For restaurants, participating in a delivery marketplace can be a double-edged sword. Delivery aggregator apps can drive volume, but they do little for loyalty or brand awareness, and the benefits are not always worth the costs to the business in terms of implementation and fees.
According to Ray Reddy, Ritual CEO and co-founder, that puts these businesses in the undesirable position of having to choose between the lesser of two evils.
Either they join a marketplace, where they run the risk of becoming disintermediated from their customers, or they white-label a software platform that gives them full control over the customer experience, but doesn’t help them on the customer acquisition side.
That’s why Reddy says it’s time for a digital transformation in local commerce – and introducing technologies like tap to pay isn’t enough. Tap to pay might create a good experience, he said, but it’s not transformative; customers are still individually entering stores and standing in line to pay.
According to Reddy, a truly transformative platform must enable new and interesting experiences that were not previously possible, such as letting large teams of people organize around coffee or lunch using digital tools and creating a peer-to-peer discovery and delivery network for local restaurants.
That’s what Ritual’s new feature Piggyback does, and it’s what got investors like Georgian Partners, Insight Venture Partners and Mistral Venture Partners interested enough to invest a total of $70 million in the order-ahead app in a recent funding round.
Reddy says the non-choice between joining a marketplace or white-labeling a solution is a uniquely North American challenge. In Asia, platforms like WeChat have found a middle ground that gives businesses the best of both worlds – both control and discoverability.
In a recent interview with Karen Webster, Reddy explained what these platforms are doing differently, and how Ritual is working to replicate the approach with Piggyback in the U.S. and other markets.
In North America, said Reddy, marketplace participants are either buyers or sellers. Buyers can reach out to sellers with questions, comments and concerns, but it’s a one-way communication street – sellers can’t reach out to buyers to let them know about value-add opportunities.
To do that, merchants must develop their own mobile app, and that creates a whole new set of challenges – prime among them being that nobody likes to download lots of apps, so unless the brand is already well-known, creating a bespoke app is likely a lot of effort for not a lot of payoff, Reddy noted.
He added that even some of the biggest names in the restaurant space can’t achieve a satisfactory engagement level with their bespoke mobile apps. They may be able to bribe customers to download the app initially, he said, but after they get that initial free thing, they never come back.
Finally, Reddy said, marketplace sellers are also constrained to presenting their storefront in the chosen format of the marketplace, limiting the potential for any significant branding efforts.
Conversely, Reddy said, WeChat and the other Asian marketplaces that Ritual aims to emulate give sellers the freedom of a bespoke app when it comes to presentation and marketing, but with the reach and accessibility of an aggregated delivery app.
On these platforms, sellers have total control over how their storefront appears, and they have the ability to reach out to customers and have a conversation with them or present offers – it’s not just a one-way street.
In any given neighborhood, Reddy said, restaurants can have tens of thousands of people within a five-minute walk, but less than 2 percent of them have ever eaten at the establishment. A platform like Ritual helps restaurateurs who want to reach the other 98 percent by being more personal and proactive, rather than having a third-party marketplace come between them and their customers.
The Social Effect
With Piggyback, Ritual adds one more component to the WeChat model, and that is the social network – but not, said Reddy, in the way one might expect.
Instead of using digital social networks like Facebook and LinkedIn, the platform uses real-world social networks within workplaces as an acquisition mechanism. When a customer joins Ritual, he’s forming a “team” at his company that can expose an entire office to the restaurant.
Imagine the customer has a favorite coffee shop and joins Ritual there. The next time he orders from that coffee shop, Piggybacks sends out a notification to his colleagues that he’s going to pick up a coffee and can pick one up for them, too.
In short, Reddy said, it’s a way for office workers to get a coffee or lunch brought to their desk using social currency in their team.
Restaurants are getting the benefits of exposure and increased order size, plus delivery they don’t have to pay for, since customers are bringing back orders for their entire team. Offices are getting the benefits of improved camaraderie by sharing coffee and lunch together, as well as the convenience of delivery without the fees.
Thus, what Ritual is really out to disrupt is delivery – and the social aspect of Piggyback may be giving it just the leg up it needs over other delivery options.
Reddy noted that the platform’s frequency metrics group it more with social apps than with commerce ones. A particular key metric is how many monthly active users are on the platform daily. For the typical commerce app, that percentage is around 5 to 7 percent. In retail, it can be as low as 2 or 3 percent.
Conversely, social apps see a much higher frequency of usage. At the height of its popularity, Farmville was seeing 25 percent of its monthly active users using the app every single day. Reddy reports that this frequency metric for Ritual is just under 20 percent – and that’s due to a very deliberate categorical choice.
Other than food and drinks, there’s not much that people use a credit card for on a daily basis. Recurring purchases like groceries, rent and utilities are paid weekly or monthly; other retail purchases are “occasional” as items are needed and funds are available. Reddy said it was not by accident that Ritual chose an everyday category as its beachhead in the effort to digitally transform local commerce.
“Customers can use the product every day, or multiple times a day,” Reddy said. “That’s how habits are formed.”