take customers off site to meet their producers, they offer free cooking classes and wine tastings. It is about immersing shoppers in the world of Cactus and in return becoming part of theirs.
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In a nation of 600,000, their loyalty card scheme has 300,000 members.
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Knowing your
Worth
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And finally, some operators maintain a direct connection to a loyal audience by simply knowing their worth.
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Akiba Dori, LPM, Ruya and Zuma are just a few local restaurants here in Dubai that don’t participate in typical third party discount or loyalty schemes. They don’t do coupons, or bogofs, and save their discounts for an exclusive segment of their audience. They know their
worth and the worth of their audience. Their customers are loyal
because of the service, and food and how the restaurant makes them feel, not because there is a coupon they can slip inside the bill folder.
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As we move into a Post Covid-19 world, I hope restaurants emerge better equipped to make better business decisions and there is an honest evaluation of 3rd party partnerships. I hope this issue of The 86 has provided some food for thought.
I’d like to leave the following thoughts directly for the restaurant owners and managers who are reading this issue.
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In my opinion, long term discounts are not your friends and they do very little to promote genuine loyalty. Use them sparingly.
Re-connect with your community - don’t take the easy way
out by outsourcing that conversation with them. Put in the effort, market yourself wisely, and take back control of your business. It might hurt in the short term, but it’ll make for a much healthier business in the long term.
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Covid-19 changed the industry. Let’s change it some more. Remember to support local, and order direct. Visit www.deliverdxb.com for a comprehensive list of restaurants that need your support. Stay safe, look after one another and start looking forward to a new dawn in the F&B industry. I’d like to leave this with you as the final final (I promise) food for thought.
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Disruption starts with unhappy customers, not technology. Disruptors enter markets not by stealing customers, but by stealing customer activities. The activities that disruptors steal are precisely the ones that customers are not satisfied with.
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