Thailand: Hitting the road, getting a leg up on rivals

• Apr 18, 2019

While online, app-based food deliveries may be relatively new to Thailand, the motorcycle drivers carrying insulated boxes filled with orders and branded with their company logos have become ubiquitous in the country’s urban areas. 
The three major players in online food delivery — Grab Food, Line Man and Foodpanda — all say they have the largest share of the market and are offering promotions, incredibly low delivery fees and aggressive marketing strategies. 
Meanwhile, newcomer Get, backed by the Indonesian unicorn startup Go-Jek, believes it can grow to become a substantial competitor to the big three in the next few years. 
While food ordering, along with other mobile app services like ride sharing, is rapidly becoming popular, it still only makes up a small fraction of the market compared with more old-fashioned methods. 
According to research firm Euromonitor International, online food deliveries in Thailand only make up US$63 million of a total $937 million delivery market, meaning Thais are still much likelier to pick up a phone and dial a restaurant if they want food delivered. 
Even so, online delivery had a 29% compound annual growth rate (CAGR) over the past five years. 
“Thailand trails behind countries like Indonesia when it comes to adoption of online food delivery,” says Grace Chia, senior research analyst at Euromonitor. “Indonesia’s online food delivery market has grown at a CAGR of 73% over the past five years. Consumers in Bangkok have easy access to a wide range of dining options and may not find food delivery necessary. However, if food delivery players are able to develop predictive algorithms to reduce delivery time and target time-stressed consumers, food delivery will gain greater traction. As busy consumers place greater value on convenience, they will be willing to pay for delivery services rather than being caught in a traffic jam in Bangkok.” 

FIRST TO MARKET 

Alexander Felde, managing director of Foodpanda Thailand, disagrees with Euromonitor’s market size and says the current market in Thailand is much larger and with greater potential for growth. 
A Google Temasek study estimated the size of Thailand’s online food delivery market to be as high as $300 million in 2018, averaging out to 120,000-140,000 deliveries a day. 
Mr Felde says the market could grow enough to accommodate 3 million deliveries a day in the next five years. 
Foodpanda was one of the first players in online food delivery in Thailand and the first mobile app offering the service. Founded in Singapore, it moved to Thailand in 2012 and laid much of the groundwork for the online food delivery infrastructure, getting restaurants on board with the new technologies and logistics behind the digital transformation. 
Today Foodpanda has partnerships with over 5,000 restaurants in eight cities and has about 2,000 active delivery drivers. In early April, Foodpanda saw its 1 millionth delivery of the year. 
Mr Felde doesn’t see the heightening competition and increasing number of market players as a bad thing. 
“Everyone is winning in an early-stage market,” he says. “In 2018, with new players entering, it has helped jump-start the market, helping educate more people and drawing more people in with promotions.” 
He says the market could expand in three ways: by getting people to switch from telephone ordering to online apps; by changing lifestyles in which consumers are likelier to order for delivery; and by penetrating into more areas of Thailand. 
With all the new players in the market competing to keep delivery prices low (many restaurants on Foodpanda offer free delivery), more people are finding app deliveries the most convenient and at times the cheapest option. 
Despite the healthy level of competition, Mr Felde still thinks Foodpanda is on top. 
“I’m pretty confident that in terms of gross merchandise volume and revenue we are far ahead, at least five-times-plus ahead of anyone,” he says. “We have a more distributed segment of consumers, so we have a medium to premium market that is almost completely with us, and now we are moving super strong into the lower segment of the market. On the transaction level and orders level we are also still ahead, but Grab progressed very well in the past few months and might be just behind us.” 

