INTEGRAL UNIVERSITY , LUCKNOW

FACULTY OF COMMERCE AND MANAGEMENT

DEPARTMENT OF COMMERCE AND BUSINESS MANAGEMENT

SEMINAR REPORT ON

“ CHALLENGES ASSOCIATED WITH ONLINE FOOD DELIVERY

Submitted To –

Mr. Mohd Ariz Siddiqui

Assistant professor

DCBM , Integral University

Mr. Ehsanul Haque

Assistant Professor

DCBM , Integral University

Submitted By –

Mohammad Arsalan Sheikh

Enrollment No. – 2000100276

Group - B
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 Challenges Associated With Online Food Delivery System

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 Acknowledgement

I would like to acknowledge that my report on ' challenges associated with online food delivery

system ' has been concluded and I am ensuring that this was done by me and not copied.

It has been a great experience working on this assignment as it gave me a better understanding of

number of challenges faced by the online food delivery system .

In this attainment I would like to express my special gratitude to all my teachers and most

importantly Mr. Mohd Ariz Siddiqui and Mr. Ehsanul Haque of INTEGRAL UNIVERSITY,

without their guidance and feedback I would not have been able to complete this assignment.

I would like to thank all the faculty members of INTEGRAL UNIVERSITY who directly or

indirectly helped me in the completion of this assignment.

Finally, I would like to thank my parents and friends who also helped me in finishing this

assignment.

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 Faculty of Commerce and Management

Department of Commerce and Business Management

Integral University , Lucknow

CERTIFICATE

This is to certify that the Seminar Project Report entitled “ Challenges Associated with Online Food Delivery

System” submitted to the Department of Commerce and Business Management , Faculty of Commerce and

Management , Integral University , in partial fulfillment for the award of the degree of Bachelor of Business

Administration , is a record of work carried out by Mohammad Arsalan Sheikh , Enrollment No. 2000100276 ,

under my/our guidance.

The Seminar Project Report of student is found to be satisfactory for submission for the award of degree of

Bachelor of Business Administration . I wish him all the best for his future endeavours .

Mr. Mohd Ariz Siddiqui

Assistant professor

DCBM , Integral University

Mr. Ehsanul Haque

Assistant Professor

DCBM , Integral University

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 Index

CHAPTER…………………………………………….............. PAGE

I Introduction………………………………………………………………………….…... 6

Growing market of online food delivery system .................................................................7

Zomato and Swiggy Company Profile……………………………………………………8

Business model of Swiggy and Zomato…………………………………………………11

Challenges associated with online food delivery system ………………………………13

Statistics Regarding online food delivery system ……………………………………….16

Challenges faced by the food delivery business amid COVID-19 pandemic………….. 23

Essential features to include in your food delivery app to tackle COVID-19………… ..25

Challenges

Restaurant management tips for restaurateurs to overcome COVID-19 challenges…. …27

Effective tips to boost user engagement for your online food delivery business……. ..28

Objectives ………………………………………………………………………......... …31

Knowledge gained as per the objective of the study……………………………… 32

Conclusion………………………………………………………………………….........33

Reference………………………………………………………………………...............34

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 Introduction

Nowadays, there have been a lot of discussions that are happening around the development of a

food delivery platform. You must not be unbeknownst to the rising popularity of food delivery

app development, which is tremendously popular among the people owing to the convenience it

offers along. But every new development certainly comes with its very own challenges and

challenges in online food delivery are nothing new. 

Now here as we discuss the food delivery system, a food delivery app development is not that big

a problem. The real challenges are associated with the maintenance of a food delivery system.

While we focus on this trend, let's explore it all about its origin. 

 The current wave of food & grocery delivery ventures came into existence in the Uber-

for-X rush. 

 However, you need to keep in mind that the logistics for this arena are way more complex

as compared to matching riders with drivers and providing GPS tracking facility in a mobile app.

 For the success of any food delivery platform, it must carefully build and maintain menus

as well as inventory lists for millions of individual merchants, track a huge number of daily

received orders, and also run a well-organized dispatching system. 

