One of the most foundational questions that I’ve been asking myself for a long time now is that why are aggregators like UberEats and JustEat are winning in spite of not being very friendly to the restaurants?
The answer lies in the marketing budget
When UberEats is charging 35% for every order, remember the 35% is on the revenue and not not on the profit, which in most cases is more money than the actual restaurant is making on that order, so if you look at the amount of money that UberEats is left with for marketing, it is actually humongous.
I would like to point out that of course UberEats is aggregating thousands of restaurants and definitely their marketing budget will be no way comparable to that of a restaurant, but what is more interesting is that the money that is being made from the individual restaurants is much more than the very restaurant sets aside for marketing.
Basically aggregators are huge marketing houses who are targeting consumers with really good promotions, which is being funded by the individual restaurants itself
I think the phenomenon is same across industries, for instance in transportation services a lot of small and regional taxi operators are going out of business because they don’t have enough marketing budget to compete with the giants like Uber or Ola. This business model is extremely one sided and there is absolutely no way that the participating players could compete against them.
One of the characteristics of a small businesses is that they operate with little or no marketing budget and what is rapidly changing in the marketplace is the amount of money that is being spent targeting potential consumers about a product or service. So I would argue that unless you are providing something that is extremely unique, there is absolutely no way to stand-out or compete against the aggregators.
So the next time you thinking of starting a business please think about how you were going to reach out to potential customers and if you have got enough marketing budget to play with.
Coming back to the restaurant industry itself, I think the destruction has already happened and there is absolutely no way that this could be undone. It is going to be an extremely difficult journey for restaurants to gain their voice back
A few restaurants have cut themselves free of the aggregators and have created a customer base for their own. One of the common traits of such restaurants are that they are run by owners who are inherently better communicators and are able to establish a dialogue with their customers.
The sad news is that the number of restaurants who are able to do this are in the minority and platforms like us (Zagl Mobile Commerce), who would like to empower restaurants with a voice are facing exactly the same issue of the marketing dollars when it comes to getting the word out.
The only asset that we can leverage in spreading the word is the relationship the restaurant owners have got with their regulars. But still the question of, if we could outsmart the continuous influx of marketing dollars with an organic effort of creating awareness among restaurant owners and customers about the hazards of commissions is it yet to be uncovered.
As a concluding remark I would like to say that from the point of view of business do not look at UberEats or JustEat as food tech companies, instead if you look at them as marketing houses who could simply outsmart the constituents with better marketing team & money, I think everything falls into place and we can get a better understanding of what we’re dealing with.
For newbies, Zagl is a mobile commerce platform, which is designed to empower individual restaurant owners to create a community for themselves and accept orders directly without paying commissions. Our objective is to create an ecosystem where every constituent restaurant would benefit irrespective of the number of restaurants and to create a healthy and sustainable ecosystem for the restaurant owners and to eradicate commissions altogether from the restaurant industry.
If you are a restaurant owner check Zagl to see how you could set up an online ordering system on mobile for free. If you are not a restaurant owner, then I’m sure you are using one app or other to place orders with your local restaurant, so the next time onwards please use a commission free system which would benefit you and also the restaurant owner to make the world a better place.
Commissions are unsustainable.