In the last video we looked at the landscape of different activities taking place in the food delivery sector, which should have given you a pretty good overview of what's involved in each. If you haven't watched that, I suggest you check out that one, before looking at this one.
In this video I want to talk about what are the different opportunities for starting businesses. Which ones take the least money, and can you get up and off the ground the fastest. Because I've been speaking to a lot of people on the Spatula chatline who are really looking at opportunities. They're seeing the growing trend in food delivery, and thinking, "How can I get involved in there, in my area, and get something going?"
Let's talk about the opportunities. Usually, the first thing people are talking about, is how they can jump in and be a number 6 business. If you haven't watched the last video, basically, this is the overlap between selling the food online through an online marketplace of some sort, and then making the delivery. Because they've seen UberEATS, or Deliveroo, or GrubHub, or Foodpanda — depending on where you are in the world, or [Go check 00:01:06]. It seems like a very pervasive way of getting a business up and running.
Examples: Uber, Deliveroo ... Sounds good, because they're all massive. But one thing to be aware of is that one of the reasons why there were all massive is because of the marketing cloud. You actually need to succeed in that particular space. The challenge is, where a lot of the profit is going for these food deliveries, is to whoever makes the sale. So this circle here becomes quite dominant.
Actually there is a lot of talk in the press, around, you know, even back to before they were making the delivery as well, the ... Excuse me ... The food restaurant aggregators, and some of them using some relatively aggressive tactics, taking sales off restaurants, and then charging commissions on that. A lot of the gross profit on a particular sale, moving into whoever's making the sale. That makes it quite tempting to say, "Right, well, I want to be one of the sellers," but that's actually quite a challenging space to play in.
First of all, you have to attract customers, and then keep them. And then you've got to deals with all of the restaurants, who can it be preparing the food, and say, "Hey, I'm going to take a chunk of your money if I sell to your customers." Otherwise you're going to be selling directly to customers, but you'll have to put your margins on the top.
So you're really operating a double sided marketplace, and that comes with some very specific challenges. Mainly, if you are trying to please both sides of the market, then you're relying on getting both sides going at once, and that requires a lot of resources. So you see in new markets that Uber, and DeliverEats, and Deliveroos and whoever else is playing go into — especially when is multiple of them — they can pay it really hard. They spend a lot of money and they don't always operate at a profit at first, until they've built up quite a good market share.
This space here sounds like — sounds like — big bucks coming in, but it can also mean big bucks going out as well. Well, that might be the first one, that a lot of people think of, they're saying, "That's the business I want to start." Really consider whether you can make that happen. And, if your market doesn't necessarily have anyone doing that yet, think about what it would mean if someone larger did come to your space, and then you're competing, and the cost of advertising goes up on [Mark 00:03:52], on Facebook, or Google, or whoever it is.
So it can be quite a difficult place to compete. Having said that, if you win, it's an extremely lucrative place to be. Certainly a worthwhile business model to think about. Very, very challenging place to play, but not necessarily a bad one. And there's plenty of tech to enable you to get up and running in that space.
The things that you need are: the sell side, so you need the order platform. Then on this side, you need the delivery system, well, I'm going to just use ours, Spatula, to manage all of ... You know, track where the drivers are, dispatch the jobs out, and let the let the customer track the driver on the way in, let, they would expect if they were getting Deliveroo, UberEATS, or whoever is the getting. So you have to have both sides of the tech.
That's not a big deal. These are becoming more and more pervasive. There's a few different ones, like, if you talk to the guys at Entrée, if you talk to the guys a OrdersIn, there's a few different ones available in order to set that part up. And then Spatula or we've got some competitors as well — obviously, that we won't talk about, but ... Spatula will let you manage that the driver side, so you can set the whole technology thing up pretty quickly.
You'll soon realise that the challenge is, well, how do you actually attract enough customers to your side and compete with very, very big and sophisticated marketing campaigns, that others are doing. Then, how do you get your drivers, how do you get the restaurants, it's a three-way marketplace. Okay, so that's all I want to talk about for that one. I might actually start a new video, to talk about some of the alternative business opportunities there are in the whole food delivery space, and go from there. I will see you in the next video!