How Restaurants Can Play With The Big Boys

It was easy for restaurants to get lured into a false sense of security as they watched during the early days of the great digital shift in retail. “Restaurants aren’t prone to disruption,” according to the prevailing opinion. The restaurant experience can’t be replicated online. Food, particularly prepared food, was too perishable to be “shipped,” and restaurants too hyperlocal to fall prey to the digital disruption that they witnessed in the retail sector.

Until they did.

Restaurants underestimated two things. The first was consumers, and how much their habits and preferences were going to change in the digital era. Restaurants’ second, and perhaps the biggest, oversight was their failure to see how innovators would reimagine the Amazon experience for the restaurant sector. Most totally missed the rise of third-party marketplaces, and the impact they would have on the relationships with restaurant customers, even potentially cutting them out of the deal entirely someday.

It’s time for restaurants to get up to speed very quickly on building a credible, competitive and ultimately better offering to draw consumers back into working directly through them or risk permanently losing those relationships.

The Bad-To-Worst Case Scenarios

It’s no secret that third-party aggregators — the Deliveroos and Uber Eats of the world — are an expensive proposition for most restaurants. They deliver volume, and a lot of it, but at a cost. At 30 percent commission on each order, aggregators eat into the already-thinning margins of those restaurants. It’s not entirely clear if the customers they deliver to turn into profitable relationships down the road.

In part, that’s because of the bigger risk to restaurants that they pose: disintermediating or de-listing them. Unfortunately for some of the less savvy restaurants who have become portal dependent. The consumer becomes loyal to and dependent on the marketplace itself, and the restaurant that provides the food plays second fiddle to the “Amazon” of food ordering.

It seems inevitable with all of [the aggregators’] data on what consumers like and want, they have built the perfect path to opening their own ghost kitchens and private-label brands to serve up to consumers who order through their platform[s].

That sounds like a raw deal, but it doesn’t have to be. It doesn’t even mean that restaurants need to pull the plug on their relationships with those marketplaces immediately, in a move to protect their turf. The marketplaces have a value, especially when it comes to discovery — since they bring with them a cohort of customers, often a large cohort, and it is absolutely to an establishment’s benefit to put itself in front of new cohorts of consumers.

From that exposure point, however, the challenge incumbent upon restaurants is finding ways to bring a consumer into their orbit and form a one-to-one relationship that is separate from the marketplace itself, and that can evolve into a profitable relationship with the consumer.

They need to find a way to differentiate the in-house experience from the indirect one. The airlines and hotels have done that when it comes to separating themselves out from the travel platforms — and it is a lot more complicated than just giving stuff away.

Discounts and promotional offers are a place to start, but in Digital Restaurant’s 7 years on the market working with restaurants to build digital brands, what really works is offering consumers extra value. That might mean order-ahead or delivery. It might mean offering a full menu within one’s website, but only a limited selection on the aggregator’s website. It might also be something as simple as making it easy for customers to order within the brands own mobile website, but not making it possible to customise on any other touchpoint.

What they all come down to is offering a series of incentives for the customer to connect directly to the brand.

The Emerging Future

There is a middle ground between restaurants and third-party marketplaces as they exist today. Could there be a platform to aggregate restaurant brands and possibly connect Delivery-as-a-Service, but in a way that still sends consumers directly to the restaurants’ website?

2019 could be the year the market will start to see it happen. Google is the best-positioned platform to deliver it.

The biggest disrupter of all and our money is firmly on it is the next generation of ordering “voice commerce” and the use of AI to personalise the experience.

There is still much to do to help restaurants better make the transition into a digital world.
Stay tuned , we have some exciting new products launching soon…