DINING is a cultural imperative all across Asia, and perhaps nowhere exemplifies the centrality of food than China, where technology and on-demand delivery services are transforming the country’s dining industry.
A recent whitepaper by Meituan-Dianping noted the industry is one of the biggest drivers of the economy today, contributing CNY3.5 trillion (US$516.3 billion) worth of revenue in 2016. Of course, China’s diverse cultures yield a dizzying array of cuisine options, and coupled with low barriers to entry, the restaurant business sees more than 100 new eateries opening
Of course, China’s diverse cultures yield a dizzying array of cuisine options and coupled with low barriers to entry, the restaurant business sees more than 100 new eateries opening everyday in the major metropolises in the country.
However, there’s a catch – the market is getting incredibly saturated. New restaurateurs are opening shop everywhere, but there’s a particular focus on five specific kinds of cuisine: fast food, baked goods, hot pot meals, Sichuan cuisine, and barbecue.
The effect of many doing a few things is that entrants drop out quickly. More than 70 percent of new places close within a year, largely due to high operations costs and turnover rates.
As a result, the restaurant business can be seen as a largely unsustainable one and there is a very real possibility the lack of success could eventually lead to a fall in new entrants.
Meituan-Dianping, an e-commerce service platform that connects consumers and merchants, suggests businesses could benefit from implementing new technologies that take advantage of China’s shifting demographics and accelerating digital economy to remain competitive in this saturated market.
Meituan-Dianping’s research surveyed their dining app’s 260 million strong user base to learn innovations such as on-demand food delivery services are a kind of lifeline for restaurants in the saturated dining market. In 2016, revenues from on-demand food delivery services tripled, leading some analysts to speculate the potential of the market to achieve CNY300 billion (US$44.3 billion) by 2018.
On-demand delivery services have worked for both sides of the dining table – for restaurants, delivery services have allowed the extending of a business’ peak hours as well as broadening its customer reach. Whereas before customers were limited by accessibility and foreknowledge of a specific eatery, they now have access to a massive directory of all dining locations near them.
Here's my take on the on-demand food delivery space and why it's so difficult for startups https://t.co/CTzYtdXrsK
— Don Richard (@DonaldRichard) May 26, 2017
“The rate of growth for China’s dining industry is expected to hit double digits, so we would say there is plenty of room to grow in an unsaturated market,” Meituan-Dianping’s head of dining platform and on-demand delivery Huiwen Wang told Tech Wire Asia in an email.
“We expect the trend of on-demand deliveries, a new way to have meals, to grow in popularity over in-restaurant dining and kitchen cooking in the next three years.”
The research paper also notes delivery services are particularly sticky with Chinese consumers – 79 percent of all orders are from repeat customers who will order more than once a week, while 47 percent will rely on on-demand food delivery services for more than three meals a week.
Respondents to Meituan-Dianping’s survey have come back with results that speak to the fact that on-demand food delivery services have a significant impact on a restaurant’s bottom line. A business can process more orders quickly and efficiently through such platforms, while also being cheaper to run.
Furthermore, the on-demand delivery service taps directly into China’s secret sauce: a large and growing millennial consumer base that prizes connectivity, speed and personalization.
“Millennials are driving the growth and development in the industry,” the report reads.
“Middle class consumers born in the 1980s and 1990s contribute to more than 70 percent of dining consumption.”
However, it doesn’t all begin and end with the food-delivery service. Meituan-Dianping notes restaurants can implement a variety of management software that can help them boost efficiency while also keeping operating costs relatively low. Some options include intelligent resource planning (ERP) solutions with cloud connectivity that are able to bring an elegant simplicity to the complicated business of running a dining business.
ERPs can platform services such as managing reservations, ordering and payment all on a single platform that costs significantly less that hiring a large staff. By digitizing themselves, restaurants will be able to provide a far more transparent and environmentally-friendly service, while also boosting their compliance capabilities. Incorporating data analytics into their businesses can help owners make better decisions about their menus, locations and promotions to stay competitive and remain relevant.
Wang told Tech Wire Asia at the moment, the company is working with industry regulators, users and merchants to “establish industry-wide protocols that will help improve food safety and protect the environment” with the power technology.
Beyond the defined boundaries of the food delivery service, technology can yield many innovations to enhance diners’ experiences, from “more intelligent software and hardware to optimize efficiency and innovate new offerings like a ‘ready-to-cook’ product” to new lifestyle solutions to help them “eat better and live better.”