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Food delivery firms begin pinching pennies: Report
A plunge in growth last year is compelling food delivery platforms in Southeast Asia to scrutinize their costs for the sake of profitability.
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A delivery rider for Meituan, one of China's biggest food delivery firms, heads out to make a delivery after picking it up at a restaurant in Beijing on April 27, 2021. (AFP/Greg Baker)
F
ood delivery platforms in Southeast Asia are forced to optimize costs for the sake of profitability after the segment saw a plunge in growth last year.
The segment recorded a mere 5 percent rise in gross merchandise value (GMV) in 2022, according to the Food delivery platforms in Southeast Asia report released on Jan. 17 by Singaporean venture capital outfit Momentum Works, which closely monitors technology business trends in Southeast Asia.
“We believe profitability is attainable with volume, density and operational efficiency,” said Momentum Works CEO Jianggan Li on Jan. 17.
Food delivery is a thin-margin business; even the world’s arguably most efficient player, Chinese shopping platform Meituan, has achieved an operating margin of only 6 percent, according to the report.
Momentum Works’ analysis puts the long-term food delivery operating margin at 5 to 8 percent and the report names three ways of cost optimization to reach that number: improving delivery operations efficiency, cutting customer incentives and controlling payments.
Read also: Southeast Asian food delivery GMV growth plunges to 5 percent
According to the report, delivery costs in Southeast Asia accounted for up to 80 percent of total revenue. Meituan’s cost once lay at around the same figure, but the company managed to shrink it to 70 percent within just three years.
