Most food delivery platforms witnessed a slowdown in business once lockdown came into effect. Working from home gave people enough time to cook their own meals and with redundancies and salary cuts, a more frugal attitude was embraced. For UAE-based Lunch:On – now rebranded to Munch:On – its main business of delivering lunch to workers in offices came to a standstill. The startup had to counter the crisis with a shift in its model.
We spoke to Mohammad Al Zaben, co-founder and chief executive officer, about how the company is coping with the crisis and its future plans.
How have you pivoted your strategy and operations to cope with the outbreak?
The virus really affected us in a major way. People were working from the office, and we built a business model that catered to them in that physical location. As soon as we started seeing people working from home, that had a huge impact on our business. Overnight we saw our business dropping and over the course of a week we went from over a 100 per cent all-time high to a significant low rate, it was a major hit.
We really needed to improvise. What was good is that we were piloting a dinner service on a very small scale just before coronavirus, which overnight we had to quickly rely on as people were then staying at home.
We shifted all of our volume automatically to this new vertical. It took a huge effort, within a matter of 10 days we were able to launch a residential lunch and dinner service on our platform. It was very well received.
It felt like we were starting from scratch, but things moved a lot faster when we launched a new vertical. Our side business became our main one.
What are the main challenges and changes the food delivery space is experiencing?
Things are changing very rapidly and we see developments on a week by week basis. Regardless of the economic situation, the amount of people who are leaving the country is going to affect [our] business. Everything is connected, if 20 per cent of the workforce leaves and you have salary cuts, people will have less spending power.
The supply is one of the main challenges. A lot of the restaurants were similarly caught off-guard, we had a very large group shutting down operations completely because the climate didn’t make sense for them to sustain. That caused a huge impact on the delivery space.
Fine dining, which is at the intersection of people not wanting to go out and also not wanting to spend, is going to be impacted for months and years to come. Not a lot of people are ordering fine dining for delivery, as it is also more of an experience, people pay for the ambiance, the music and the level of service.
Moreover, a lot of our avid users were saying they were preparing their own meals at home now that they have the time. This is starting to taper off, though.
As a third-party aggregator, how has your model of bulk delivery been able to face the massive changes the market has seen?
Drivers became a really big asset in this crisis, whether for e-commerce or food delivery, because people could not go out. That caused the cost of delivery go up, as being able to mobilise drivers to fulfil orders became more valuable than pre-Covid-19. A lot of the platforms were not able to react quickly to handle this cost increase, and those who could not make it efficiently work by mapping the drivers’ supply with the demand were really harmed financially.
Because the cost of delivery went up, our model became even more compelling. The change of the cost per order from say Dh12 to Dh15 across 15 orders does not make a huge difference. This is where it started to show that you need to build a very efficient delivery solution.
What were the difficult decisions you faced during the crisis?
We did have to make tough decisions. We were fortunate that we were well capitalised, but we also got to hear from others in the ecosystem how hard it can be to raise capital. Any plans that we had in the past we had to put on hold and stay focused. We had aggressive plans to enter other cities in Saudi Arabia as well as Kuwait, now we are just focusing on the UAE and Riyadh.
We also had to cut costs. We love our team and we felt they would be able to capitalise on any new verticals that we find ourselves in, so we kept every single one on the team but we had to cut salaries by an equal percentage for those who earn above a certain amount.
We re-evaluated our marketing and discretionary spend and we were able to cut our spend by 50 per cent. We looked at every single contract we had that was negotiated pre-Covid-19, we had a diligent discussion to look at this with fresh eyes and push for discounted costs.
Why did you change your name now to Munch:On?
We started with just lunch, and when you start your company the first thing you want is for people to know you in an easy way. Our name came from the motto that lunch is always on, allowing people to access affordable meals via delivery. But once we started offering breakfast, catering and most recently residential and dinner, we became much more than lunch.
It made sense to make that transition now to adapt to the situation.
What kinds of policies you wish were in place to better help you during this crisis?
We are hearing a lot of restaurants getting rid of their drivers, and this is a problem for us as we rely on the restaurants’ infrastructure. It is mitigating risk in response to a variant demand.
With lots of them losing their jobs, these people become a burden on the state. You have an obligation as a country to support them. One of the first things that need to be considered is relooking into restrictions placed on these individuals in order to ease their lives in times that are so uncertain like this, this can be achieved through looking at the gig economy.
If it is allowed or regulated in a way to enable people to earn their living, they will become productive. This will kickstart a lot of businesses. If someone wants to open a restaurant or a delivery business, it would make sense for them to pay as money comes in. This will mean less startup capital as you avoid hiring someone and providing them with a visa. People can infinitely then scale their business according to demand.