AirAsia's food delivery platform airasia food has hit the ground in Singapore, charging a commission rate of 15% to merchants which group CEO Tony Fernandes touts as "the lowest commission rate in town". The platform was initially launched last May as OURFOOD but rebranded to airasia food as part of airasia.com's super app.
As part of the launch in the Singapore market, airasia food is on the hunt for F&B operators to sign up as merchants, offering a special sign-on rate as low as 8% for the month of March. According to Fernandes, this enables merchants to earn more while having full control over their menu, pricing and easy access to data aside from being able to communicate directly with their customers.
Airasia food also claims to be "a seamless, fuss-free and affordable solution" that runs on flat-rate plans, allowing merchants to go live within 48 hours upon registration. According to the airline, airasia food merchants will have access to what it describes as "business-friendly features" including the immediate online sign up with no contracts or forms required, the ability to talk directly to customers, build a database and reach more customers. They will also receive support from dedicated account managers who will assist in bringing the F&B business online, provide system support on data analytics and monitoring. Merchants can also leverage on airasia’s extensive marketing effort and periodic campaigns to drive publicity and sales.
Although airasia food said in the press release that it charges a normal commission rate of only 15%, head of airasia food Sabrina Khaw said last year that given the effects of the ongoing pandemic, the team felt that a zero-commission model will work best to ensure it helps as many local businesses as possible. The platform currently has more than 1,500 riders offering delivery services to more than 1,200 restaurants around Klang Valley. MARKETING-INTERACTIVE has reached out to AirAsia for additional information.
Meanwhile, the company is encouraging businesses in the beauty, cosmetics, fashion, fresh produce, and hotel sectors to register their interest as the airasia super app targets to also expand its eCommerce services in Singapore soon. Airasia food is among the list of offerings under the airasia.com super app, which include airasia shop, airasia fresh, hotels, flights, and IKHLAS.
Tackling the scene in Singapore
According to Fernandes, Singapore is the most vibrant market in the region, if not globally, and it is excited to kickstart airasia food in Singapore. "Our Allstars Delivery Squad has painted the town red in Malaysia and now we are ready to take on the streets of Singapore. Just as how we democratised air travel, airasia food will democratise the food delivery industry by providing value, simplicity and inclusivity for everyone," he added.
While this might be true, Singapore's food delivery market is an already cluttered one with major players such as GrabFood, foodpanda and Deliveroo vying for consumers' wallets. Safe to say, the entry of airasia food into Singapore might place food delivery players on alert, as they await its next move.
In a conversation with MARKETING-INTERACTIVE, Foodpanda's spokesperson said as the first food delivery platform in Singapore, it has seen new players in the food delivery space come and go in the last nine years.
"Our strength in technology and logistics infrastructure, plus deep insights to our customers’ preferences will allow us to remain the preferred choice for Singapore customers. We are not distracted by competitive forces and will continue to stay focused on bettering our delivery speed to under 30 minutes, product and service offerings," the spokesperson added.
Meanwhile, Deliveroo's spokesperson said it welcomes the competition as it benefits customers, restaurants and riders alike. "At Deliveroo, we are focused on what we do best, that is being passionate about food and delivering an amazing food delivery for people, whenever and wherever they want it, morning, noon or night," its spokesperson said.
Grab did not comment on MARKETING-INTERACTIVE's queries at the time of publication. The brand is however no stranger to the tough food delivery industry having copped flak last year for charging a 30% commission rate to merchants amidst the pandemic. This came after the Restaurant Association of Singapore called for food delivery players to lower their commission rates, which are typically between 25% to 32%.
The company later clarified that merchant revenue takes up 70% or more of its order value, while GrabFood's commission comprises up to 30% of the order value. There is also a SG$0.20 platform fee per order. The post added that its delivery fee goes entirely to its riders, and the commission GrabFood earns is partially used to top up its riders' incentives. Despite this, some netizens pointed out that 30% was still too high of a commission rate, while others said the ad is not representative of delivery fees because most orders are more than SG$25, which was the price point Grab used for its post.
Nonetheless, Grab has supported its merchant community in a variety of ways, such as the #GrabFoodBank campaign, the #GF7SecAd, as well as new features such as islandwide delivery, local heroes, and mix and match.
Can airasia food punch above its weight?
While AirAsia has offered few details about its entry into the food delivery space, Shiv Choudhury, MD and partner at Boston Consulting Group, leader of the global advantage practice area as well as consumer practice area in Southeast Asia, assumes that airasia food is "going down the aggregator route" and this is an area which is pretty tough to break in and make money in. "Last mile riders are at a major premium and availability is low, costs are high. It will be tough for airasia food to get a share of that. Also, most restaurants already partner with three or four [food delivery] players. Hence, it will not be easy to prove they need another delivery company," Choudhury explained.
