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View our webinar recording below to learn how to launch winning marketing strategies!
Photo credits: Photo by https://unsplash.com/@bedbible
and here’s why:
Supporting local businesses has been a widespread movement for Filipinos since the pandemic started, with #LoveLocal and #SupportLocal hashtags trending on most platforms. However, despite the support, a significant portion of the revenue generated for these small businesses don’t actually go to the business itself!
Small food businesses lose 20-30% of their revenue to third party platforms
When the pandemic hit, a lot of food businesses were faced with a giant problem: Hhow can they sell on a digital space without losing a chunk of their revenue to third party platforms like GrabFood or Foodpanda?
When a local or small food business joins a third party platform, chances are they’ll need to pay commission fees amounting to 20-30% of their profits, with most micro businesses on the higher end. Why? Because only larger merchants are given the advantage of negotiating these fees down, in exchange for bringing in a certain volume of orders to the platform in question.
Kaloka, ‘di ba? Let’s run the numbers.
Our sample merchant, Alfredo Bakery, is a small home-based business. They wanted to scale up and opted to sell on Foodpanda. The commission fee they were given was 25%. That means, for an order worth P500, Foodpanda immediately gets a commission of P125, leaving the business with only P375.
However, there are other costs to take into account: food cost, which can be anywhere from 30-50% of revenue, staff salary, and location rent, to name the major operational expenses. If Alfredo Bakery had a monthly revenue of P100,000, a total of P25,000 would be lost to platform fees alone.
Alfredo Bakery’s Monthly Profit Margins & Operational Expenses
Despite the increase in food delivery orders, can a small business actually survive with these costs?
The solution most small business owners turned to was to start with accepting orders using Facebook or Instagram. Other business owners set up their own ordering website on easy-to-use platforms like Shopify.
Unfortunately, the accessibility and user-friendly interface of the Grab app or Foodpanda still have customers turning to them first before ordering directly from the business, leaving them with tighter margins.
As compared to sales on platforms with high commission fees, sales from direct channels (even with promos) give merchants higher margins. To encourage ordering directly from merchants businesses opt to run these win-win campaigns to promote such channels. As Abi Dinaya, Hanako’s Marketing Associate shares, “We try to match the discounts offered on 3rd party platforms on our own [direct] channels [and] another inevitable tactic was to mark-up our prices on [third party] platforms and match their low delivery rates.”
Thankfully, Abi says that Hanako’s sales are growing by the month, with the help of their consistent promotions. Check out cravehanako.ph for exclusive website promos!
As a consumer, how can I effectively support small local food businesses?
The answer is simple: spare a quick minute to search for your favorite local food businesses’ direct selling channels – be it on Facebook, Instagram. e-commerce ordering websites, like Shopify, also provide a more convenient experience for both customers and business owners, since products and their prices are immediately displayed, and payment can be done online as well without manual processing.
“As a local brand, we appreciate [your] continuous patronage for a local Japanese restaurant like ours! We look forward to [continuing] to satisfy [your] authentic cravings. 💚”
– Abi Dinaya, Hanako
Many small businesses are trying their best to survive and push past the many hurdles from the pandemic; however, small mindful changes in our buying habits may just give them a fighting chance to thrive.
Do you have a food business, but don’t have the time to set up an ecommerce store on your own? Let ZAP help you! Visit our website at www.zapestore.com!
Having trouble with the holiday rush sales? View our FREE Food Businesses: Tackling the Holiday Rush Sales to learn how to to maximize your revenues during peak seasons, and how to fully prepare your store for the holiday rush!
Learn about how to master key techniques for sales such as
-Bundling
-Pre-Orders
-Promos
-Collaborations
Given the challenges brought about by the pandemic – with malls now operating in a limited capacity and dine-in heavily discouraged – it’s understandable how many businesses and food entrepreneurs have been forced to adopt the “home cooking model” to survive. However, becoming a home cook is harder than it seems.
It’s easy to think, at first glance, that home cooking is just about preparing meals. “Passion can pull me through,” one may think. But, more often than not, home cooks just end up doing everything themselves. And that’s not exactly the best way to streamline.
Here are some struggles you may encounter as you embark on the journey of becoming a home cook.
Manual.. everything
Cooking in itself is already an arduous process. If you’re doing things alone, this entails doing all the prep work, the actual cooking, and the clean-up. And how many times do you have to do this in a day? In a week?
Yes, we can romanticize the idea of cooking food on your own, grinding for your art. However, operating a home kitchen goes way beyond cooking. Think of the process beyond the kitchen. Suppose you’re a one-person army running a food business. How will you take orders? You’ll take it one by one via SMS, WhatsApp, Viber, or IG DM? After a person orders, you have to individually check payment settlement or even wait for
Cash-on-Delivery.
