Pre-order capability will transform the Hospitality Sector Featured

Dec 10 2017 1 comment
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Pre-order services are now being touted as ‘essential’ services for the commercial success of hospitality, food and events management businesses. Proponents argue that by allowing customers to book, order and pay in advance, both customers and businesses benefit. Customers, they claim, can avoid lengthy queues and can also take advantage of the many loyalty schemes these businesses offer. Businesses benefit from the increased efficiency of their operations (customers are not standing in queues) and from the additional sales opportunities this creates.

There is no doubt that pre-order capability radically changes both what and how consumers purchase products. There is also no doubt about the numerous benefits that result from these changes. Pre-order capability is, after all, one of the ways by which Internet based businesses operate. Purchasing a 'soon to be published' item for home delivery through Amazon, for instance, is achieved through a pre-order process, a process which is now the norm. What then is changing in the world of hospitality and why is this deemed so new and so desirable?

Pre-order capability is an outgrowth of the Pre-Pay model

What is new is the integration of this pre-order capability into the core operational model of hospitality, food and events management ‘brick n mortar’ businesses. Previously, for instance, you would simply walk to your local cafe, order your coffee, pay for it and sit down or take it away. You now have the ‘choice’ of purchasing this beforehand and having it delivered to your door or collecting it at a time of your choosing. The new wave of food delivery businesses such as Just Eat and Deliveroo is a good example of how quickly this capability can take hold and overturn previously accepted norms of business. Ordering food in advance is a long established practice. Ordering freshly cooked food to be delivered to your home or office is new and can transform how food businesses operate. By introducing pre-order ‘click and collect’ or ‘deliver to my home’ capability, restaurants and food businesses are often significantly broadening their customer base and opening up new channels of revenue.

In practical terms, Pre-ordering a food or beverage product allows you to secure the product and hopefully avoid the queue. In the world of Cafes and Quick Serve Restaurants (QSRs), there has been an ongoing search for changes to operations that can improve the overall efficiency of the system. In these settings, pre-ordering may help alleviate the length of queues but the much more radical impact is being felt in upholding and nurturing the relationship between the business and the customer. As an example, in a office tower somewhere in London a worker has just decided to do what he often does at 11:00 am on a Wednesday and order his lunch. He has come to know the chef well because he has visited the restaurant several times. The chef knows him and has often made slight alterations to his meal in line with his likes. More often than not, our example 'worker' is far too busy to escape at midday and uses his App to pre-order his lunch which is then delivered to his office. His Pre-order App allows the restaurant to recognise him as they have access to his order history. As they also manage the delivery service, they are able to ensure that there are no delays and  the food arrives as planned. This is a very personal service and one that has been aided and made possible by pre-order technology.

That consumers are taking up these 'opportunities' is a clear indication that they are wanted..

That consumers are taking up these ‘opportunities’ is a clear indication that they are wanted. What perhaps is not so clearly understood are the negative consequences of this engagement for consumers. As has been true with most of the ‘efficiency’ gains brought by online ordering, consumer’s personal information and ordering history are often used to build profiles that are then sold on or used for marketing purposes. Consumer data is big business and often regarded as a company’s most valuable asset. The integration of pre-order capability into the hospitality industry provides businesses with a wealth of personal data and with the means to generate revenue from this data. The battle for its ownership is just beginning.

To highlight just how important the management of 'personal data' is, lets look at it more closely. Depending on the commercial agreement that hospitality businesses enter into with Delivery Providers or Aggregators like Just Eat or Deliveroo, they may or may not have access to the consumer data generated from an online order. This is clearly a problem if your business is one which thrives by maintaining a close relationship with your clients as in the example given above. Many restaurants and food retailers have found this objectionable and they are now actively seeking alternatives which would allow them to continue to manage and ‘own’ customer order data, securing the close relationship that they have with their clients.

This need for an alternative has led to the rapid development of a number of companies offering pre-order capability (Preoday, Pepper, Easypreorders) for the Hospitality industry. These companies seek to benefit from the dissatisfaction expressed regarding the loss of access to customer order data and they hope to position themselves between hospitality, food and events management businesses and the consumer by promoting the integration of pre-order systems that guarantee businesses will continue to have full access to consumer order data. This provision is fundamental to their offer as is the revenue model they have adopted. Rather than force food retailers to agree to commissions of between 17% and 24%, these companies tend to charge a minimal monthly access fee. Neither do they encourage Restaurants or Food Retailers to offer large discounts for delivered products which put undue pressure on their operations as do the larger Delivery Service Providers. 

Looking at the London restaurant market and their use of food delivery services, it is very clear that many restaurants are using all options at their disposal to enlarge their delivery capability. You will regularly find Deliveroo, Just Eat and Preoday systems running side by side. The advantage of the larger Delivery Providers is clear in that most of the orders made will be through their platforms. However, when speaking with the Restaurant Managers you will hear a very consistent and telling story. They say quite openly that Just Eat and Deliveroo's commission (17%- 24 %) is far too high and they prefer the systems and arrangement set up by the smaller start ups (PreodayPepperEasypreorders). They prefer to manage their own Delivery Drivers and do not see why this could not be managed independently. The ordering 'platforms' provided by Just Eat and Deliveroo are just that, ordering sites that are familiar and therefore frequented. They cannot understand the basis for the high commission charges and they think it quite unfair. The fact that these views were found to be so consistent should be very worrying for the major Delivery Service providers.

It may very well be that the 'right' Delivery Service Platform has yet to arrive, but should these start-ups continue to grow, they could very well position themselves to challenge the likes of Just Eat and Deliveroo by creating a service model that is more attuned to the mutual needs of businesses and consumers alike.

Read 2545 times Last modified on Dec 22 2017

Senior Research Director, Foodservice Network

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A fascinating look at one of the most dramatic and radical changes to be seen in the foodservice sector in the last decade..

William Chadwick
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