COMFORT FOOD

In the year investors began to lose faith in food tech, more Indians ordered food online

Obsession
Getting There
Quartz india
Obsession
Getting There
Quartz india

India’s food delivery sector has gone from startup playground to a graveyard with companies shuttering and downsizing and food tech investments plunging from $500 million in 2015 to $80 million in 2016. However, restaurants and customers have been embracing online food-ordering.

Overall, the restaurant industry in India grew 11% from 2015 to 2016 but was far outpaced by food delivery’s 30% figure in the same period, according to a 2017 RedSeer report. Although this includes all delivery orders placed—online, over the phone, in-person, etc—a sizeable part of the success stemmed from the expanding online food-delivery market.

RedSeer measures the market size in terms of gross merchandise value (GMV), the sale price per item multiplied by the number of items sold. Online food delivery grew from a $120-million industry in India to $300 million between 2015 and 2016, the consulting firm said. (GMV is often considered a window-dressing metric that exaggerate success, but still the massive uptick is still notable.)

Restaurants are joining multiple online delivery platforms to reach a range of customers; over 60% of the 500 restaurants assessed by RedSeer had by February 2017. With behemoths like Google and Uber stepping into the field in India, restaurants’ avenues will expand.

Moreover, since the US-based tech giants can undercut prices, partner restaurants and customers stand to gain from cheaper deliveries. In a price-sensitive economy like India, a Rs15 ($0.23) delivery fee on an UberEats order will likely entice users who shied away from forking out between Rs30 and Rs40 ($0.47 to $0.62) to Swiggy’s.

Urban phenomenon

Since the report looked at over 500 restaurants and 3,000 customers spanning five Indian cities, it offers a good snapshot of the online delivery industry in urban hubs. Success is concentrated in a handful of urban regions—the five Indian cities with the most online ordering accounted for more than 80% of total orders in the country. Online shoppers from metros prefer online delivery platforms because of the “convenience of scanning menus, prices, and peer review across restaurants,” the report states.

But that’s not the full India story. Over two-thirds of Indians inhabit rural areas and only 26% of the country’s population of 1.3 billion has access to internet. People living in parts of the country where electricity and internet connections remain scarce and spotty are yet to come online—and eventually, order food.

Compared to other countries, online-delivery penetration in India is minuscule. Just 2% of all restaurant delivery orders in India are made online, compared to 11% in China, 13% in the US, and 32% in the UK, according to RedSeer. The firm believes the UK is a mature market while the US and China are in a period of stable growth. Indian online food delivery, meanwhile, is still in its infancy.

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