The hospitality business in Kenya’s capital Nairobi is booming, attracting international brands such as KFC, Naked Pizza and Subway. Homegrown brands such as Java Coffee Shop, Dormans and Artcaffe Coffee & Bakery are also thriving. The market’s success is attributed to a growing middle class and expatriate community in the city, and has attracted both local and international investors. [hidepost=9][/hidepost]
Hellofood, an online startup funded by Berlin-based internet incubator Rocket Internet, is betting on the growing restaurant market and Kenya’s internet and mobile phone penetration to grow its business.
Hellofood lists restaurants, coffee shops and hotels and enables customers to place orders online. Individual food outlets then make the deliveries. According to Collins Nalimae, founder and country manager at Hellofood Kenya, the service has widened the market reach of restaurants in Nairobi.
“We are driving orders directly to restaurants. If a client does not know about a particular restaurant and they use Hellofood they are able to order food from that restaurant without stepping into the physical outlet,” said Nalimae. “Customers can easily walk into any restaurant virtually. We are eliminating all the fixed costs that a restaurant incurs [and] the marketing costs. It is cheaper for them to produce and deliver.”
Hellofood Kenya has listed 127 restaurants in Nairobi and plans to expand to other major cities in the country. Restaurants list on Hellofood free of charge and pay a 20% commission for every order made via the online platform.
“Our target market is the middle and upper classes. However, the restaurants on our platform appeal to all classes. We have restaurants that sells one meal for as low as KSh 100 (US$1) and those that sell one meal for as high as KSh 10,000 ($114).”
Nalimae explained that while the “middle class are a busy lot” there are other factors that are pushing Hellofood’s success in Kenya.
“You need to appreciate that the Kenyan middle class is well educated, they are curious and want to try new things and they want to do things out of the normal. I will sit in my office, order a meal and it will be delivered. It will be the talk in the office. They [middle class] want to be seen and felt.”
“The high internet penetration and mobile phone use loyalty makes this a ready market. It is an easier step for an online business to succeed in Kenya. E-commerce is growing in this market,” Nalimae said of the brand’s entry into Kenya.
Ironically, the firm uses a cash-on-delivery model in a country where mobile money payments are very common. This, Nalimae explained, is due to trust issues among consumers.
“Kenyans have a common problem: we have trust issues. We decided to use a cash-on-delivery system so as to develop trust before moving onto online payment systems. It is weird that we trust M-Pesa so much but we are reluctant to pay online for goods.”
Hellofood Kenya is also hoping to build customer trust by ensuring that restaurants listed on its platform offer customers a good experience.
“We keep restaurants on check. If a restaurant says it will deliver a muffin in 10 minutes, it has to be 10 minutes. If any restaurant goes against our agreed contract rules we strike them off.”
He added that initially Hellofood Kenya faced challenges in the market because most restaurants were not offering delivery services.
“Only a few restaurants in Kenya were already doing deliveries [when we launched], so for majority of them we were introducing a whole new concept. It was a huge task educating restaurants on the process from booking to making the delivery.”
Expanding the business
Besides online food ordering, Hellofood also offers services in food court management for events such as sport tournaments and entertainment functions.
“This is not just an extra revenue stream for us but an opportunity for our restaurants to create offline exposure.”
Nalimae said the startup is focusing on the corporate market to expand its user base at a faster rate. Expansion outside Kenya is also in the pipeline.
Nalimae, who has been involved in building a number of technology businesses in Kenya, said developing trust among consumers is critical to the success of any online business.
“The general perception is that internet businesses are scams. For you to demystify that, you have to deliver on what you say. Don’t start en masse, don’t target everybody. You need to have a particular target group in mind.”
Regardless of the region’s thriving technology space, Nalimae cautioned entrepreneurs against ignoring market research and proper execution.
“You might have an idea, a very big idea, but the most important thing is execution. I am a great advocate of internet business. I believe anything can be sold and bought online,” said Nalimae. “Do not wait until you have a huge resource tank to execute your idea.”