5 Essential Elements You Must Know for Setting Up an Online Food Delivery Business in Europe

If you are considering launching an online food delivery business in Europe, here are the essentials you need to keep in mind.

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By Beschir Hussain

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Convenience is probably one of the main reasons why time-starved consumers show a growing appetite for having food delivered. According to UBS, the global online food ordering marketplace is currently worth $35 billion and is expected to rise to $365 billion by 2030. These numbers demonstrate why the demand for online food ordering and delivery is real -- especially among millennials.

Fueled by the alluring prospect of a lucrative market, more and more entrepreneurs attempt to enter this industry to gain a piece of the cake. However, each industry has its own unique challenges depending on desired marketplace in which food entrepreneurs want to start off their venture.

Here are the most essential elements you must know for setting up an online food delivery business.

1. New options mean food entrepreneurs can be more nimble.

In Europe, eating habits change fast. Food ventures should be built around mechanisms that allow for constant flexibility and innovation. The rise of delivery applications and platforms across the world has played a major role in the emergence of delivery-only kitchens, which perfectly illustrate this approach. Virtual restaurants are kitchen facilities without seating areas that take orders through online apps and prepare food exclusively for pickup, takeout and delivery customers. Berlin-based startup Vertical Food operates multiple food brands out of single kitchen facilities and says it can launch a virtual restaurant within one week at minimal costs, as it does not have to invest in store forefront, additional staff, kitchen infrastructure and logistics. Furthermore, if one concept does not work out, the company can deactivate the restaurant, adjust its inventory and production lines, and try out a new one with very little effort.

2. Know your customer and their preferences.

Statistics do not always tell the truth about consumers. In some Middle Eastern and North African countries (MENA), data reflect a significantly higher proportion of male customers initiating online payment transactions. But women purchase food equally often in these communities, but tend to use their husbands' credit cards in the checkout process, which ultimately may distort your conclusions about customer profiles. Therefore, make sure to look beyond your aggregated data to understand who your real customer is. This will also help you to design a menu that addresses your customers' needs more accurately. For example, the average ticket size in the online food delivery industry is much higher in collectivistic societies than in Europe. Customers often purchase food for the entire household in MENA, while in Europe one still receives a large portion of orders from single households. These insights are decisive in determining the extent to which you should focus on product bundling practices.

3. Know your environment and localize your solution.

Entrepreneurs who start and scale online food delivery ventures in Europe usually must operate in a geopolitically fragmented market with different cultural barriers. Customers reflect different purchasing, consuming and rating patterns. Therefore, everything you do should be tailored to the behavior and needs of the area in which your company operates. Regional challenges need regional solutions: In Saudi Arabia, for instance, there is no established framework to objectively identify postal addresses, which makes it difficult to automate the order transmission process without human interaction. What is taken for granted in most European countries is one of the main obstacle's founders have to face in the last mile food delivery segment. The legal, social and commercial environment of a startup may have a direct impact on the operational processes you define for your company. Don't ignore it.

4. Stay independent.

The success of delivery-only kitchens often relies on logistics-enabled marketplaces. Today, Uber Eats has more than 1,600 virtual restaurants listed on its app around the world. If you plan to launch an online food delivery brand, protect your core business from being dependent on marketplace aggregators. Marketplaces have a portfolio perspective and seek to maximize their value in a utilitarian way, while you incorporate the interest of one single entity as a member of this portfolio. I observed several brands ceasing operations since they had completely relied on partners with conflicting interests. Shortcomings in product, marketing and logistics become weaknesses you are unable to control. You should always be capable of managing the main steps of your value chain yourself.

5. Raise a sufficient amount of capital to run your venture.

Food entrepreneurs should not underestimate the amount of capital necessary to run their business. As a founder, you need to have a broad plan of where you'd like to stand with your company and fully understand the investment that is required to achieve your milestones within a certain period of time. Being underfunded is one of the main reasons of the collapse of startups. Make sure you have enough assets to start and scale your online food delivery business. Build your company step by step and select the moment of scaling up carefully. Startups fail because they either grow too slowly or too quickly. Do not scale up when you're not ready to.

Beschir Hussain

Founder of Vertical Food, Co-Founder hellofood Middle East

Beschir is the founder of Vertical Food, a Berlin-based online food ordering and delivery chain, and the co-founder of Hellofood Middle East. He holds a M.Sc. in management, having studied at WHU and Columbia University. He worked in private equity, strategy consulting and the public sector.

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