eatigo launches in Malaysia

RESTAURANT reservation platform eatigo is now officially available to users in Malaysia. The platform enables users to make off-peak reservations at restaurants and enjoy a range of discounts.

eatigo completed its Series B fundraising in October 2016, securing investment from Trip Advisor and bringing its total funding to date to US$15.5 million (its Series A was completed in December 2015).

Already in Bangkok, Pattaya and Singapore, the funding from Series B is being used to expand eatigo into more markets in Southeast Asia, starting with Kuala Lumpur and Hong Kong, where it launched a few weeks ago.

Co-founder and chief executive officer Michael Cluzel says that while the objective of the Series A round was to prove the viability and sustainability of the business model in its alpha markets of Thailand and Singapore, the scope of Series B is to prove that the business model can succeed quicker in Malaysia, Hong Kong and other markets.

“We want to see if we can reach meaningful revenue and breakeven quicker, thus showing our shareholders that our business model is not just sustainable, it is also exportable,” says Cluzel.

eatigo is headquartered in Bangkok, and its co-founders are of diverse nationalities and entrepreneurial backgrounds. Besides Cluzel, the co-founders are Thailand director Pumin Yuvachruskul, Singapore director Judy Tan, and chief financial officer Siddhanta Kothari.

Cluzel emphasises that eatigo wants to have a meaningful presence in every market it enters, which means becoming the leader or second in the market by the end of one year and breaking even within two years.

The platform has been operating in Malaysia since the beginning of April and, according to Cluzel, the ramp-up has been satisfactory since then. The Malaysian office reached its first milestone in daily bookings in 10 days, compared to nine months in Thailand and eight months in Singapore.

eatigo’s premise is simple –  it ‘connects empty stomachs and empty tables’ by offering time-based discounts of up to 50% every day for every restaurant on the platform. Basically, users are able to make reservations at their favourite restaurants at off-peak hours and receive significant discounts while restaurants are able to fill seats that would otherwise be empty.

Cluzel calls eatigo a yield management platform, meaning it charges people a different price and different times. This is common in the airline and hotel industries, but restaurant prices are pretty much fixed, which is why eatigo has had a significant impact on the industry.

Because of the nature of the restaurant business – high capacity utilisation at the peak hours of lunch and dinner and low utilisation at other times – restaurants run at a global average capacity utilisation of 35%, an incredibly inefficient rate especially compared to the hotel and airline industries, which run at nearly 80% capacity utilisation.

For eatigo, this leads to a global opportunity of tremendous size. Cluzel points out that the global sit-down restaurant market size is US$2.6 trillion. “If we can improve the capacity utilisation to just 45%, that’s an incremental global market size of US$260 billion. It’s completely not serviced at this time.”

“It’s an opportunity that is global, huge and Blue Ocean, because we are the first mover in this business,” he says.

This is really what sets eatigo aside from most other players in the market who are traditional reservation or social buying apps – it sends 90% of its traffic to merchants during off peak hours thus guaranteeing additional profitability for the merchants.

This is also why Cluzel refers to eatigo as the anti-Groupon, in that it does the exact opposite of the latter.

“We replace 0% profitability with an inventory that has a positive profitability. eatigo drives 20% – 40% of merchants’ daily traffic and drives this traffic to them exactly when they want it. A restaurant always makes more money with eatigo than it does without,” says Cluzel.

“eatigo works with everybody from McDonald’s to Michelin,” quips Cluzel, meaning that the startup does not discriminate between types of merchants. The only important factor, he says, is popularity because eatigo only works with good merchants.

“The underlying elasticities of eatigo don’t work with bad merchants,” he says, explaining that the demand for discounts at off-peak hours lives and dies with popularity of the merchant. “We help them monetise the popularity they already have.”

There are currently more than 1,000 restaurants on the platform and the app has seated more than four million diners since inception in 2013. The app was launched in Kuala Lumpur with 110 restaurants in the city on the app. According to Cluzel, this number will more than double by the end of the year but says that there is no set goal for how many restaurants must be on the app by then.

“eatigo prefers to focus on the quality of the restaurants and discounts. We are not chasing a number. We want the right restaurants.”

eatigo works with big AAA restaurants such as Pizza Hut and TGIF, hotels, and independent restaurants. Cluzel says that most of the bookings on the app go to the AAA restaurants, while most revenue comes from bookings at hotel restaurants, and the independent restaurants help with eatigo’s image.

The startup charges merchants a flat fee per diner, which differs according to category of restaurant and country. “We deliver something for the user, something for the merchant, and we make money in the process.”

“We are in a difficult business. We are in the business of changing human behaviour,” says Cluzel.

To do so, he continues, you need one of three things: “a lot of time, a lot of money, or a real good reason.”

eatigo has a real good reason – discounts. Cluzel makes is clear that eatigo is enjoying its success not just because of the great mobile app penetration in the countries it operates in but also because of Southeast Asian users’ big discount affinity.

Restaurant reservation culture is not as strong in Southeast Asia as it is in the West, though it is picking up. It is stronger in more mature markets such as Singapore and Hong Kong as compared to Thailand and Malaysia – Cluzel reveals that Thai people normally rarely make reservations – but across the board, the discounts that eatigo offers serve as a huge motivator to make the reservations.

“People don’t use eatigo because they want to make a reservation; they use us to get a discount. This is a very powerful motivator. We find out what people want and we give it to them,” he says.

Users get a discount on every booking they make and every restaurant on the platform offers a 50% discount every day some time during the day.

However, changing human behaviour is still a tall order, so eatigo solves this by requiring users to change just one thing – the time they dine. “At no other point are we asking the user to do anything different from what they would do if they were making a normal reservation and dining at a restaurant. The whole user flow is designed to be completely natural,” explains Cluzel.

User experience with the app is also designed to be quick and easy, and the platform allows for browsing and specific searches to accommodate different user needs across the region. Cluzel reveals that Thai users prefer to browse while Singaporean users generally have a fixed idea of which restaurant and time they want. “We are excited to see what Malaysian users are like,” he says.

The eatigo business plan is constructed independently of the number of merchants it acquires and number of bookings it processes, which means that it concentrates on quality of merchants and value of bookings instead.

Cluzel also emphasises that eatigo “prefers slow money over fast money”, preferring to achieve its Series B goals before thinking of the next funding round, which will have a bigger scope.

“We are rolling out at the beginning of this year and then we will see how operations go. The next round could be as early as this year, it might be next year. It really depends on how eatigo and our investors interpret the results we see in the market,” he says.

The startup remains focused on the Southeast Asian region, but Cluzel stops short of revealing where the platform will launch next. “We are very sure that the business model will work anywhere. But we are still a young company and we don’t want to stretch ourselves too thin,” he says.

“Food is a wonderful business to be in because it transcends culture, age, economics, everything. Everybody in the world needs to eat three times a day. If you’re trying to build a regional or global business that is transaction-based, what better business to be in than food?”

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