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 Growing Market Of Online Food Delivery System

Before jumping towards the challenges faced by food delivery companies, let’s first have a

sneak-peek into this system which has been widely embraced by the worldwide audience.

It has been learned from numerous researches and studies that online food delivery and the

takeaway system will be growing at a CAGR of 15.25 percent by 2021. 

The figures don't surprise anyone at all, going by the increasing amount of people choosing to

order-in their food. Numerous restaurants and delivery services have joined this bandwagon and

there is no going down for a long time.

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 Zomato and Swiggy Company Profile

Over the last decade, we have lived through enormous changes in concepts as simple as

restaurants. These changes have been led by online food ordering and delivery platforms. One

day you’re driving down to your favourite restaurant and the next there’s talk of the same food

being delivered through drones.

In India, these changes have been led by several companies most of them unsuccessful like Eat

Fresh, TinyOwl, FoodPanda, UberEats, etc.

The decade clearly has two winners, Zomato and Swiggy. They have not only successfully

entered the unicorn club but also have expanded their presence from metropolitans to tier II and

III cities.

Both the companies have attracted considerable investment with the former amidst its IPO to be

the first of its kind to list in the Indian stock market.

1) Zomato – Never Have a Bad Meal!

Founded in 2008, Zomato initially only existed as a platform that provided restaurant

information, restaurant menu’s and their user reviews at one place. The start-up only entered the

food delivery business in 2015 and hasn’t looked back since.

Within the next 3 years, the company entered the unicorn club. The company has raised over

$3.4 billion in funding including the IPO. The main sources of income for Zomato are

 Commission on delivery.

 Restaurant promotions.

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 Zomato Pro Membership.

 Ticket sales for events at their partner restaurants.

 Hyperpure, a supplier of farm products to restaurants.

2) Swiggy – Order food from favourite restaurants near you!

Swiggy was founded in 2014. Although a late entrant the startup was set up as a food delivery

platform from the beginning itself.

Swiggy entered the unicorn club the same year as Zomato in 2018. Over the years the company

has successfully raised over $2.9 billion in funding.

The main sources of income for Swiggy are

 Commission on delivery.

 Swiggy Access, which provides ready-to-use kitchen space to restaurant partners.

 Swiggy Super, its membership program.

 Restaurant promotions. 

 Swiggy Go, its package delivery service available to all customers.

Both the company have used similar strategies to emerge as market leaders. The most important

being a strategic discounting model. This has helped them attract customers and retain them.

Zomato has also extensively used inorganic means to grow not only in Indian markets but also in

international markets. Its most prominent acquisition being UberEats.

Zomato acquired Uber’s food delivery business in India for cash and stock transaction value of

Rs. 1376 crores. Swiggy acquired companies like 48 East, Scootsy logistics and partnering with

Sodexo.

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Crunching Numbers: Swiggy vs Zomato

Post-2015 Swiggy managed to maintain a marginal lead in the food delivery segment. But post

the acquisition of UberEats Zomato finally gained a significant upper hand.

According to Bernstein analysts, Zomato leads the market with about 50% market share as of

2020. The two food delivery giants currently maintain a duopoly holding more than 80% market

share for the same year.

Through its inorganic growth, Zomato operates through 35 subsidiaries through its acquisitions

and business units. Its consolidated revenues stood at Rs. 2605 crores in FY20. Its losses

however rose to Rs. 2358.6 crores for the same period.

For the first 3 quarters of FY2020-21 Zomato clocked a revenue of Rs. 1,367 crores. On the

bright side although Zomato was yet to be profitable they reduce their losses by Rs. 812 crores

for the 3 quarters.

Zomato did this by cutting discounts and reducing costs. These measures included selling its

stake in Bengaluru-based Loyal Hospitality. In addition to this Zomato shut down its subsidiaries

in Austria, Romania, and Norway.

