How can F&B businesses adapt for growth, given changes in consumer behaviour?

This article was originally published on UOB Business Banking Insights by UOB on 27 April 2021.

Key Takeaways:

  • Online food delivery is a trend that’s here to stay in Singapore. F&B businesses need to adapt fast in order to capture this market opportunity
  • Online ordering platforms help F&B businesses attract online consumers while maintaining control of the online user experience and brand presentation
  • Platforms that provide end-to-end management capabilities enable F&B businesses to digitalise various business processes

As an F&B business owner, you may have sustained your operations last year by fulfilling orders placed through delivery apps. And data suggests that this behavioural shift towards online food delivery may have become permanent among Singaporean consumers.

When restaurants closed during the Circuit Breaker last year, Singaporeans turned to online food delivery services. More than half of consumers (51%) increased the time they spent on food delivery apps during that period to satisfy their needs and cravings.

But even as establishments re-opened, people continued having food sent to their homes. In Q4 2020 alone, the number of orders Foodpanda processed was equivalent to the total number of orders it received in 2019. A survey by The Straits Times and Milieu Insight, conducted in March 2021, revealed that 46% of Singaporeans are more likely to order food delivery now compared to pre-Circuit Breaker times.

In fact, Nielsen predicts that this behaviour will become one of several “new and lasting habits” that Singaporeans formed during the Covid-19 pandemic. Online food delivery could even make up 40% of total restaurant sales in Singapore by 2025.

But you may have also realised that it can be challenging to maximise profits when relying on delivery platforms and online marketplaces as these platforms typically charge commission fees of 25% to 30%.

This is why it’s crucial for F&B businesses to adopt diverse online channels as more consumers demand food delivery. By not putting all your eggs in one basket, you can position your business for growth and leverage consumers’ increased adoption of online food delivery.

Here are some ideas you can consider to adapt to the evolving demands of F&B consumers.

 

Cloud kitchens

For F&B businesses and startups, one way to control costs is to use a cloud kitchen.

Cloud kitchens are on the rise in Singapore and across Southeast Asia. They are centralised production facilities that are used to prepare food for takeout or delivery only. That means you don’t have to think about paying for front-of-house staff, guest services, interior design, and other costs related to dining in.

Several businesses may share a cloud kitchen, making it more cost-effective as they can split the rent. Businesses with several brands can also bring them together under one roof.

 

Online ordering systems

Online ordering systems are Software-as-a-Service (SaaS) platforms that restaurants can integrate into their own websites or apps. While not new, online ordering systems saw a boost in traction during the pandemic. One such example is Getz.

This is because they provide several advantages: restaurants get to maintain their brand, control the user experience, and gain insights into consumer behaviour data – all of which they can’t do on third-party marketplaces and delivery platforms.

Plus, providers of online ordering systems typically charge very low fees. Getz, for instance, charges a fee from as low as 4% of online take-away or delivery sales.

 

Considerations for adopting online ordering systems

As with cloud kitchens, you’ll need to think of how to digitalise various processes in F&B production and management to maximise the benefits of ordering systems. The good thing is that some of these SaaS platforms provide end-to-end process management capabilities.

Consider adopting a singular end-to-end digital solution that connects order management across online and in-store channels to restaurant POS (including a payment system) and delivery booking systems. This approach can help prevent disjointed processes and hefty integration costs across multiple vendors.

 

Digitalise other business processes to maximise business growth and profits

The benefits of digital solutions are obvious—but as an SME owner, you probably know that adoption isn’t a piece of cake. This reflects a trend among SMEs in Singapore: 83% have digitalisation strategies but 54% delayed implementation due to Covid-19. Meanwhile, 56% are hesitant due to the high cost of digitalisation.

The good news is that the pandemic has convinced many F&B businesses – even traditional restaurants—to try out digital solutions. Such efforts have yielded quick results. In December 2020, many restaurants that had adopted digital tools reported that revenues had bounced back to 70% to 80% of pre-pandemic levels.

The challenge now is to identify and implement the tools that will help you grow your business and maximise your profits. This involves identifying what other parts of your business can benefit from digitalisation, including procurement, inventory, bookkeeping and accounting, and human resources.

It can be daunting to digitalise these different aspects of an F&B business, so it helps to think in terms of an ecosystem approach. Identify related processes that can be digitalised and automated, such as procurement, invoicing, and payroll to lessen manual repetitive tasks and to enjoy faster and seamless workflows. To make this process easier, you can look for programmes that curate digital solutions for SMEs in specific industries.

 

Get the support you need for your digitalisation journey

Online ordering system and delivery is a significant part of the New Normal for F&B businesses. To grow and thrive, you need to adopt solutions that allow you to reach online audiences and provide deliveries without having your profits squeezed.

If you’re worried about the cost of adopting these solutions, you can tap these government initiatives to help defray cost:

  • Productivity Solutions Grant – Covers 30% of the cost of purchasing, leasing, or subscribing to an IT solution or equipment
    Digital Resilience Bonus – Provides payouts of up to S$10,000 for using qualified digital solutions to improve business processes in the food and retail sectors.

Contact us to learn more about how we can support small and medium F&B businesses.

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