The manual process in itself, on a case-by-case basis, is not only too much for one person but troublesome and inefficient for your overall operations. Yes, you can personally set up a website or e-commerce platform. But, if you’re doing things alone and are not savvy, do you really have the time to learn?
Coordination can get crazy
Let’s say getting orders and payments, both manually, is something you feel like you can manage. Let’s also consider the coordination of things: think of the back-and-forth. Part and parcel of home cooks and their cloud kitchens is delivery. There is no such thing as dine-in in this model. So your service will hinge on logistics.
For each order, you have to check the status of the kitchen; you have to notify the customer of their delivery status. This can take multiple rounds per customer.
Then after the delivery, you need to tally sales, manage the inventory, and the other tasks part of planning and managing operations. You may count on third-party services to handle delivery and coordination, but those ask for high commissions, leaving you with extremely thin margins.
Customer service suffers
There won’t be enough free time to make your service feel more personal. Coming up with promos or loyalty programs will not be easy too, as those need additional monitoring.
Compound all of this time you spend on manual processes, and chances are your energy will be well spent keeping daily operations afloat. You won’t have enough bandwidth for the things that matter the most: keeping your customers happy.
Lastly, joining a delivery platform to “ease” things may raise awareness about your shop but will also drive prices up to the detriment of your customers.
This is not a mere issue of saving money and operating lean; instead, it is one of holding you and your business back. That can outweigh any potential good. And, think of yourself. Your attention and overall wellness will suffer, and, in turn, maybe your food will too.
Lighten the load
With any business, spreading yourself thin is not the way to go. The best alternative to these circumstances is streamlining holistically. This is far from just doing everything on your own. It is consciously selecting one’s battles and finding ways to incorporate automation and other tech services.
Yes, at times, it’s hard to go beyond the traditional. But with digital transformation accelerated globally – with 6 out of 10 businesses going digital – you don’t want to be left behind.
An agile home cook knows they can do better by launching their own branded e-store. They also know that these are steps they don’t have to do by themselves. There are services, like ZAP e-store, which can help you launch your e-business quickly and efficiently. They can handle set-up and integration whether you have an existing app or don’t.
Automated ordering and inventory management are also present, so you won’t need to message the kitchen yourself. An order gets sent straight to your store for preparation. Plus, whether it’s online or manual payments (if you still want to give people the option), either is available.
Remember, this is your own branded e-store, with the term “own” not being used lightly. This means smaller third-party commissions and control over promos, discounts, and loyalty programs. All this leads to higher profit margins.
According to Betty Nakpil of Betty’s Best, home of the best sisig sotanghon, “[An e-store] super simplified [our business] for us, and also for customers. It’s nice to make the experience of the customers good; not just for the products we sell, but also for the whole buying experience.”
Less load on you and your lean team, better customer service, this is how a home cook ready for the “next normal” operates. Are you ready?
Photo credits: Food photo created by freepik
Two years into the pandemic, we have already become more or less accustomed to the changes COVID-19 has ingrained in our way of life. While these changes are not always easy, today, the conversation has shifted from merely surviving for the time being to thriving under these circumstances in the long term.
For many food entrepreneurs and restaurateurs, the first layer of their pivot involved embracing digital and making their take-out and delivery operations more robust. This often included partnering with third-party delivery apps so their businesses will be “discoverable” on the respective platforms.
However, we are realizing now that while third-party providers served a purpose early in the pandemic – apps were a good way for one’s food business to remain relevant – it is not exactly a sustainable strategy. Third-party apps help you survive but not exactly thrive.
How app fees damage profits
Admittedly, when we were all grasping at straws to find quick ways to save our food businesses amidst months of lockdown, joining a reputable delivery app was a godsend.
For one, they already had the tech in place to automate processes. They already had riders. And most of all, they already had people using their apps, meaning there was an assurance that hungry customers were bound to encounter your food business, in one way or another.
However, third-party apps demand commission fees ranging from 20-25% in exchange for the short-term comfort they provide. For a small food business struggling amidst a pandemic, this isn’t exactly a friendly rate.
Let’s put things in perspective. In pricing menu items, food entrepreneurs already factor in a profit. The strategy here is to charge enough to earn but make the price friendly enough for your target market. However, add a 20-25% commission fee from a third-party service, and chances are you’d have to choose between who’d take the blow: the customers or your profit? Would you raise your prices or take a cut from your earnings?
This is a crucial decision for many restauranteurs and food entrepreneurs. But this doesn’t always have to be the case. There are alternate paths to thrive under the current challenges that do not demand you pick one over another.
Customer service leading to greater returns
As we mentioned, while third-party providers do serve a purpose in helping your food business’ discoverability, ultimately, it shouldn’t be your be-all-end-all strategy. We’re not saying you should cancel your partnership altogether. However, It shouldn’t be your primary source of sales too; this way, commissions wouldn’t eat too much into your profit margins.
