1. Food delivery sector has grown significantly on the back of changing consumer preference
While lockdowns resulted in a drop in demand for the overall food services sector, the impact was net positive for the foodtech market. The food delivery market grew significantly in the past year as more consumers adopted it because of restriction in movement. We expect the food ordering behavior to increase as more customers adopt online delivery and frequency of purchases also increase.
2. Unit economics are improving but still challenged
Revenue growth has resulted in a positive contribution margin of the sector in the region. While the contribution margins are still relatively thin, they compare favorably with players in other parts of the world. Any improvement will require management of delivery cost, as commissions are already under pressure from increased competition.
1.Other Revenues include marketing & promotion fees paid by restaurant
2.Other Cost include payment gateway fees and support provided to restaurants
3. Players have been innovating to improve profitability, more players expected to enter
Food delivery platforms have been looking at new ways to increase their margin through multiple initiatives such as tweaking the operating models, entering new verticals and opening dark stores/kitchens. We expect these new initiatives to help gain scale and further drive towards profitability. However, the sector is expected to see increased competition from players in other industries who are entering the foodtech sector.