ShopeeFood Gives a Signal to Enter the "Food Delivery" Service Competition

ShopeeFood is starting to come to enliven pass food delivery in Indonesia. These services can be accessed through the Shopee platform, both on the website and in the application mobile devices. Not as express delivery service as it should be GrabFood or GoFood, most of the food/beverage products served are more durable, such as frozen food, various cakes, or packaged drinks. While the scope is quite wide, in various provinces throughout Indonesia.

The introduction of the service certainly sparked a lot of speculation in the market. What is clear is that food delivery services are indeed on the rise amid social restrictions due to Covid-19. In Indonesia alone, according to research by McKinsey (2020), there was a 34% increase in the use of food delivery services during the pandemic. Surveys conducted DailySocial and Populix also pointed out the fact, during the self-quarantine period, 53% of respondents said that food delivery applications were the most widely used.

Compete with predecessors

As a digital giant in Southeast Asia, Sea Limited (Sea), the parent of Shopee, certainly has ambitions to enter into various potential business models. For information, as of today (21/1) the company's market capitalization reached $118,72 million – becoming the most valuable technology company in the region. And if we look more closely, the approaches taken by the various company units are also quite unique, such as 'It is never too late.'

Take service for example online marketplace Shopee, they just started to enter the Indonesian market in May 2015. At that time this business segment was already quite busy, with the dominance of its predecessors such as Lazada, Tokopedia, Bukalapak, elevenia, Blibli, Alfacart, etc. However, in the last two years, in terms of sales volume and transactions, Shopee has been able to lead the market.

There are many factors, one of the most obvious because it works 'burn money' at the right time. They make customer acquisition very maximal when the market has been successfully educated by previous players. Jargon 'free shipping' is now very attached to the distinctive platform with the orange color.

The same strategy can be done, with market conditions food delivery which has become more mature and massive in Indonesia. The homework for Shopee is of course to strengthen the necessary infrastructure – what we currently have is an ordering and payment platform (ShopeePay), while what we don't have is logistics. first mile.

Di last mile, they already have Shopee Xpress (SPX) which is now serving some users at online marketplace. Recently, there has been news that Shopee is recruiting driver partners to serve ShopeeFood orders. Plus, their marketing team has started promoting ShopeeFood services which can later be used for order favorite food such as meatballs, soto, martabak, etc. (fast food).

We have tried to ask for confirmation regarding some information directly to the Shopee team in Indonesia, but as of this writing there has been no response.

Value proposition

Citing findings GlobalWebIndex survey, there are several reasons that encourage people to order food through the app food delivery, the top five include: free shipping (51%), fast delivery (48%), discount offers (43%), item availability and completeness (36%), ease of ordering (30%). Kendari's survey was not conducted specifically for users in Indonesia, but was representative enough to describe the condition of market share.

To win the market, the platform must have a strong value proposition to accommodate those needs. Several strategies began to be rolled out by some players, for example through initiative cloud kitchen. The shared kitchen concept allows the platform to gather several merchant food in one place. From the consumer side, it makes it easier for them to get more options when they want to buy food with 1x order and delivery.

From the side merchant, the platform can determine (based on data) about potential products in a certain area so that it helps them to ensure their business gets the relevant market. In addition, it certainly saves capital costs and operational costs, because it only focuses on serving delivery.

Details like this that ShopeeFood must be keen to see as a new challenger in this business landscape. But actually Shopee has also taken some initial actions related to the market food delivery in Indonesia. For example they support Weyland Tech in the launch of AtozGo in Jakarta -- ShopeePay was used as the main payment system. So that there are many possible synergies that can be done when ShopeeFood really starts to be maximized.

Encouraging consolidation

With Sea's capital strength and market reach, this is clearly not good news for its competitors. In Indonesia, so far Gojek and Grab be a provider food delivery with the widest reach and the most partners. To deal with the digital giant, it was even previously reported that the two of them wanted to do something to merge. Unfortunately the latest news says, founder did not reach an agreement on the distribution of shares.

The rumors that are circulating plan to merge antara Gojek and Tokopedia. Platforms online marketplace made by William Tanuwijaya is now also in tight competition with Shopee – from various researches it is said that Tokopedia is in second place just below Shopee. Consolidation clearly opens up collaboration opportunities in many elements, including service expansion food delivery combining culinary SME partners owned by Tokopedia, to the expansion of GoPay services for payments on Tokopedia.

Market cake for food delivery in Southeast Asia is also tantalizing. The annual e-Conomy SEA 2020 report said the recorded GMV of food delivery services last year reached $6 billion, even more than transportation on-demand which is worth $5 billion (down due to the pandemic).

While in Indonesia itself, there are actually several other players who are trying to accommodate food orders, including: