Move Fast And Fix Things: How Dubai's Startups Are Stepping Up With Solutions For "The New Normal"
A look at how GoFood and Opaala have pivoted away from traditional service models to help cater better to the hospitality sector while keeping an eye on educating customers on what ails F&B owners, especially during the ongoing crisis.
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For many businesses, the COVID-19 crisis has brought to the forefront glaring issues in their business models and operational efficiency. More than ever, it has become apparent that resilience and willingness to innovate are qualities that can help startups navigate through any crisis.
"Although the COVID-19 pandemic has clearly posed challenges to businesses worldwide, startups have a competitive advantage over bigger companies in terms of their flexibility to respond and adapt quickly to changing circumstances," notes Natalia Sycheva, Manager of Entrepreneurship, Dubai Chamber of Commerce and Industry. "The uncertainty hanging over the market has led startups in Dubai to take practical steps to ensure they are protected from a legal standpoint, cut short-term costs, and maintain cash flow."
"In the long term, entrepreneurs will likely rethink their business models, shift their focus in line with evolving consumer needs, scale up digital solutions, and adopt new strategies that drive sustainable growth," Sycheva continues. "For example, one of our startup members recently launched competition to fight the spread of COVID-19 and increase exposure of their robotics hardware kits, while another has diversified its offerings of electric delivery motorcycles to SMEs, restaurant owners, and government hospitals in a bid to meet growing demand for delivery services."
Natalia Sycheva, Manager of Entrepreneurship, Dubai Chamber of Commerce and Industry. Source: Dubai Chamber of Commerce and Industry
Sycheva also points out that throughout the coronavirus pandemic, Dubai Startup Hub, the entrepreneurship initiative by Dubai Chamber, has continued to give the startup community access to various programs and initiatives, such as its MarketAccess program that pairs corporates facing specific challenges with innovative startups that offer the right solutions to address them. At the same time, Dubai has seen enterprising entrepreneurs look at problems that have arisen amid this period, and come up with innovative solutions to get past them as well.
One such enterprise that has come out of the crisis is GoFood. Launched earlier this month, GoFood is a food delivery app that uses comparatively low commissions on orders placed through it, while allowing restaurant owners to directly run the services. "During the global pandemic, we realized that the existing delivery apps weren't being good partners by refusing to lower exorbitant commissions," says CEO Naveed Dowlatshahi. "As seasoned restaurant operators, we knew something needed to be done, and fast, if we were to survive in the long run. So we decided to take our concerns and combine them with industry experience to deliver a tangible solution that supports restaurant operators, and gives the customer an ethical alternative to the current trend."
Dowlatshahi explains that GoFood has a far more reasonable commission structure (2% for the first 2,000 restaurants that registered on the platform, and 5% for the rest, which is said to be the lowest margins in the market), and because it is directly run by the restaurant owners themselves, delivery fees goes directly to the restaurants as well. There is no membership or signing fees, and it gives customers the added bonus of directly supporting their favorite local restaurants. In addition, GoFood also offers a last mile option– transportation services to restaurants that do not have their own drivers or when an existing service proves to be too expensive. "We are also in the process of kicking off a strategic relationship with the RTA where they will facilitate the last mile solution on our behalf," adds Dowlatshahi.
Naveed Dowlatshahi, CEO, GoFood. Source: GoFood
But with a business model that relies so heavily on a low-commission structure, questions on long-term sustainability and financial impact arise. But when asked about how he plans to keep GoFood running, Dowlatshahi replies that there are extra revenue streams in place to aid the firm financially. "Naturally, the commission structure that we have in place is not sustainable on its own, so we do have other revenue streams planned, which include a B2C and B2B grocery and supply chain option, in addition to provided value added services to merchants that include, but are not limited to, social media management, website design, graphic design, food photography, packaging, printing, and even business audit," he says. The GoFood business model thus aims to provide a more holistic, one-stop-shop platform for the UAE's restaurant community, but a big part of their success will lie in how well the app itself performs. "Our current solution is a white label product, and whilst a good product, we know there's always room for improvement," Dowlatshahi says. "Continuous investment is critical for the long-term sustainability and viability of GoFood."
GoFood's business model is also largely customer centric- a launch offer, which includes AED200 worth of loyalty points for everyone who downloads the app, is a way to build customer loyalty, Dowlatshahi says, but he also hopes to educate consumers about the difficulties faced by restaurants in the current business landscape. "The average customer had no clue that up to 35% of the order value was actually being charged by these aggregators," he says. "Additionally, the discounts being offered on these apps are paid for by the restaurant operator, and not the apps, so you can imagine the pressure that restaurants face when they are offering anything up to a 50% discount in addition to the 30% commission. What's left for the restaurant? Restaurants today, whether small or large, share the same challenges, and we hope customers get behind the cause and support GoFood, and in turn, support local restaurants during these challenging times."
The GoFood App. Source: GoFood
At the same time, the restaurants GoFood partners up with have free access to key customer data including mobile numbers and email addresses. "Greed is good, but trust is even better. By joining the platform, these restaurants have put their faith in us, and we are so grateful. At the end of the day, we are merely a facilitator, so it's only fair that restaurants have access to customer data."As for the future of GoFood, Dowlatshahi is ambitious and open to collaboration. "Essentially, we want GoFood to be the catalyst and benchmark for other existing or up and coming aggregators to follow," he says. "The harsh reality is that the home delivery model is here to stay, and it will be more significant moving forward than ever before, as customers with busy lifestyles demand convenience, speed of service, and accessibility. Competition is healthy, so we welcome others getting on board with our mission, thereby creating a competitive marketplace where ultimately the customer benefits, and one which restaurant operators can sustain with a viable business model."
