The online food delivery industry in Nigeria has seen tremendous growth over the past few years. Food delivery apps and websites are transforming how people order and access meals in major cities across the country. The rising popularity of food tech companies like Jumia Food, Glovo and Bolt Food has introduced convenience and simplicity in ordering meals from the comfort of one’s home or office.
However, despite the strong potential, the online food delivery space in Nigeria still faces some key challenges. In this article, we explore the rise of food delivery services in Nigeria, the opportunities this presents for restaurants and customers, and the obstacles the industry needs to overcome.
The Emergence of Online Food Delivery
The online food delivery sector in Nigeria kicked off in earnest in the early 2010s, with the launch of food listing and ordering platforms like Hellofood and Jumia Food. These initial startups focused mainly on allowing customers browse menus and order food for delivery or takeout from partner restaurants.
In recent years, the market has grown more sophisticated with the entry of on-demand delivery platforms like Glovo, Bolt Food and Sendy. These companies maintain their own fleet of delivery riders and have expanded food delivery options for consumers. Rather than just providing a food listing and ordering service, they now offer quick doorstep deliveries from a wider range of restaurants and food businesses.
According to Ken Research, the food delivery market was valued at $438 million in 2021 and is projected to reach $2.1 billion by 2027. The emergence of venture capital-backed startups with innovative business models has catalysed the sector’s high growth. With increased investment in technology and logistics, more customers are being onboarded.
Driving Factors for Food Tech Growth in Nigeria
The potential for online food delivery services in Nigeria is massive given the right conditions. Here are some of the key factors driving the adoption and usage of food delivery apps and websites:
Expanding Internet and Smartphone Penetration
With internet access and smartphone ownership on the rise in Nigeria, more people are able to benefit from the convenience of food delivery apps. Internet penetration stood at around 33% in 2019 according to Statista, indicating promising room for growth as digital connectivity improves outside major urban centres.
Busy Urban Lifestyles
As daily commutes get longer due to traffic congestion in major cities like Lagos and Abuja, and work days get busier, online food delivery presents a handy solution for time-strapped professionals. Instead of spending over an hour driving to restaurants during rushed lunch breaks, office workers can now get a wide selection of foods delivered.
Growth of Online Payments
The transition towards cashless payments and mobile money in Nigeria has also boosted the food delivery sector. Consumers are increasingly paying for goods and services through secure online channels using their cards, bank accounts or mobile wallets. Food delivery apps are integrating a variety of payment options which improves convenience.
Changing Consumer Preferences
Increasing exposure to global food trends and more women joining the workforce means busy young professionals now have less time to cook but have disposable income to order food frequently. Nuclear family units and single person households are also better suited to ordering food for convenience or variety.
The COVID-19 pandemic led to lockdown restrictions limiting restaurant dining. As more restaurants moved their operations online, food delivery apps became a lifeline that allowed many businesses to survive and reach stuck-at-home customers. Having experienced the benefits of delivery, more Nigerians now routinely order food online.
Venture Capital Interest
VC funding towards African startups hit record highs in 2021, with fintechs and on-demand applications attracting substantial investments. Well-funded food delivery companies are using capital injections to expand their logistics capabilities and onboard more restaurants and customers. Improved product experience helps to retain users and grow market share.
Key Industry Players
The food delivery landscape in Nigeria comprises a mix of older listing/ordering platforms and newer on-demand delivery services competing for market share. Some of the major companies dominating the space include:
- Jumia Food – Originally launched in 2012 as Hellofood before rebranding in 2019 as part of Jumia Group. It has the largest geographic coverage across Nigeria.
- Glovo – Spanish on-demand delivery app launched in Nigeria in 2018. Covers Lagos, Abuja, Ibadan, Port Harcourt and 10 other cities with fast deliveries. Has its own delivery fleet.
- Bolt Food – Ride-hailing company Bolt launched its food delivery vertical Bolt Food in 2019 in key locations including Lagos, Abuja and Port Harcourt.
- Sendy – A fast growing Nigerian on-demand delivery startup offering 30-minutes deliveries in Lagos from a network of dark stores.
- ORide – OPay’s food delivery arm ORide focuses on quick food deliveries in Lagos, Ogun and Oyo states and several universities.
- ChowNow – Domestic food delivery startup operational in Abuja with free deliveries within 45 minutes and no hidden costs.
- FoodCiti – Online food ordering platform providing deliveries across Lagos within 60 minutes. Fast growing portfolio of restaurants.
- Sweetkiwi – Dessert ordering and delivery app offering treats and pastries from vetted bakeries and kitchens in Lagos.
Various global players are also looking to expand into the promising Nigerian food delivery sector including Uber Eats and Delivery Hero.
Benefits and Opportunities for Restaurants
The growth of online food ordering and delivery in Nigeria presents game-changing benefits for restaurants looking to expand their reach, revenues and customer base:
Increased Order Volumes and Revenue
By partnering with popular food delivery apps and sites, restaurants can significantly boost their daily orders and sales. Platforms like Jumia Food and Glovo provide valuable exposure to thousands of potential customers. A solid delivery setup can account for 30-40% of revenues for restaurants.
Lower Customer Acquisition Costs
Restauranteurs save substantially on advertising and promotions by leveraging the large existing user base of leading food delivery apps. It is cheaper to acquire customers through established platforms than spending resources on in-house marketing campaigns.
