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How China's online delivery boom is creating ghost restaurants

China leads Asia in online delivery, while also driving a new trend in ghost restaurants

Photo: Capwiuejooh/Wikimedia Commons
Ghost restaurants, also known as delivery-only restaurants or dark kitchens, are opening across China, fuelled by an online food delivery market worth over 37 billion USD alone.

In a recent report by Nikkei Asian Review, China, Japan, India and numerous other countries in Asia have seen in increase in the number of ghost restaurants, food businesses which serve customers exclusively through online ordering and delivery. Without brick-and-mortar storefronts to maintain, these virtual eateries not only avoid the costs (rent, labour, operating expenses etc) usually associated with sit-down restaurants, but also their notoriously high failure rates (26 percent of independent restaurants fail in their first year, according to a US study), making them an increasingly attractive business model.

Asia’s total online food delivery market is estimated to be worth roughly 53 billion USD. Responsible for 37 billion USD, China leads Asia in online food delivery, accounting for almost 70 percent of the total market. A study by research firm NPD Group found that almost two-thirds (63 percent) of Chinese people use websites and apps to have their food delivered, in comparison to only 36 percent and 27 percent in Japan and South Korea respectively.

Due to this demand, Beijing-based company Panda Selected has opened 103 shared kitchens across China in the last three years alone. Described by many as the ‘WeWork for restaurants’, Panda Selected reports over 500 food businesses currently use its shared kitchens. With fewer people dining in restaurants, the company argues that the streamlined model of renting kitchens and offering delivery creates an average profit margin of 20 percent, in comparison to 10 percent for traditional restaurants.

‘Shared kitchens have boomed in China because Chinese families are used to food delivery,’ said Panda Selected CEO Li Haipeng in a video on the company's website. ‘As long as China’s desire for food delivery continues, the demand for shared kitchens will only grow.’

Li, so far, doesn’t seem to be wrong. Back in February, the South China Morning Post reported that former Uber CEO Travis Kalanick is considering attempting to break into the Chinese market once again, this time with his Los Angeles-based shared kitchen venture CloudKitchen.

Meanwhile, e-commerce juggernaut Meituan launched its latest venture ‘Meituan Delivery’ this past Monday (May 6), a short-distance delivery platform that can reportedly complete an on-demand delivery within an average of 30 minutes, also putting it in direct competition with Shansong and JD. Meituan has previously stated its intention to focus more on food and restaurant management and reduce losses from its ride-hailing and bike-sharing services.

Meituan and Ele.me remain the biggest players in China’s food delivery industry, with both apps collectively claiming 102.8 million monthly active users back in December. That same month, Meituan teamed up with Chinese coffee chain Luckin Coffee to deliver coffee and food through its delivery network, after Starbucks announced its own partnership with Ele.me that previous August.

According to internet data analysis service provider Analysys, the total number of online orders for meals, drinks and groceries reached 10.96 billion in China last year, doubling from last year (it reportedly doubles year on year).

With China seemingly hungrier for increasingly more convenient ways to get food, only time will tell how Beijing’s restaurant scene will evolve.

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