Disruption is the order of the day in today’s rapidly changing environment. Traditionally, we either go out for a meal or have a homecooked meal at home. With food delivery becoming the norm, we could get the food we desire without leaving home or the office or wherever you work. Furthermore the additional cost if any is marginal compared with the cost of transport to the food and beverage (F&B) outlet. For many F&B outlets, the volume of orders for delivery has been rising by the day. Many kitchens in these F&B outlets had difficulties coping with delivery orders.
At present, anyone contemplating entering the F&B business had to contend with high rents for an outlet in a visible and high traffic location or in other words, a somewhat prime location. To cater to a certain volume of customers, the space required had to be of a certain minimum size. Trying to situate the outlet in a low rent low traffic location would be a recipe for disaster. All these requirements boil down to high overheads for the entrepreneur.
The significance of the shift to delivery should not be underestimated especially for the entrepreneur. Instead of a large space in a visible and high traffic location, the entrepreneur could change the business model. An outlet would still be required in a prime location. One could not expect to receive many orders for delivery with an outlet in an obscure location starting from scratch. However the new outlet need not be as large as had been in the past. A much smaller outlet would suffice until the dine in crowd grows out of hand. When orders for delivery rises beyond the capacity of the small kitchen, the entrepreneur could situate a second kitchen in an obscure location. This second kitchen could serve only the delivery crowd. As the location is not prime, the rent for this second kitchen would be much lower than the one in the prime area. This way, the entrepreneur could cater for a higher volume of business at a much lower cost.
There had been talk of retail stores using this similar practice. Instead of a large retail apparel store stocking all sizes plus a large stock, a smaller outlet with all sizes but no stock was the new business model. Customers could go to this model apparel store to try out the size. Upon deciding on the apparel and the correct size, the customer then had to make a purchase without collecting the physical goods from the store. The store would then arrange for the delivery of the apparel to the customer’s home. Similar to the F&B example earlier, there would be substantial cost savings with this smaller model outlet. On the other hand, the warehouse where all the stock were stored could be situated in a low rent obscure location.
However the retail stores had not been too successful with this business model. The lack of success could be due to the time lag that customers had to endure before receiving the goods. The goods could be delivered in a day or two. That would be too long a wait for most customers. Retailers should adopt the food delivery approach and ensure that customers receive their goods once they reach home. This should not be difficult given the experience of the food delivery business.
In conclusion, sometimes one has to borrow practices from other industries to incorporate them into the industry you are in.