Adding on to it is the increasing congestion levels and longer waiting times at many restaurants having swayed a section of consumers into going for the convenience of ordering-in rather than eating out.
Further, access to the Internet and mobile communication has scaled up demand, as consumers now have more convenient means for ordering from home. Encashing on this opportunity, Domino’s pizza has recently launched a mobile ordering application using which consumers can order from anywhere, at any time, via their mobile phones. Pizza Hut launched a new sub-brad, “pizza Hut delivery(PHD Express)”, four years ago to capture the upward spiraling demand in the office and home delivery segment. Other prominent brands such as KFC, McDonald’s and subway also provide home delivery services.
Another demand driver for these formats is the growth of multinational corporations, towards commercial hubs like Gurgaon, Whitefield (Banglore), Salt Lake City(Kolkata), Andheri (Mumbai), leading to a higher number of expatriate office goes staying away from their hometowns preferring home delivery instead of dine-in and cooking. Online food services, a very recent concept in India, has also benefited immensely from this migration of employees. These services are unique in terms that they do not have any physical presence and only deliver to offices and homes. Moreover, they offer food items at prices far lower than those offered by brands which have a physical presence. Home Curry, Mad Bites, etc. fall under the online food services segment, providing delivery services. International QSR giant McDonald’s also launched its home delivery services called McDelivery in India only in 2004, almost after 8years of operation in India. McDonald’s further invested INR 3 crore(USD 0.6 million) in 2007 to strengthen its home delivery services, sensing, the growing potential of the segment.
This growing popularity of takeaway/delivery segment is one of the key drives behind the growth of the food services market in India. The home delivery segment of the organized food services market in India is still evolving and is estimated to grow at 30-40% over the next five years. Several food services players have entered the home delivery segment, which contributes ~15% to the chain’s revenues.
Internationally, busy and chaotic consumer lifestyle, a constant in every country, have propelled the demand for home delivery services, especially in major cities where heavy traffic jams are a part of daily life. During sporting events like the European Cup and Olympics, Home delivery services see a significant spike in demand. In Thailand, McDonald’s keeps all its outlets open 24hours a day during peak seasons.
Delivery services are also conspicuous in counties like Indonesia, where the leading QSR chain A^W, for instance, introduced a home delivery call centre while local chain Bakmi GM waived the minimum order limit on its home delivery services. In Chaina, prominent QSR chains like KFC, McDonald’s, East Dawning and Pizza Hut aggressively promote delivery services through advertisements and special promotions, and also enable online order placement to accelerate ordering.
The trend is also picking up in India with increasing presence of delivery models in the organized food services market (Exhibit 106).
Some of the prominent brands have derived significant benefits by deploying a focused approach towards home delivery generating 30-40 % of revenues from delivery services.
The underlying interest of players in this business is quite clear. There is requirement of a smaller space which translates into lower and cheaper rentals and consequently, lesser capital investment (rental deposit, interiors, furniture, etc.) In addition, on-going operational costs (Staffing, utilities, etc.) are also lower.
The concept of home delivery offers a two-fold opportunity in the organized food services market. The first opportunity is for the present brick-and-mortar food services players who can tap into delivery to significantly increase revenues. The second opportunity is for new entrants who can evade the difficult to maintain, and expensive, store-based format and focus on home delivery as a sole channel for entering the market and generating revenues.
As it is, home delivery offers additional benefits to brick-and-mortar formats. First, it allows the retailer the ability to cash in on more consumption opportunities and increase points of contact with consumers than the due-in model. It also lets retailers maximize their capacity utilization by serving additional customers who desire the product more than the experience, thereby also minimizing lost sales. The overall result can be an improvement in store profitability achieved by higher revenues and better asset utilization. This channel can further be enhanced by a transition from phone-based ordering to web-based ordering.
Thus, it can be observed that the commercial viability of delivery formats underpins the growing phenomenon of food service retailers. They should not only adopt the home delivery segment as an extension of the existing dine-in format but also exploit this channel as a business model in itself. Pizza Hut Delivery and Domino’s Pizza are using the home delivery format to tap the potential the growing segment offers.
Originally, this concept of “On the Go” food evolved from QSRs, which provided consumers with busy schedules a time-efficient eat out option. The kiosk format has evolved primarily to cater to on-the-move and busy customers who from their major target segment. This concept is mostly present in shopping malls, railway stations, airports, and office complexes, i.e. locations where people prefer not to devote much time to eating. The influence of western modes of life has also helped build the acceptance of the concept among Indian consumers. For example, Coffee day Xpress is a separate division that is dedicated largely to serving people on the move. Also, QSR brands such as McDonald’s not only have separate takeaway counters but also drive-through windows in certain outlets. Other brands like BizzyB, Nirula’s, Fast Trax, Kaati Zone etc. have adopted the takeaway format alongside dine-in.
Further, the boom in real estate and new corporate entities eyeing the Indian market will propel the on the go food market. This will in turn widen the scope for kiosk models that are better equipped to minimize costs and deliver quality consistently to consumers.
Also, the projected growth of the food services market and the changing trends in the sector will definitely provide thrust to the growing delivery/takeaway business models. It is of high likelihood that future business models will adopt online ordering as a medium of choice not only to enhance approachability and accessibility to target customers, but also to increase revenues.