Why Deep Discounting by Food Delivery Apps Could Crush the Restaurant Business? A Cambodian Perspective
The rise of food delivery apps in Cambodia has undoubtedly reshaped the dining landscape, providing convenience to customers and opening new revenue streams for restaurants. However, the aggressive strategy of deep discounting, employed by many of these platforms, is creating an alarming ripple effect that could significantly harm the restaurant sector in the long run. As Cambodia’s dining scene matures, restaurateurs are increasingly voicing concerns over the sustainability of this model.
The Deep Discounting Dilemma
Deep discounting, where customers are lured with eye-catching price reductions, often to the tune of 30–50 percent, comes at a high cost. Restaurants themselves fund these discounts, only to share the profits with food delivery apps that charge hefty commissions ranging from 30 to 37 percent. For a typical restaurant in Cambodia, this can mean a 20–25 percent drop in profits, according to industry insiders.
One restaurateur in Phnom Penh laments, “It’s baffling how these platforms offer such steep discounts. No business can sustain itself with these margins.” The problem intensifies when payment delays, ranging from instant transactions to up to seven days, disrupt cash flow—a lifeblood for small and medium-sized businesses.
Impact on Dine-In Culture and Restaurant Sustainability
Deep discounting not only affects a restaurant’s profitability but also threatens to erode the traditional dine-in culture. Restaurateurs like Serei, who manages a prominent eatery in Phnom Penh’s Toul Tum Poung area, argue that dine-in spaces are irreplaceable for fostering direct customer interaction and loyalty. “We are losing the essence of dining to a race for online discounts. It’s not sustainable,” she says.
Furthermore, some restaurants resort to unethical practices to remain competitive. By inflating menu prices and then applying discounts, they deceive customers into thinking they’re getting a bargain. Unfortunately, this compromises food quality, often targeting unsuspecting tourists, which could harm Cambodia’s reputation as a culinary destination.
The Cambodian Market: A Unique Dynamic
Cambodia’s restaurant industry is booming, with nearly 3,000 establishments offering 103 distinct cuisines. The majority of these restaurants (86 percent) are concentrated in Phnom Penh and Siem Reap, highlighting the intense competition in these areas. With prominent food delivery apps like Nham24, GrabFood, Foodpanda, E-Gets, and WowNow dominating the market, the pressure on restaurants to participate in deep discounting campaigns is immense.
In a market where online food delivery is still relatively young, platforms argue that deep discounting is necessary to attract and retain customers. A senior executive at Grab shared, “As the segment matures, we believe the industry will find a balance that benefits everyone.” However, many restaurant owners worry that waiting for such equilibrium could come at the cost of their businesses.
Lessons from the Pandemic: Balancing Online and Dine-In Revenue Streams
During the COVID-19 pandemic, food delivery apps provided a lifeline for many Cambodian restaurants. However, the post-pandemic era requires a recalibration. Restaurateurs like Muhammed Thaslim, who owns a restaurant and catering business in Siem Reap, emphasize the need for balance. “Food delivery apps were crucial during the pandemic, but now we must focus on a sustainable model where both online and dine-in segments thrive,” he says.
Thaslim suggests that open dialogue between restaurants and food delivery platforms is essential. He also advocates for restaurants to regain control over their customer data, which is often exclusively held by delivery apps. “If we have access to customer data, we can build better relationships and provide tailored services,” he adds.
Potential Solutions for the Cambodian Market
To mitigate the adverse effects of deep discounting, the following steps could be considered:
- Collaborative Pricing Models: Restaurants and food delivery apps could collaborate to create pricing models that allow both parties to benefit without excessive discounts.
- Promoting Dine-In Experiences: Restaurants should invest in creating unique dine-in experiences that cannot be replicated online, such as themed events or personalized services.
- Educating Consumers: Raising awareness among consumers about the hidden costs of deep discounting could encourage them to support fair pricing practices.
- Government Intervention: Authorities could introduce regulations to cap commissions and ensure ethical pricing practices, as seen in other markets.
- Diverse Revenue Streams: Restaurants should diversify their offerings, such as catering services or exclusive menu items available only for dine-in customers, to reduce reliance on delivery apps.
The Future of Food Delivery in Cambodia
Cambodia’s food delivery sector holds immense potential, especially in urban centers like Phnom Penh and Siem Reap, where convenience drives consumer behavior. However, for this growth to be sustainable, the relationship between restaurants and food delivery platforms must evolve into a more equitable partnership.
As one expatriate investor aptly puts it, “Even billion-dollar companies need thriving restaurants to succeed. If restaurants fail, the entire ecosystem collapses.” The onus is on all stakeholders—restaurants, delivery platforms, and regulators—to ensure that the industry thrives in the long term.
Final Thoughts
While food delivery apps have undoubtedly revolutionized the way Cambodians enjoy their meals, the current trend of deep discounting risks destabilizing the restaurant sector. To sustain the vibrancy of Cambodia’s dining scene, both restaurants and delivery platforms need to prioritize long-term gains over short-term discounts. After all, a strong restaurant industry benefits everyone—diners, delivery platforms, and restaurateurs alike.
What’s your take on deep discounting? Should restaurants and delivery apps work together for fairer practices? Share your thoughts in the comments below!