Improved Operational Efficiency
Outsourcing deliveries to third-party logistics providers allows restaurants to optimize their kitchen operations and focus on food preparation. This results in faster order processing and delivery with fewer mistakes.
Expanded Geographic Reach
Tie-ups with food delivery platforms that have covered wider locations help restaurants extend their reach beyond their immediate neighbourhood. Demand can be met from new customers further away.
Access to Data Analytics
Food delivery apps provide valuable data insights around dish popularity, order patterns and other metrics. This enables smarter decisions around menu planning, inventory management and targeted promotions.
Joint promotions and discounted offers on food delivery platforms helped restaurants stay afloat during lockdowns and the toughest phases of the pandemic. Apps generated demand and provided much-needed revenue streams when dine-in was restricted.
The partnerships local restaurants forge with food delivery companies will determine how well they are positioned to benefit from Nigeria’s evolving food tech landscape.
Benefits for Customers
For hungry Nigerians, the emergence of food delivery apps and websites has introduced welcome conveniences and advantages:
No Need to Leave Home/Office
The biggest gain is being able to order meals and get them delivered without having to pick them up or dine at the actual restaurant. This saves time and fuel, especially when making orders during busy work days or late nights.
Wider Range of Meal Options
Ordering through a centralized delivery app opens up food choices from different restaurants in the area, beyond what’s located in the immediate neighbourhood. Cravings for a particular cuisine can be easily satisfied.
On-demand delivery startups facilitate quicker meal deliveries, within 30 to 45 minutes depending on location. Their focus on speed meets expectations for fast service.
Deals, Discounts and Loyalty Programs
Promotions like free delivery, percentage discounts and combo meal offers make ordering food more affordable. Loyalty programs also reward frequent patrons.
Touchless deliveries and online payments limit exposure and ensure safety, which has became more important during the pandemic. Customers appreciate minimal contact with delivery personnel and packages.
Payments and Order Tracking Convenience
The ability to pay seamlessly using cards or mobile wallets and track orders in real-time makes the delivery process smooth and hassle-free for customers. They stay updated on estimated arrival times.
Opportunity to Support Local Restaurants
By ordering delivery directly from restaurants instead of through informal food vendors, customers can choose to support legitimate food businesses in their area who comply with food safety and licensing regulations.
Challenges Facing the Sector
Despite the positive trajectory, food delivery companies still grapple with crucial challenges that need to be addressed for sustainable long-term growth of the segment in Nigeria:
Limited Coverage Outside Major Cities
Food delivery services remain largely concentrated in big urban centres like Lagos, Abuja, Port Harcourt and Ibadan. Expanding services to smaller towns and rural areas will widen the addressable market. But this will require significant investment in transportation and logistics to ensure reliable deliveries across longer distances and difficult terrain. Companies need to boost their fleet capabilities.
Low Levels of Trust and Awareness
Unavailability of licenses and lack of enforcement of standards creates hesitancy among customers about ordering from unfamiliar, uncertified players. Raising awareness and improving visibility of legitimate food businesses on delivery platforms will help build trust. Associations like WARC are advocating for regulatory frameworks.
High Commissions Charged to Restaurants
The commission rates charged by delivery firms, ranging from 20% to 30% of order value, are seen as exorbitant by restaurants. Lowering the commissions can attract more restaurant partners and ensure profitability. Companies need to optimize their operating costs and fleet usage.
Limited Payment Options
Despite the growth in card and mobile money adoption, a large share of customers still prefer making cash payments. Integrating more cash payment methods can help onboard more users currently deterred by fully digital options.
Safety and Hygiene Concerns
Reports of food tampering and compromised packaging during transit negatively impact customer confidence. Players need to enforce stringent checks and protocols around secure handling and delivery, especially when moving food over longer distances. Training delivery fleet on safety best practices is critical.
Traffic and Address Identification Challenges
Food delivery timelines get severely impacted by traffic congestion and mobility difficulties in crowded cities like Lagos. Driver routes and ETAs need to factor in traffic conditions. Identifying precise addresses is also a problem – apps need to integrate improved location mapping and GPS capabilities.
The Road Ahead
To address the challenges highlighted, Nigeria’s food delivery industry needs to harness technology more effectively across the value chain:
- Tap into the growth of online groceries and CPG deliveries beyond just meals – this expands the reachable market
- Utilize data analytics and AI to analyze order patterns and optimize delivery routes in real-time
- Build checker workflows to ensure packaging integrity from restaurants to customers
- Deploy digital advertising to drive awareness among target customer segments
- Offer ** subscriptions packages** that incentivize repeat purchases and improve loyalty
- Integrate digital QR-based menus to enable contactless restaurant browsing
As consumer behavior continues evolving, the addressable market will grow. Players who build robust logistics operations, expand their selection, ensure strict hygiene and provide superior user experience will emerge as winners.
With rising investment, maturing business models and rapid digitalization across Africa, the food delivery industry in Nigeria looks well placed for 10x growth over the next decade. Consolidation is also on the horizon – major players could acquire smaller startups once the ecosystem matures. Overall, seamless online food delivery looks set to become an integral part of modern urban lifestyles in cities across Nigeria.