‘It’s basically not been touched’: foodpanda and Deliveroo join menagerie of online food delivery start-ups vying for Hong Kong’s nearly virgin market
There’s a battle playing out on the streets of Hong Kong between pandas and kangaroos - or at least icons shaped like these on bikes and satchels - as online food delivery companies vie for market share.
Frankfurt-listed Rocket Internet’s four-year-old online takeout delivery start-up foodpanda and recent arrival Deliveroo, a British start-up, are among a growing number of companies trying to tempt hungry Hongkongers to order meals online.
These two companies have ramped up their marketing recently by deploying people dressed as pandas and kangaroos, respectively, to drum up interest.
But a third major player, Delivery.com, which originally hails from New York, avoided using any animals in its ads when it expanded its corporate food delivery service to include individual customers last April.
All three say they chose Hong Kong in light of the territory’s high density, generous incomes and rapid adoption of new technology.
“This is a lifestyle thing. It’s a convenient way to eat,” said Justin Landsberger, one of two general managers for Deliveroo in the city.
“Hong Kong is a time-constrained city. People work hard and people play hard, so when you know you can get your food in 30 minute, it’s attractive to a lot of people.”
Euromonitor estimates the food delivery market in Hong Kong from outlets without seating will be worth HK$423.2 million (US$54.43 million) in 2016, while Foodpanda’s sister company Foodora claims the market has already hit HK$2 billion.
Companies like these provide online ordering online or on mobile from restaurants near a user’s location. More areas are being covered, but the services remain largely focused on the central and western parts of Hong Kong Island.
Despite being something of a latecomer to the local food delivery industry, Landsberger said Deliveroo, which launched in Hong Kong in November on the back of US$100 million funding, was focussing on its services for customers and restaurants.
“If we are not successful in Hong Kong or in Asia, it’s because we did something wrong. It’s not because someone [else[ did something better,” he said.
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Foodpanda launched in Hong Kong 18 months ago and quickly acquired local food-ordering companies Koziness and Maidan. It was joined by sister company foodora in September to offer deliveries from more high-end restaurants.
However, Foodpanda felt compelled to lay off 300 employees in India and close its Vietnam operation late last year, suggesting it has struggled or at least overestimated some markets in Asia.
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Foodpanda and foodora have now merged in Hong Kong to build on heavy investments made in the past 12 months, said Alexander Roth, the managing director of foodpanda’s local operations.
“The market is still gigantic in Hong Kong. It’s basically not been touched. That’s how we see it,” Roth said.
“So I think it’s still very small and can grow very, very rapidly.”
Roth said the company holds the No 1 spot in most of the 28 countries it operates in and is not concerned with rivals.
But Foodpanda and foodora recently announced they would cut their delivery times from one hour to 30 minutes, which analysts see as a bid to stay competitive with Deliveroo, which vows to get customers their food within 32 minutes.
The market is now being closely watched by James Giancotti, the CEO of start-ups rating company Oddup. He said he is interested to see the returns on these companies’ investment in marketing.
“Of course all these start-ups are chasing the same small market, so it will be interesting if the model takes off in Hong Kong,” Giancotti said.
“Our view is that Hong Kong is not the best market for this type of service given the ease of access as a city.”
Delivery.com, which now sees an equal split between corporate and individual orders, views the increasing number of delivery companies as a sign of a healthy market. It said it is encouraged by its continuing growth.
“It means merchants care about delivery, because they see rents are increasing, competition is fierce and this is another channel for them to sell to customers,” said Delivery.com’s head of sales and business development Linda Wang.
Chef and restaurant co-founder Peter Cuong Franklin said his restaurant, Viet Kitchen, has been using most of the major online food delivery services over the past three months.
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He said these have boosted his sales by about 10 per cent as they reach new customers, or those unable to make it to the brick-and-mortar venue in Central.
He said service standards at his restaurant have also improved, such as shorter delivery times, as competition has increased. But he is unsure how long this can continue.
“The need is there and the competition is good, but I think there’s going to be a filtering-out process because Hong Kong isn’t a huge place, so it cannot maintain that many delivery companies.”
Meanwhile, Dim Sum restaurant Ding Dim 1968 has been offering deliveries through Delivery.com since last September. It also works with foodpanda.
Alex Chau, Ding Dim’s self-titled “Dimsum Advocate”, said the services have brought in up to 15 per cent more orders, but that commission of around 35 per cent on orders squeezes his already tight margins.
“I’m sure they can bring in customers, because they have a customer base, but [the commission] really eats into our revenue, which means we can’t do every single order and keep losing money. It’s not worth it,” Chau said.