Food tech startups such as Burger Singh, Chaayos and Yumist which earlier worked with third party hyperlocal delivery firms like Shadowfax, Roadrunnr and Opinio have now set up their own delivery fleet citing lack of customer satisfaction while working with such companies.

The move also comes at a time when country’s hyperlocal delivery sector as a whole has almost ceded to exist. While Sequoia-backed Roadrunnr re-branded to Runnr and transitioned into a food ordering and delivery platform, firms like Opinio, Pickingo and Parcelled have shut shop.

The food tech sector received barely USD 117.44 million funding from venture capital funds in 2016 as compared to USD 207.25 million in 2015, according data tracking firm Tracxn.

Chaayos has shifted 100 percent of its delivery to the staffers on its payroll, Burger Singh and Yumist currently get over 70 percent of their deliveries done by their own staff.

“We realised that we could not deliver with the experience that we wanted to. So we build our own delivery fleet in the last three months. We have gone back to the traditional method because we know that is the only method, we can have 100 percent control,” said Raghav Verma, co-founder of Chaayos.

While the move by food tech firms may help them increase customer stickiness, it is likely to add a layer of capital expenditure costs on them, especially at a time when the investor sentiment is bearish towards the sector.

Chaayos has not hired extra riders and is utilising its own staff to make deliveries. It has bought over 100 bikes. “They are the team members who are part of our cafes,” Verma said adding though the whole exercise is a cost intensive, it will prove to be fruitful in the long-term.

“Third party would have been cost effective, if they served the purpose. At the end of the day, if we are getting complaints from our customers that the orders didn’t reach on time on didn’t reach at all, it won’t work. The cost of delivery is definitely higher than third party but the problem was that, we were not able to scale that model because repeat orders were very low,” he said.

Chaayos was working with Shadowfax and Opinio, among others. It claims that the average ticket size of orders going for delivery is 30 percent higher than the average amount spent by dine-in customers. Similarly, Yumist works with third party logistics firms such as Delhivery, Grab and Jugnoo among others. It is looking at ways to ensure that even these delivery firms provide them with dedicated delivery fleet.

“We need a dedicated fleet to do Yumist orders. They can either be on our rolls or on the payrolls of the third party firms,” said Alok Jain, founder of Yumist.

The company in 2015 had 95 percent of its delivery outsourced. It has now set up its own delivery fleet. About 70 percent of delivery happens through Yumist’s own staff. It claims that out of the rest, about 15 percent the riders are dedicated third party riders just for them.

Burger Singh gets its delivery outsourced only when there is a peak in the orders. It has 35 bikes of its own. While maintaining a delivery fleet may look appealing maintaining it is not an easy task as it requires a capital expenditure and robust technology to take care of that.

Kabir Singh, co-founder of Burger Singh said that to keep the capex low, the company buys second hand bikes instead of investing heavily in new ones.

Clearly, the year 2017 is going to see some consolidation as food tech companies will look to cut costs in a tighter funding environment.

Source: Money Control