Think of delivery apps as merely the top of the funnel. They are middlemen that lead people to your business. You don’t want your customers to build a relationship with the middleman! They should only serve as an introduction. After being led to you, it should be your responsibility to keep them coming back. Make the service personal – because personalization is the one thing a business couldn’t achieve via a third-party provider.
You can look into creating promos and discounts unique to your business and not reliant on the mandate of the apps. Building a loyalty program is also another way to keep your best patrons engaged, that is not available via a delivery app.
E-stores are the solution
In your digital transformation journey, having an E-store strikes a balance between automation and personalization.
A service like ZAP E-store can handle both the set-up and integration of your e-business, whether you have an existing app or not. It reduces the need for manual coordination by streamlining processes, from order taking to inventory management. It also gives you the flexibility to accept both online and manual payments.
What makes having an E-stores truly special, though, is that it shifts the control back to you and away from a third-party provider. An E-store is the closest experience to running your restaurant, albeit online.
You get to integrate your own promos and discounts in whatever way you want to, whenever you like to. You get to actually see who of your customers are the ones that keep coming back and reward them in the process. And, you can do all this without the stress of thinking of exorbitant commission fees.
All these lead to higher profit margins altogether.
If you want to learn more about why 200+ F&B stores trust Zap, visit their website via this link.
Photo credits: Background photo created by benzoix | Background vector created by rawpixel.com
There is still no concrete data on how many restaurants were severely affected or closed down due to the COVID-19 pandemic. However, walk down any Metro Manila pre-pandemic food spot – whether that be Poblacion, Kapitolyo, or Maginhawa – and the number of “For Rent” signs you’ll come across would be enough to paint a picture.
“Our brands, King Sisig and Bulalo World, were hit hard by lockdown,” said Rafael Nemeno, owner of Royal House Food group. “Our business was primarily based in malls and relied heavily on dine-in revenue,” he explained.
Nemeno’s story is just one of many. The government’s closing of public venues during the early days of the pandemic, as well as the consumer preference to stay indoors even when safety regulations were finally relaxed, forced entrepreneurs to pivot. It was an “evolve or perish” scenario. And this evolution, for the most part, involved embracing digital.
Digital transformation pain points
According to Forbes, globally, 6 out of 10 businesses digitally transformed their businesses. This ranged from accepting online payments to setting up their own websites and e-commerce platforms.
For Rafael Nemeno, at least for his group, their digital transformation had to go back further. It also required them to rethink things from the ground up; they had to adjust their menu. They came up with frozen food pack versions of their best-selling dishes like bulalo, sisig, crispy tawilis, and kare-kare. Of course, these pivots would be all for nothing if they didn’t use technology to make their food available to the people.
Nemeno, now operates ayosbusog.com, an E-store powered by Zap, which allows Filipinos to order their favorite Filipino food for pick-up or delivery.
Amare La Cucina, a famous Italian restaurant located in the Kapitolyo food district, found themselves in a similar predicament. They also had to switch operations to focus on deliveries and pick-up since dine-in was not allowed during the pandemic.
However, their pain points came in their chosen method of adaptation. Early into their journey into digital transformation, Amare La Cucina took orders via phone and Facebook Messenger. According to Tristan Tio, co-owner of the Italian resto, this led to frequent back and forths between their representatives and customers.
Tio and his business partners also tried their hand at the delivery app route, but they found a huge chunk of their income going into the apps’ fees.
Today, both owners still use food delivery apps but mainly just to boost customer discovery. They found better success in doing in-house deliveries.
“[When we set-up our own E-store] we got a lot more in-house deliveries. This saved us a lot from the commissions that the apps get,” explained Tio. “Since we posted about our site on social media, most of our orders would go directly to the website.”
Success in E-stores
Both restaurateurs Nemeno and Tio attribute their success to their E-stores. For Nemeno, the convenience of removing manual processes like inventory management and delivery coordination helped their efficiency, boosting the overall customer experience.
“Zap E-Store helped us build this website. Powered by their technology, our customers are able to conveniently schedule their orders with complete delivery addresses and details up to the hour,” explained Nemeno.
On the other hand, Tio couldn’t hide his happiness when talking about Amare La Cucina’s website. “I think the site being user-friendly was a come-on for most guests, and perhaps that resulted in additional orders,” he expressed.
Coming from their stories, both restaurateurs agree that they genuinely enjoy the benefits of customizability with their E-stores. They get to exercise ownership in how they want to operate their shops. Aside from the efficiency and higher profit margins, they can implement their promos, discounts, and loyalty programs.
For them, an E-store feels more than just a website. An E-store is the closest thing to running your own actual restaurant online.
For restaurateurs looking to digitally transform their business in a way that’s efficient and effective in building loyalty, you can check this link to learn how to set up your E-store: https://www.zapestore.com.
