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How food-delivery app start-ups are riding on demonetisation wave

22-December-2016
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How food-delivery app start-ups are riding on demonetisation wave

Much like the rest of the start-ups that are powered by electronic payments food delivery start-ups too have immensely profited by the recent demonetisation. This has turned out to be the opportune moment for these start-ups to increase their customer base and register more restaurants on their platform. Restaurants that had independent delivery systems are the ones that have been affected negatively by demonetisation if they only accept cash from customers.

“Demonetisation has increased the pace of technology adoption. From a matter of convenience, it is becoming a habit,” said Srivats TS, VP, Marketing, Swiggy. It is this habit that has driven even those sceptical of using electronic modes of payment to shift to using e-wallets, credit cards, debit cards instead of relying on cash on delivery.

“Demonetisation has changed our buying habit, the habit being that of the mode of payment. Once it has changed, it has changed. We tend to stick to a pattern,” said Sandeep Das, Co-founder, Scootsy. “We see demonetisation as an opportunity to drive consumer behaviour towards a cashless economy. The food sector is no different. Consumers will increasingly adopt digital payments and correspondingly we will see a gradual decrease in transactions involving cash. Food delivery start-ups that allow customers to pay for their food orders through debit and credit cards, netbanking, e-wallets, etc are well positioned to benefit from this initiative,” said Srivats.

Foodpanda removed the COD option immediately after the demonetisation announcement to reduce confusion that may have arisen. Das who is himself averse to placing pre-paid orders, now uses one of the many electronic payment options. Scootsy also accepts payments by bank cheques now. “Prior to demonetization, as many as half the users preferred to pay via COD. Many of these users have transitioned online payment modes, especially in the period immediately following demonetisation. We are seeing a rise in payments through credit & debit cards, net banking and through mobile wallets,” said Srivats.

The transition to electronic payments has been smooth and is an indication that the transformation to a digital ecosystem is here to stay, at least in the urban clusters. “Since we have witnessed spike in order numbers during the demonetisation phase, it clearly indicates that our customers have moved on to electronic payment methods. The transition from the customers who use COD to electronic payment methods has been very smooth,” said Saurabh Kochhar, Co-founder and CEO, foodpanda India.         

Most of the players in the market witnessed significant hikes in their volume of orders and new user registrations. Scootsy which was launched in 2015 had been witnessing a month on month growth of 20-25%. Since demonetisation the start-up has gained an extra 5% growth.

“We have witnessed 40 to 50% spike in the order numbers post the demonetisation. Our latest statistics show that around 92% of payments are being made online. As our order value ranges between Rs 400-500, consumers do not mind paying online,” Kochhar said. Swiggy also witnessed an increase in transactions during this period. “The digital payment options on our platform saw a 2.5x increase in use,” said Srivats.

In the past companies in this niche sector have struggled with keeping their head above water. They have also regained their position in the market by consolidating their strengths and seeking out optimal delivery and marketing solutions. Demonetisation may give them an extra boost to plant themselves even more firmly in the market.

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