by Editorial Team
February 05, 2019

Intelligent technology that brings concrete benefits to users changes everything – even a traditional holiday that is thousands of years old. The important Chinese New Year family holiday that started today highlights a huge trend made possible by technology that has gripped the whole of Asia: the food order boom. Find out why more and more people order food online and what role the platform economy and user-friendly technology play in this.

Chinese New Year is mostly about food …

Chinese New Year, also commonly known as Lunar New Year or the Spring Festival, is maybe the most significant Chinese holiday. In addition to China, countries like Malaysia, South Korea, Vietnam and many more also celebrate the festival as a public holiday, which has a significant impact on the economic activity in many parts of Asia.

Eating together as a family is at the center of celebrations, with certain foods having symbolic meanings associated with luck and auspiciousness. Traditional dishes such as steamed fish, rice cakes, hot pot, dumplings and tangerines are typically served during the Chinese New Year, bringing friends and families together.

Chinese New Year Shopping

The queues in grocery stores before Chinese New Year might become shorter and shorter, thanks to the success of technology-driven food delivery services. (Source: Wikipedia)

… which more and more often is ordered online

Traditionally, most family reunion dinners were large home-cooked meals consisting of steamboats and ‘prosperity’ platters. Today, it is mainly the proliferation of technology that is fuelling a different kind of appetite – for food delivery services. Consumers are able to avoid market and restaurant crowds and days of preparation in the kitchen. Fast food, hotpot and “local cuisine” are among the most popular choices, the South China Morning Post reports, but dinner sets priced over 2,000 yuan (US$320) sold by high-end restaurants are also becoming more popular.

And while the appetite for ordering food is particularly high on public holidays, you can feel it all year round. In terms of revenues, China has become the world’s largest market with a volume of US$38,411m in 2018 – far ahead of countries like the USA or India, as you can see here:

Source: Statista, November 2018

Besides that, China is also the most dynamic food delivery market worldwide – for the period 2018-2023 experts predict a compound annual growth rate (CAGR) of just under 11%:

Revenue forecast in million US$ in China; the dark red part is for the Restaurant-to-Consumer Delivery, the upper red part is for Platform-to-Consumer Delivery. (Source: Statista, eServices Report 2019 – Online Food Delivery)

Why technology is a key driver for the food delivery boom in China

There are several reasons for the growing popularity of food orders. Various studies mention the convenience as the most important factor because ordering your meal simply saves time. The growing average population wealth in China also plays a role – but these reasons alone do not explain this huge boom. Instead, it is worth taking a closer look at the technology behind it. 

1. Digital platforms enable a whole new customer orientation

First of all, we have to distinguish between two different types of food delivery concepts:

  • Restaurant-to-Consumer Delivery (R2C) means meals are ordered online and directly delivered by the restaurant, no matter if ordered via a restaurant website or a platform.
  • Platform-to-Consumer Delivery (P2C) means the online meal order and delivery are both carried out via and by a platform.

As can be seen in the chart above, the experts see an enormous growth potential, especially in the platform-to-consumer variant. While overall growth of 59.22% is predicted for R2C in the five-year window, P2C will grow by an impressive 82.42% by 2023.

Not long ago, Wirecard’s EVP of Group Strategy Markus Eichinger wrote here about the global megatrend Platform Economy. From that article, here are the most important structural benefits driving the triumphal march of platforms worldwide:

  • There are massive economies of scale, allowing even SMEs to access powerful and professional-grade tools, and thus opening up business opportunities to all-new segments of society.
  • The value of an offer increases in line with the number of consumers using the same solution, i.e. the so-called network effect. Or in other words: the more active users a hotel and restaurant rating platform such as TripAdvisor has, the higher value that platform generates for each individual user.
  • Third, platforms enable valuable insights, generated from the vast amounts of data from both the supply and demand side – which allows the platform providers significant profitability optimization.
  • Finally, platforms make it possible to scale quickly even in traditional markets: As there is no need for extensive CAPEX, invested money can flow into the platform distribution, allowing for much quicker scaling than the platform members’ original businesses.

The phenomenon has become so significant for food supply companies that consulting company McKinsey published an interesting study on “The changing market for food delivery”, noting “the rise of digital technology is reshaping the market. Consumers accustomed to shopping online through apps or websites, with maximum convenience and transparency, increasingly expect the same experience when it comes to ordering dinner.”