Swiggy on the other hand earned a revenue of Rs 2776 crores for FY2019-20. Their losses for

the same period stood at Rs. 3768.5 crores.

Swiggy also suffered losses in many of its subsidiaries. These included Mumbai-based delivery

venture Scootsy, Milk delivery startup SuprDaily which posted losses of  Rs 206.8 crore and Rs

272.2 crore during FY20 respectively.

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 Business Model of Swiggy and Zomato

lets understand the actual business model of Swiggy/Zomato either of them use the same

business model.

They have three different verticals first is food delivery, second is advertising services, third is

business consultancy services.

Let’s start with Food delivery on an average these apps are providing 30%-40% discount per

order , here lies the catch if a dish is available on a restaurant for 100 then on these app it will be

already 15%-20% inflated so half of the discount is already being covered. If we ask a question

to a restaurant owner that which case is more profitable to him people eating at their place or

parcel(take away) system . The common answer would be take away as it saves electricity, waiter

and other associated cost . So restaurant owner are giving discount to these app to increase their

order frequency and at the same time reduce their cost. So coming back to a 100Rs dish example

these app would get that dish in 80-85Rs.This discount is treated as commission from the

restaurant.

So by now we know these apps are not burning cash by giving heavy discount it’s a practical

business model, then how these company are posting heavy loses. The loses comes from the app

maintenance charges, data storage cost, advertising cost, R and D cost, delivery boy charges as

they are paying more than industry prices to retain their employees.

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Let’s now talk about the second business vertical which is advertising service and priority

listings. These app gives options for restaurant to appear first when people are typing in a

particular food, not only these restaurants have an option for promotion in between apps to

increase their visibility. For these types of services Zomato is charging heavy fee from these

restaurants. Let’s look again this if a restaurant is earning half of its revenue from Zomato which

mean they are heavily dependent on Zomato to earn more they will advertise more and Zomato

will use this fee money to give more discount for that particular restaurants and this cycle will

continue.

So we finally come to the last and most interesting business vertical of these apps which is

business consultancy service .With a lot of data about consumer purchase and consumer

behaviour they can help a new restaurant by sharing the relevant data , or they can start their own

food house and cash on it as they knew everything about their customers. They knew which type

of food is prevalent in which locality and by what time they order the most. With this data power

investors are so bullish on these companies. 

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Challenges associated with online food delivery system

Online food delivery system though extremely popular, still has its dynamics, and presents

several problems with online food ordering which have been discussed below, to give you a

deeper understanding of the channel:

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 Neglecting Customer Loyalty

In the times of the digital world, fidelity means the most to customers. More the choices, the

more they get spoilt, and the more they love it. Customer management is one of the major

problems with food delivery start-ups. So, the mantra for them is “the more the merrier.” Those

who don't focus on maintaining their customer base are certain to face the consequences bitterly.

However, when a delivery service or restaurant treats its customers with exclusive deals,

incentives, freebies, they instantly gain their loyalty that very moment. The sooner the restaurants

realize this fact, the better it is for them.

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 Not Keeping the Price Model Predictable

The prominence of a new system certainly attracts fierce competition towards it and adds to food

delivery app challenges. Owing to the huge competition in this arena, adopting a price model that

doesn't continuously fluctuate and push sales is thoroughly challenging.

So, now the small businesses run on lower margins & capital, and when they further reduce the

price it puts them out of business. And then in the case of well-set restaurants and delivery firms,

there is still no guarantee of higher sales after the price cuts too, noting the customers are always

expecting more benefits as they place orders.

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 Statistics Regarding Online Food Delivery System

ZOMATO H1FY20

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 Competition with the Biggies

Realizing the great potential lying in the online food delivery system, e-commerce giants are

entering the market. For instance, Amazon & Uber are already up with UberEATS and Amazon

Restaurants respectively. There are also old players like Starbucks and McDonald's planning to

join in the bandwagon. The big names are quite aware of the problems with food delivery apps.