Another hospitality tech startup that launched amid this crisis is Opaala, founded by Marwaan Saab and Giles Wright, which offers a smart service system to boost sales and provide contactless interaction for operators in the hospitality industry. A cloud-based platform, Opaala aims to provide a user-friendly platform for customers to easily access the menus and other services at hospitality venues, so they can have greater control over and personalize their experiences, while also reducing staff costs and service wait times for the venue owners.
Marwaan Saab (left) and Giles Wright, Founders, Opaala. Source: Opaala
Besides pivoting away from the eight-step service model traditionally seen in the hospitality sector, Saab explains that his three-pronged system -Opaala inVenue for restaurants, Opaala inRoom for hotels, and Opaala reMote, a local order and delivery platform for businesses- is foregoing the trend toward apps and instead choosing to be a browser-based service. "We're not an app- it's a small thing, but it's critical," Saab says. "We don't take valuable real estate on your phone, we don't demand your details, yet we're available in an instant when needed. We also wanted to make sure it's as easy for a regular customer, as it is for a first-time visitor of a venue or hotel to be able to access the menu instantly. Having to download something delays that experience, and causes people to rethink the need to use the platform."
But how exactly do the services provided by Opaala aid and abet the hospitality sector during such a particularly difficult time? "It's well documented the frustration the F&B industry is having with all the delivery apps, especially during the COVID-19 lockdowns when venues were, and still are, suffering," Saab says. "The financial impact has been horrible, and venues need to find any way to save money. They already operate at minimum margins, and this crisis has shown how dangerous this is. We identified the typical experience most of us have when we walk into a venue, where the pain points are, and then thought about how we can make it a smoother experience, for both the guest and the venue."
The traditional eight-step service model vs the Opaala service model. Source: Opaala
An important observation here is that the Opaala services are seemingly two-directional– every step taken towards easing the financial and other burdens on the hospitality sector has a directly connected impact on the customer service aspect of its business model. "Guests can personalize their service, from doing everything autonomously to using the platform to communicate with staff, and receive one-on-one service. For venues, this means providing guests with a better experience, in addition to a very tangible financial impact. We've seen 20%-30% reduction in overhead costs, along with an average of 15% -and rising- growth in revenue due to an increase in orders."
A particular feature of the business model that is discussed at great length is Opaala's assistance in point-of-sale (POS) integration with the venues. "Venues are able to split their space into zones easily, with orders from different sections going to specific POS systems or directly to individual staff members. They are able to run tabs for guests, run voucher systems, or do a pay as you go ordering system. POS integration is a key, venues have the option to run the platform of any browser, have it connect to a printer in the kitchen, or to integrate directly with their POS. Integration into the venue's payment gateway is another important item, this means venues get their money instantly without any crazy percentages added on top of the other fees," elaborates Saab.
In addition to overhead reduction and cost cutting for venues, the firm also uses ethically and environmentally responsible methods in its quest to help the hospitality industry find more ways to add to their overall revenue. "Beyond the fact that we help venues reduce cost and increase revenue, we also help make them more sustainable in a very literal sense by eliminating a lot of waste in the form of paper," Saab says. "Menus change often, prices change, items change, etc. It's amazing how often we find mistakes in printed menus, spelling, even price mistakes. If they have a new special, they need to print add-ons, and in the COVID-19 era, throw away menus are the law. We eliminate all of that- no more reprints, no more mistakes. That cost is gone, and paper consumption and waste is gone."
Their system, Saab adds, enables a better guest/venue connection. "We are not there to replace the brand; we aim to enhance it," he says. "And we do not charge from both ends." However, it raises the question of how Opaala will sustain its own revenue streams in the long run. Saab insists that the start to their journey has been unexpectedly promising. "We expected usage numbers to start off slow, we wanted to see if there's any frustration from both guests and venue, but even we've been surprised by the results," he says. "One of our partners saw an immediate impact, with 95% of orders coming through the platform, and because they're able to engineer their menu better based on actual data, and adding images, they saw a 20% increase in orders within the first week of implementing Opaala."
Saab believes that it is Opaala's innovative and flexible approach to the issues at hand that will stand the startup in good stead in the long run. "What really sets us apart is we're constantly improving and adding features, from things we already have in our pipeline, to special request features made by our partners and their guests," he says. "We don't believe in a one size fits all, we know venues have their own way of doing things, and we're not there to change them, we are there to improve things, to answer any specific issues they might have through technology. We work closely with venues to understand their pain points, and automate things for them." While he has plans to expand Opaala to other areas of the GCC, Turkey, Mexico, and Canada, Saab says that a big part of the end result he's aiming for is to educate the customers on what ails the hospitality sector, and how they can help. "We would love for guests to be more aware of the margins F&B and hospitality operate under, so much time and effort is put into creating great experiences and great food at a direct cost to venues, and the margins are shrinking. So please go out, enjoy the atmosphere and food, and help these great businesses."