Afrigather About seven out of ten new companies fail within the first 5 years, however ChowNowNow, a meals supply service in Lagos, made it to yr six earlier than it threw within the towel. When Olamide Olaleye, the founder and CEO, posted on Instagram saying the closure in February 2024, he obtained many messages. “Share your ewa agoyin recipe,” one buyer requested.
Whereas Olaleye had provides from buddies to place in cash to maintain the enterprise going, he turned them down; he was spent. “I’ve misplaced religion within the meals supply enterprise,” he shared. But he has not misplaced his entrepreneurial drive and is elevating cash to fund ShopNowNow, a brand new grocery supply enterprise. The brand new path will put him in competitors with well-funded opponents like GoLemon, PricePally, and Chowdeck.
“The grocery supply will deal with massive orders, with a minimal threshold of ₦25,000,” he mentioned. It’s a distinct form of beast from ChopNowNow, the place the typical order worth was ₦1,000. The brand new grocery enterprise will schedule deliveries in batches and won’t be pressed for time like a meals supply service.
Arduous classes from meals supply
ChopNowNow started as a standard darkish kitchen with one major location to ship inexpensive meals rapidly within the enterprise districts of Lekki and Victoria Island. A darkish kitchen meant it made meals and will management inputs and high quality. Nevertheless it later included a dine-in choice because it had area to spare.
With free supply as one in every of its worth propositions, this was the usual low-margin play that wanted quantity to interrupt even. “The everyday margin for eating places like ours that promote meals at a low worth was 30%.”
The promise of free supply was the allure. “It labored like magic,” Olaleye recollects. ChopNowNow additionally used influencer advertising and marketing to succeed in its audience, and at one level, the comic, Mr Macaroni, was one in every of its influencers. The corporate grew from three supply motorbikes to thirty inside three years and expanded its distribution channels to different meals supply platforms that used an aggregation mannequin.
The restaurant was listed on Jumia Meals, a meals supply platform that shuttered in December 2023, citing skinny margins worsened by intense competitors. ChopNowNow was additionally listed on OFood—an Opay-operated meals supply service that was as soon as a part of a super-app play by the fintech big—and Glovo the place it was a buyer favorite. Enterprise was good, and Olaleye who had recouped his preliminary funding within the bootstrapped enterprise with some revenue was optimistic in regards to the future.
Inflation pulls a quick one on ChopNowNow
The economic system was about to tug a quick one on enterprise. Meals inflation, which started to rise through the COVID-19 pandemic, had worsened to 19.5% by mid-2022. As client buying energy got here below stress, extra folks started classifying meals supply as a luxurious.
“Every time we referred to as clients, many mentioned that they had begun cooking at dwelling.”
The very first thing to go was free supply. ChopNowNow restricted free supply with its in-house fleet to areas inside Victoria Island, the place it had probably the most clients. Because it withdrew the free supply it had at all times promised, clients moved to newer discounted opponents.
“There’s no loyalty on this market. You count on that after spending years buying customers, the purchasers would stick round.”
“They at all times run to the meals supply platform that may outspend others [in discounts and food delivery.]”
Like many eating places that compete on worth, ChopNowNow struggled to adapt to rising enter prices. Regardless of how sharply the price of substances rose, the restaurant was reluctant to cross on these prices to price-sensitive clients. Value-cutting was the corporate’s solely choice.
Olaleye believes the circumstances would have been completely different if he had began focusing on high-end clients or had a warehouse to retailer produce and soak up the shock of worth fluctuations.
The arrival of meals supply apps intensified competitors, with extra eating places coming on-line. The corporate remained at its present location and started promoting off belongings.
At this time, Olaleye rejects the distinctive proposition that when helped him entice 1000’s of consumers. He tells anybody prepared to hear that free supply just isn’t the best way to seek out loyal clients.
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