Now they have financial & operation resources required meeting market demand. They can

easily combat the competition coming their way, due to which, small setups and independent

food delivery businesses are struggling to retain their place in the market.

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 Dilemma Over Logistics

One of the most common online food delivery problems is logistics. Shall we keep the delivery

restricted to a few areas or across the whole city? Is there any chance of grabbing a higher

amount of orders from a specific area? How many vehicles would be needed for delivery and

how should they be allocated across delivery points? How to ensure that food remains fresh

while retaining its quality even when the delivery is for a far-off location?

Hence, there are endless concerns and restaurants & delivery services must keep all of these

parameters in mind as they decide upon the last-mile logistics model. Timely delivery should be

ensured as its opposite may tick-off customers and the chances for the same are high in case of

ineffective logistics. Once the trust in your service is lost, it is going to be tough to gain it back.

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 Inconsistent Food Quality

It is a real job to maintain the quality of food being delivered to the customers. After all, the food

delivered in packages stands just no comparison to food which has been served straight to the

customer's table from the kitchen, which is just a meter away in restaurants.

Even when the adequate measure is taken to maintain food quality & packaging measures for

online orders, they remain prone to quality lapse. Like, the pizzas may turn cold, curries are

certain to spill; noodles turn sticky while sandwiches get moist. And the customers always equate

food quality to delivery quality. Some of the major problems with food delivery services are

faced due to the quality of the food delivered to the customers. 

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 Inefficiency to Cope with Volumes

So, let's assume that a particular food delivery service has gained prominence. So, the demand is

soaring and orders keep coming in. But, do the restaurants have the operations & logistics in

place to deal with the volume without any interruption to services provided to walk-in

customers? This is one of the major challenges faced by swiggy. Often it happens that restaurants

fail in developing a second or alternative line of operations to deal with online delivery orders.

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 Unreliability In Delivery & Logistics Staff
With there being myriad retail e-commerce services for possibly every arena, the demand for

delivery & logistics staff has certainly fuelled and this is quite a major problem faced by swiggy.

But the attrition is pretty high too owing to various reasons like inadequate salary, poaching &

absconding, lack of training, no employee benefits and nor the opportunities of progression, life

and health risks (due to weather, constant changes in work schedule and they also carry such

heavy, bulky bags).

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.

Challenges Faced by the Food Delivery Businesses Amid the COVID-

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Challenge 1: Upholding Safety Standards

As the fear of Coronavirus is looming all over the world, customers may have doubts about the

safety standards being followed by food delivery companies. From packing the food to delivering

it to the customers, following the safety guidelines in all phases of the delivery cycle could be

challenging for the food delivery businesses.

Challenge 2: Changing Order Preferences

The eating habits of consumers have changed to a large extent since the arrival of the COVID-19

pandemic. It could be challenging for the food delivery startups to customize the menu items on a

timely basis considering changes in order preferences, dietary patterns, and nutrient intakes of

customers.

Challenge 3: Adopting Multiple Delivery Options

Adding multiple delivery options to a food delivery platform and modifying the existing app

features could be expensive and time-consuming. Food delivery companies also need to provide

additional training to the delivery personnels about the new food delivery procedure and safety

guidelines.

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Essential Features to Include in Your Food Delivery App to Tackle COVID-19
Challenges

Delivery-Safe Menu Items

Eating fresh and nutritious food is necessary to keep yourself protected from any disease.

Consider adding a delivery menu in your app that only features dishes that can be refrigerated

and reheated without compromising the food quality.

Multiple Delivery Options

contactless deliveries and curb side pick-up in your app. Providing various delivery options to

your customers would play a significant role in reducing the spread of the virus and promoting

social distancing in these crucial times.

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Awareness Notifications

It’s necessary to make customers aware of the precautionary measures being taken by your

restaurant to gain their trust and loyalty. Inform your customers via push notifications about the

safety standards followed by your restaurant. 

Cashless Payment Methods

Include online payment methods in your app to support cashless transactions. Cash exchange

could become one of the reasons for Coronavirus transmission. Allow your customers to transact

easily by providing them with multiple payment options like credit or debit cards, e-wallets, and

net banking.

