The food delivery market in Singapore is becoming increasingly competitive, with the COVID-19 pandemic accelerating the adoption of online food ordering and delivery services. As the market continues to grow, food delivery platforms face challenges such as rising costs and slowing demand, leading to the possibility of mergers and acquisitions.
Despite the dominance of established players like Grab, foodpanda, and Deliveroo, there are opportunities for niche players to enter the market and differentiate themselves by focusing on specific geographical areas or dietary preferences.
Analysts predict that Singapore's competitive food delivery market may witness mergers and acquisitions in the near future due to increasing costs and a decline in demand. Consolidating through exits, mergers, or acquisitions could be a feasible strategy for food delivery platforms, according to experts.
Analysts suggest that consolidations may be in store for Singapore's crowded food delivery industry, although it is improbable for any single platform to emerge as the dominant player. According to Statista, the online food delivery market in Singapore is anticipated to attain a value of USD 1.5 billion this year, with an estimated 3.69 million users by 2027.
According to CNA, companies, particularly those on the outskirts, could consider exits, mergers, or acquisitions as a practical option due to increasing costs and slowing demand. The difficulties faced by those competing in the food delivery industry are highlighted by the departures of budget carrier AirAsia and grocery delivery startup Honestbee over the last five years.
Measurable AI figures indicate that Grab commands the largest share of Singapore's food delivery market with 56 per cent, whereas foodpanda and Deliveroo have 35 per cent and 8 per cent, respectively. Even the three most prominent platforms are cutting expenses to survive, with foodpanda executing two rounds of layoffs, Deliveroo reducing nearly 10 per cent of its global headcount, and Grab freezing salaries for senior managers while cutting travel and expense budgets.
Smaller Food Deliveries May Be Needed
Dr. Seshan Ramaswami, an associate professor of marketing education at the Singapore Management University (SMU), stated that Grab, the largest food delivery platform in Singapore, is in an excellent position to capitalize on the COVID-19 crisis from both the demand and supply sides. As a result, smaller players in the market may be acquired by Grab.
Dr. Ramaswami pointed out that competition in Singapore's food delivery sector may arise from unexpected sources, such as e-commerce giants Amazon or Shopee. These companies possess large customer databases, sophisticated analytics capabilities, and established e-commerce frameworks that could give them an advantage in entering this market.
Meanwhile, Ng Lee Keng of the Singapore Institute of Technology identified three main challenges for existing food delivery platforms: organic growth, increasing operational costs, and mounting pressure to take greater responsibility for the welfare of their delivery riders.
In particular, she noted that Deliveroo lacks significant differentiation in terms of food choices, the ease of its app's navigation, and its customer service standards. To increase its market share, Deliveroo will need to invest more in product development and marketing.
Dr. Ramaswami said that the food delivery industry in Singapore is likely approaching a point where consolidation, mergers, and acquisitions may be necessary. Smaller players, such as Oddle and WhyQ, may find it challenging to remain competitive and could be prime targets for acquisition.
Delivery Platforms Overview
According to CNA, a spokesperson for Deliveroo stated that the platform stands out with the only subscription plan in Singapore that offers free delivery on all orders.
Meanwhile, Lawrence Wen, the CEO of foodpanda, acknowledged that the company's biggest challenge is changing consumer behaviors. Before the pandemic, orders peaked at lunchtime and were concentrated in office areas, but now, orders come in at different times and locations around the island, making it difficult to anticipate demand and ensure there are enough riders to fulfill orders.
Grab has rolled out a saver option where consumers can opt for lower delivery fees with longer delivery times and a subscription program with delivery discounts.
Oddle differentiates itself by focusing on the restaurant industry, helping merchants build their digital capabilities, and sending consumers to the merchants' own digital properties, where customer data can be easily accessed by the merchant. The primary challenge for Oddle is in educating restaurants about the benefits of having their own platforms, instead of being subject to rising costs when delivery apps raise their fees.
Analysts said that it is difficult for new players to enter the market due to the established competition and significant advantages that established players have in terms of scale and resources. However, new entrants could still carve out competitive advantages in niche areas, such as focusing on halal-certified or vegan diets, or on a specific geographical area.
Associate Professor Ng suggested that good service is the most obvious success factor and a key to success. If new entrants can reliably help solve consumers' pain points quickly and straightforwardly, they may win and retain consumer loyalty. Part-time rider Joshua Lim preferred Grab as he is able to cash out the moment his earnings hit S$50 and stated that Grab's orders flow in faster than Deliveroo's.
In conclusion, the future of food delivery in Singapore presents both challenges and opportunities. Existing players must adapt to changing consumer behaviors and competition from unexpected sources. Smaller players may need to consider consolidating or finding ways to differentiate themselves to remain competitive. Meanwhile, new entrants could carve out niches in areas like halal-certified or vegan diets or focus on specific geographical areas to gain a foothold in the market. Ultimately, providing excellent service and solving consumers' pain points quickly and effectively will be the key to success in this industry.