The study deals with the various advantages that platform-based food delivery offers which the authors call the “new-delivery business model” – where the platforms allow customers to compare and order meals through one single app or website and also provide the logistics for the restaurants. This is especially attractive for restaurants who did not deliver before – but not only.

Platforms are booming because many benefit from them

The McKinsey experts show the advantages that platform-based food delivery offers to all parties involved – here briefly summarized:

  • Restaurants
    • Are offered an additional source of revenue
    • Can build relationships with a new pool of customers
    • Profit from a marketing and logistics network
  • Customers
    • Enjoy greater convenience and choice
    • Are happy about a faster delivery, the most important factor for customer satisfaction – the optimal wait time is less than 60 minutes
    • Benefit from being able to track delivery in real time
  • Deliverers
    • Can control the complete customer experience, making sure to provide it in a high quality
    • Are compensated with a fixed margin of the order
    • Benefit from the loyalty thanks to the “stickiness” of platforms – once customers sign up, 80 percent never or rarely leave for another platform

2. Customer-centric, smart technology satisfies hungry customers

While the advantages of the platform structure described above can be felt internationally, we can learn especially from China – home of “super apps” like Alipay or WeChat Payhow a state-of-the-art technology solution leads to high customer satisfaction and thus to very dynamic sales growth.

In order to understand what causes customer satisfaction, let’s see what a recent study from Baymart found to be the most important issues which cause users to abandon carts during the checkout process:

  • 60%: Extra costs (shipping, taxes, fees) were too high
  • 23%: Couldn’t see or calculate total order cost up-front
  • 18%: Delivery timeline was much too slow
  • 11%: Didn’t believe the returns policy to be fair or satisfactory

While platform-based suppliers such as Deliveroo or Foodpanda are successful in several Asian countries, in China, the two platform market leaders are (Chinese for “hungry”) with more than 61 million active users and Meituan with over 37 million customers.

Both of them have developed an identical approach to tackle these challenges, as Product Designer Britta Cheng writes in her UX analysis of Chinese delivery apps.

Here is how they do it:

  • Complete Transparency

All the relevant information is displayed upfront so there are no nasty surprises for customers – e.g., all costs, how the social rating of restaurants is, how long delivery might take, if there are discounts and what happens a refund is needed.

Here is a screenshot from Meituan:

Source: “What can we learn from the design of Chinese delivery apps?” by Britta Cheng on Medium / UX Collective

  • Real-time feedback

Often there are minimum order thresholds and customers want to know immediately when they have reached them.

For that, uses an animation, where a little delivery box instantly change colours when the minimum sum is reached, but also encouraging customers to order more items in order to receive a deduction.

  • A seamless interaction

Usually, when people take a screenshot while ordering online with their smartphone, they either want to share it with friends to ask if they agree with their choice, they want to split bills, or they want to report a problem to customer support.

The Meituan app, for example, reacts to these three possibilities and offers an intuitive and seamless customer journey, as these screenshots show:

When users do a screenshot, the yellow dog animation pops up, offering three options: Report a problem, Share Screen or Split bill with a friend. If no action is taken, it appears immediately after three seconds. (Source: “What can we learn from the design of Chinese delivery apps?” by Britta Cheng on Medium / UX Collective)

And for a seamless customer experience, easy and secure payment is also necessary – which is why the integration of payment methods Alipay or WeChat Pay goes without saying.

Creating a top customer experience requires high-tech in the background

What is also exciting, of course, is what happens behind the scenes of these apps in order to be able to offer customers such a well thought-out shopping experience that more and more of them even entrust the providers with the most important family meal for Chinese New Year. In addition to state-of-the-art Internet technology for the platform, this includes the intelligent analysis of a wide variety of data, which is driven by artificial intelligence and machine learning – and the result is an all-round frictionless customer experience. By the way, we have also described all these terms as megatrends, just follow the link.

Source: Wikipedia

Tradition is reinforced by technology, not replaced

Some of the older generation might be nostalgic about spending days preparing food for their families, but most are supportive of these new developments – as long as the tradition of eating together as a family still stays. Which is really what the celebration is all about – to be able to spend as much time with family as you can.

With Chinese New Year starting today, there has no doubt been a spike in demand for food delivery services. Regardless of orders being booked through a food delivery app or website, it means less hassle in meal preparation but more quality time with the family. And that’s exactly what platform- and technology-driven food delivery offers – not just speed and ease in processing orders, but also making sure the deliveries arrive on time, which leaves customers more time for the things that really matter.