Will Menulog survive?
Menulog is the market leader in the online ordering in Australia, but the recent changes to the landscape including a lot of independent online ordering providers and notably UberEats has threatened it’s very existence. The question is, “Will Menulog survive?”
How commissions started?
When Menulog started commissions were the advertising fee, because one of the fundamental promises that Menulog made it to the restaurant owners was that it would advertise for the restaurant and it would increase the number of orders that the restaurants where receiving.
It is well known that advertising is expensive and for the platform to grow and for the partnering restaurants to benefit Menulog had to invest heavily on advertising. I would say that this strategy worked very well which is evident from the leadership position the platform enjoys today with millions of customers and thousands of restaurant partners.
But for a country like Australia, there are only a certain number of restaurants the platform could acquire and the same argument goes for the customers as well. Today the platform has reached the saturation point, both in terms of the restaurants and also the customers. It is evident from the fact that the revenue of the platform has plateaued and in fact it’s decreasing month on month.
I think this is where the fundamental principles of economics kicks in:
It doesn’t matter how much advertising money is being pumped into the market, your product cannot grow beyond the saturation point
Ideal move for Menulog
Not that the market is saturated, Menulog can heavily cut down on their marketing spend, which could in turn lead to reduction in commissions for the partnering restaurants. Menulog’s biggest asset is the partner network, so it is in the best interest of the platform to keep the partners happy.
On the other hand Menulog is taxing the partnering restaurant heavily with high commissions and bidding, which has led to a lot of discontent in the restaurant owners community
Too many options for restaurants
Unlike a decade ago, today restaurants have got a ton of options to create their own ordering systems, like website ordering, facebook ordering, mobile apps, competing platforms etc. The reason why so many of these restaurant owners are trying to create their own ordering channel is primarily because of the high commission charged by the platforms.
A few things are clear:
- Restaurant owners are increasingly becoming averse to paying high commissions, especially after the onset of UberEats, which has disrupted the industry to an unprecedented degree.
- They also aware of the myriad of options that are available to them to create their own ordering channel, and a lot of them have also opted to one solution or another.
The erosion has started, it is only a matter of time that a lot of these restaurants are going to sway away a good chunk of the customers from the platform
Menulog has established a profitable position in the Australian market by amassing huge number of customers and restaurant partners. In spite of all this, I could see the littler or no effort from the part of Menulog to retain the partners. Partly because Menulog is busy fighting UberEats and it is trying to get into the delivery business, which I believe is too late.
If Menulog keeps pumping money into unprofitable ventures like delivery, it is only inevitable that Menulog had to sooner or later increase the commissions for the restaurant which will further fuel the already discontent community
Individual websites and mobile apps are not a threat
One of the reasons why a restaurant’s own website or mobile app is not having a huge impact on Menulog is because, it is extremely difficult to convert their customers over from Menulog to their own channel.
But the combined effect of thousands of these restaurants trying to actively convert their customers to their own ordering channel would definitely have an impact on the bottom line of Menulog’s revenue. And the trend is only likely to continue.
On the other hand, if there is a platform similar to Menulog, where a lot of these restaurants migrate, then the message from the individual restaurant owners to order through this new platform would have a compounding effect on the migration of the customers as well. This combined with the power of social media would fuel the migration of first wave of restaurants and customers, which could potentially create to a network effect ultimately leading to the demise of Menulog itself.
Migrations like this are pretty difficult to start, but once they start to gain momentum, it is also quite impossible to stop them
An ideal replacement platform should offer exactly what Menulog offers, without the commissions and bidding, while providing a the benefits of owning their own ordering platform.
Zagl is one such platform, which is extremely well positioned to totally replace Menulog in Australia. It’s offers commission free ordering, search by name, ability to engage with customers via. notifications, and the freedom for the restaurants to run their own discounts and promotions.
Zagl could be imagined as a fair-trade version of Menulog
Unlike Menulog where more restaurants, means more competition among them on the platform, Zagl creates a win-win ecosystem, where every additional restaurant creates more value for everyone involved. For more information checkout the website at www.zagl.io
Say no to commissions
To conclude, it is totally unfair that restaurants with such a thin profit margin, are forced to pay commissions just for the privilege of an online ordering system. At Zagl, we are fighting towards eradicating commissions all together, and we actively seek the support of the public to be better informed about the chargers incurred by the restaurant when choosing a platform.
Say no to commissions today and together let’s save the restaurant industry