TAXI TO FOOD 

Tarin Thaniyavarn, the country head of Grab Thailand, has a different view. Although Grab only began food delivery (an offshoot of its popular ride-hailing service) in Thailand in November 2017, he believes that Grab has already far outshot the competition. 
Mr Tarin says Grab grew by 40 times in 2018, serving a total of 3 million deliveries that year. Over the week surrounding Chinese New Year of this year, Grab says it delivered 800,000 dishes of food (where one delivery could contain multiple dishes). 
“We believe we became number one in the market as early as August of last year in terms of deliveries, basket size and revenue,” Mr Tarin says. “I am surprised by how much me are still growing week-on-week and with more customer penetration and how behaviour is changing we will be able to continue to grow rapidly. Our growth potential is still massive and I would be surprised if anyone could catch up to us at this point.” 
He says Grab’s food delivery service was able to grow so quickly because of the already large monthly active users and driver base it had from its ride-hailing service, which made it easy to cross-sell food on the same app. Grab doesn’t disclose the number of drivers it has, but Mr Tarin says he’s sure it’s the largest in Thailand. 
“It gave us a very unfair advantage over our competitors that are simply in the food market,” he says. 
Still, there remain logistical challenges to overcome. While Grab has some restaurant partners for which customers order directly from the store, many orders go through drivers who must drive to the store, order the food, then wait until it’s ready, thus adding some time to the delivery. 
Mr Tarin says order cancellations skyrocket after 45 minutes of wait time, while ordering directly from the merchant can cut 10 minutes off delivery times. 
Grab plans to expand its food deliveries into six more cities by the end of this quarter, including Chiang Rai and Pattaya. Mr Tarin says Grab’s low 10-baht delivery fee probably won’t change any time soon. 
Unsurprisingly, Line Man, the food and ride-hailing offshoot of the hugely popular Line messaging app that came to Thailand in 2016, also thinks it has an edge in the market. 
“I think anybody can claim that they are number one, because nobody is disclosing their numbers, but I am confident we are sitting on top of the market,” says Noppadol Vashirakovit, product manager of Line Man. “People are already used to using the Line ecosystem for messaging and have a very high trust in our service.” 
He says Line Man’s primary advantage is the massive popularity of the Line messaging app, which has 45 million users in Thailand — about two-thirds of the total population. 
Line Man, which is a separate app from Line, has about 1.5 million daily active users and offers deliveries from roughly 45,000 merchants in Bangkok. 
Another advantage is Line’s ability to cross-promote its services on its app, such as advertising its food deliveries on Line TV and offering promotional details on its messaging app. Line also has access to a treasure trove of customer data that can be leveraged across services. 
“The more we understand our consumers, the more chance we have in winning,” Mr Noppadol says. 
He expects the price wars around delivery fees to eventually ease up and probably settle around a more reasonable 30-50 baht, as the current 10-baht (or free) model is unsustainable. 

THE NEWCOMER 

Get is the latest player to enter the Thai market, combining food delivery with ride hailing and more services to come. It has a huge backing from one of Indonesia’s most successful startups, Go-Jek, which is expanding across Southeast Asia. 
The company says it has about 300,000 downloads of its app with 10,000 drivers and an average 28-minute delivery time. The user base has reportedly grown 65% since the official launch in late February, following a two-month soft launch. 
Some 30% of Get’s orders come from big branded restaurants, while 70% are from SMEs and street food. A whopping 40% of orders are for drinks, representing the massive popularity of bubble tea and other beverages. 
“Of course I want us to grow because I want this business to survive,” says Wongtippa Wisetkasem, the head of Get Food. “We are so young, but we are already very happy with our results so far.” 
Ms Wongtippa says Get sets itself apart by taking a hands-on approach to training drivers at a large training facility in Bangkok. The app also works with licensed motosai drivers through the Get Win service and trains them to take food orders in their downtime. 
The app lists over 20,000 restaurants, but many merchants have no menu listed on the app, showing that Get still has some work to do improving its customer-facing listings. Ms Wongtippa says the company sends surveyors to restaurants to get menus; some restaurants may be closed when the surveyors drop by. 
“Our competitors are not our main problem right now — it’s the large untapped market and the people not using delivery apps,” she says. “The market is not as strong as it could be, but the more it grows, the more we can thrive.” 
Paul Kenny, chief executive of Minor Food Group, says: “We already have a fairly large customer base who will hopefully be happy to download our app. Everyone has a mobile phone, it’s an integral part of their lifestyle, so we’re offering this new technology to better serve our customers.” 
It’s not just tech startups offering online delivery. Minor Food Group, the operators of Burger King, Thai Xpress, The Pizza Company and other big brands in Thailand, recently launched its own 1121 app, hoping to appeal to millennials too tech-savvy to make phone orders or use a website. 
McDonald’s and KFC offer their own online food delivery services. Major brands are estimated to take up about half the online food delivery market, with the remaining half split among the major apps: Foodpanda, Line Man and Grab. 

Source: https://www.bangkokpost.com/news/special-reports/1663192/hitting-the-road-getting-a-leg-up-on-rivals