Food delivery is a cash intensive business especially as it starts off, with the core airline business being challenged. The question is whether AirAsia and its investors have the appetite to go through another cash burn business.
Choudhury said the trend of going through another cash burn business "is the forte and area of investment for Grab and the others". Therefore, it will be an intense battle if airasia food goes down that path. That said, not all is lost for airasia food and Choudhury said it should leverage its user base and loyalty programme to reduce the cost of acquisition and engagement. This is more effective against other players that have to acquire customers.
"It should bring a different offering, tie-up with gourmet or different players and tiers, for example, positioning itself around local food and mainstream pricing. It should also link all of this back to travel, such as offering food from different countries, for example, so that there is a natural link to the brand," he added.
(Read also: AirAsia.com realises super app dream: 'We have not wasted a crisis')
Similarly, Kevin Kan, CEO of Break Out Consulting Asia, said airasia food needs to leverage its brand, assets and industry disrupter mindset. Airasia food also has the huge advantage of brand recognition and it needs to leverage that in its marketing to quickly acquire customers. Kan added that it can also leverage assets, specifically AirAsia BIG, to turn food into points for redemption to draw consumers.
Citing Grab as an example, Kan said the company's partnership with Singapore Airlines allows for users to earn KrisFlyer miles when they pay with the American Express Singapore Airlines credit card. In airasia food's case, it has the advantage of being part of a larger loyalty programme that is integrated and can offer travel experience. This also provides an opportunity for a food to travel marketing campaign opportunity to consumers.
Another area where airasia food could disrupt the industry is an exceptional level of customer service. With horror stories of food deliveries not being made after order confirmation, food arriving cold or even no refunds on missing food deliveries, "if airasia food can provide guaranteed food delivery and fixing customer issues with delight, that would really transform the food delivery industry and help them be successful in an already crowded food delivery marketing in Singapore", Kan explained
That said, while AirAsia has adopted the Virgin Group's philosophy of being an industry disrupter, Kan said it is going to be difficult to break traditional human behavior of being creatures of habit. "If consumers have good experiences with existing players such as Grab and Deliveroo, for example, why would they change?"
By doing things differently with merchants, such as having a zero commission model, and having different consumer incentives, Kan said this would also spur consumers to give the new platform a try. "It could focus on Millennials first as that segment is willing to try different services and they are not traditional creatures of habit," he said.
Besides leveraging on its current capabilities and airasia.com's super app, airasia food would also need to gain an in-depth understanding of the insights of Singapore and other markets. Wong Mei Wai, founder, CEO and chief change catalyst at APAC Global Advisory, said while food delivery initially surged during the earlier phases of the pandemic in these markets, Wong said it declined in the later stages once the respective markets started to open up.
Another area that is critical for success includes building its awareness and credibility as a credible food or product delivery platform on digital and apps management, beyond what its master brand franchise represents.
"Aside from this, airasia food will need to be successful to acquire the support of merchants with attractive commissions and offers. Most importantly to leapfrog the competition, it will need to demonstrate that it can pass on the value to the consumers through more competitive pricing and ensuring that the entire process of delivery and management of the supply is smoothly backed up by excellent customer service," Wong explained.
She added that the success of such a venture hinges on excellent execution and the on-boarding of strong anchor merchants that can provide a unique array of product and/or services. At the same time, it should also offer mainstream accessibility and sustained delivery at a significantly improved commission rate for merchants. "The savings from this should then be passed on to the consumers in food prices or food promotion packages or bundles. The cross-country leadership into the new category through great talent management will help to seal any success," Wong said.
This latest move by AirAsia comes as the COVID-19 pandemic continues to impact the travel industry and organisations are innovating their business models to adapt to the new normal. According to Wong, brands are jumping on trends such as food delivery, in-home consumption and the opportunity to bring greater value to the community these days.
AirAsia is no different from the many companies which have pivoted from B2B to B2C to eventually become an online digital marketplace, Wong said. She explained that the pivot often starts with an initial test market in familiar territory such as food or grocery in the home market during the lockdown.
"Eventually, when there is some initial success and the management realises there is a huge potential unleashed through digital platforms and direct access to the community through the supply chain, they then boldly forge forward to take on diverse merchants to become a marketplace to serve the community," Wong said. She added that this may eventually even become a new pillar to business. Another reason for pivoting is to also keep the brand top of mind and engage consumers, just like how Singapore Airlines did with its SIA@Home initiative last year.
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