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 Restaurant Management Tips for Restaurateurs to Overcome COVID-19
Challenges

 Guide your restaurant’s staff about the precautionary measures needed to be followed

to keep the virus at bay.

 Implement the following workplace controls to reduce transmission among

employees:

                    → Social distancing

                    → Temperature tracking

                    → Face masks compulsion

                    → Regular cleaning & disinfecting

 Keep raw food separated from cooked food to avoid cross-contamination.

 Use hot water to sanitize and wash utensils.

 Help customers maintain proper infection control by:

                    → Discontinuing operations like salad bars, buffets, and beverage service as all

of them                             require customers to use common utensils or dispensers.

                    → Finding ways to encourage proper spacing while eating.

                    → Discouraging customers from bringing pets to the restaurant.

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 Effective Tips to Boost User Engagement For Your Online Food Delivery
Business

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  Use product badging to help users make informed purchase decisions

Adding badges on the food items with offers & discounts, ratings, & estimated delivery time

could help customers make the right purchase decision. Product badging will not only enable

customers to discover products faster but also improve your sales volume and business revenue.

 Make your customers aware of the changing delivery timings & policies

via push notifications

Offering food items with impressive menus is no longer enough to keep your business going

during the COVID-19 pandemic. Share timely updates with your customers about the operational

working hours & delivery policies of your restaurant to keep them engaged in your online food

delivery portal.

Encourage your customers to share your food delivery portal’s content on

social media platforms

sharing contests could be the best way to improve business reach amid the COVID-19 pandemic.

Ask your customers to participate in such contests and reward them with gifts & vouchers for

sharing the best images of your restaurant’s food items.

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Objectives

 To identify the various challenges associated with online food delivery system

 To identify the Essential features to include in your food delivery app to tackle covid-19

challenges

 To identify the challenges faced by the food delivery business amid the covid-19

pandemic

 To evaluate the restaurant management tips for restaurateurs to overcome COVID-19

challenges

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 Learning And Knowledge Gained As Per Objective Of The Study

By studying this topic I have gained some knowledge about the various challenges faced by the

online food delivery system be it logistics dilemma, price model , inconsistent food quality ,

neglecting customer loyalty , unreliability in delivery and logistics staff and if these many

challenges weren’t enough for the players associated with online food delivery system the

emergence of COVID -19 did the rest for them , now because of pandemic new challenges have

emerged for them like 1.Upholding safety standards , 2.adding multiple delivery option , 3.

changing order preferences etc. . And because of the pandemic they now have to add some

essential features as well in their app .

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 Conclusion

Internationally, the online food delivery services have proved to be a source of employment for many people

around the world from Chefs, Booking managers, Customer care representatives (CSR) and even the delivery

personals as well. With new advancements, new opportunities are easy to create with the most possible and

efficient ways. People are benefiting from these services, and those who have used this tool as a business

perspective are now earning to an extent which they have never thought of you can take the example of

Zomato, an online delivery service started in 2008 by an Indian Entrepreneur from a single room apartment is

now one of the leading online food delivery services in the world raising a mammoth 150 million $ just in

2018. Speaking of global leadership in online food services here are some best online food deliverables in the

world:

 Zomato

 Uber Eats

 Foodpanda

 Swiggy

 GrubHub

 Deliveroo

 DoorDash

 JustEat

 Postmates

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 Reference : Books , Articles , Web Addresses , Link Etc.

https://www.fatbit.com/fab/online-food-delivery-business-challenges-solutions-amid-covid-19/

https://www.octalsoftware.com/blog/food-delivery-apps-challenges

https://yourstory.com/2017/10/challenges-that-online-food-delivery-restaurants-and-services-

face/amp

https://networkon.io/resources/blog/an-online-food-delivery-business-solution/

https://www.posist.com/restaurant-times/restro-gyaan/food-delivery-challenges.html

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