Delivery apps gear up for a price war

2017-12-17 06:01 - Justin Brown
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Johannesburg - A battle is raging between the major food delivery apps in South Africa, according to OrderIn CEO Dinesh Patel.

OrderIn’s key competitors are Uber Eats and Mr D Food, in which Naspers has an indirect stake.

“Right now, we are in a massive pricing war to win customers. We have seen this play out all over the world,” Patel said.

As a result, no one in the digital food delivery space was profitable, Patel said. He is OrderIn’s majority owner.

Devin Sinclair, the head of Mr D Food, said that, according to his information, Mr D Food and Uber Eats were by far the largest local players and therefore had the biggest influence on pricing.

“While we are not profitable at the moment ... we believe that the necessary scale can be attained in South Africa. It is equally true that in many e-commerce industries, the smaller players often can’t sustain the losses long enough to achieve the required scale,” Sinclair added.

Uber spokesperson Samantha Allenberg denied that there was a price war among local food delivery apps.

“The competition that Uber has introduced has also encouraged innovation by existing food delivery platforms,” Allenberg said.

She said Uber did not disclose its financial results so couldn’t say if the local operation of Uber Eats, which launched in October last year, was profitable.

Patel said: “The giants – the Ubers and the big technology companies – go into markets ... they undercut everybody to squeeze out the independent players like ourselves and put people out of business.

“Because Uber Eats and Mr D Food mark up restaurant menu pricing quite significantly, the experience is pretty expensive. At OrderIn, we work incredibly hard to keep the menu pricing the same as what is on our app.”

Sinclair said that, when it comes to menu pricing, Mr D Food did not set menu prices as all prices were set by the restaurants themselves.

“While we encourage restaurants to maintain their in-store pricing, a minority of our restaurants choose to increase their prices,” he said.

Allenberg said that restaurant menus and prices were set by Uber Eats’ restaurant partners.

“Uber Eats charges a delivery fee per order, no matter the restaurant, basket size or time of day,” she said.

Patel accused Uber of being the “furthest thing from an ethical business”.

He added that Uber Eats tried to poach OrderIn staff when it launched locally.

“They scraped our website for all our restaurant data,” Patel said.

Allenberg said that Patel’s allegations were “simply untrue”.

“We are in a David versus Goliath battle,” Patel said.

Patel got his inspiration for OrderIn while working in the US. In high school, he was keen on golf and he went to the country in 2000 to play college golf.

“I ended up getting into Florida State University – that was a pretty good golfing campus. When I graduated, I joined Deloitte in Atlanta. I eventually joined Goldman Sachs ... there was a service that I used to order meals and that delivered to my desk called seamlessweb.com.”

Patel was curious about the business, so he set up a meeting with Jason Finger, the CEO of seamlessweb.com.

He came back to South Africa in 2010 and OrderIn was started in 2012.

“When I came back to South Africa, I decided I didn’t want to be in banking any more – I wanted to do something entrepreneurial. Something like the business seamlessweb.com.”

In 2012, Patel moved to Cape Town and worked on business ideas. He raised $165 000 (R2.2m in today’s money) to get the OrderIn business off the ground.

At the time of OrderIn’s launch, the company was a pure “marketplace” business, which brought restaurants and customers together.

In 2015, OrderIn changed its model so that it delivered goods to the 1 300 restaurants, mainly in Durban, Cape Town and Gauteng, in its network.

An interesting feature OrderIn offers is business meals that are tax deductible.

“Companies can register and offer employees an 18% to 45% tax break on all food ordered with OrderIn during office hours,” Patel said.

Companies that have taken on the tax break include Dimension Data, Internet Solutions, Media24, consulting businesses and advertising agencies.

OrderIn employs 40 people directly and it has 400 drivers doing deliveries.

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