I have a clear recollection of the first significant venture deal I was exposed to. It was the year of the y2k bug and unfortunately for my dad, it wasn’t going well. He had recently decided to double down and literally bet the house on a then little-known business named HotelClub. Mid capital raise the '.com' bubble had well and truly popped and the business, which was still burning cash, was running out of funding options. I won’t soon forget the lively discussions around the dining table as my mother aptly proclaimed: “This is crazy”.
You see, back then, people didn’t want to book hotels online. They wanted to call the concierge and have a yarn about which room had the best view and newest renovation. Fortunately however, supporting Leon Kamenev through the HotelClub journey was a good decision (sorry mum). In the words of the late Henry Ford: “If I had asked people what they wanted; they would have said faster horses.”
Fast forward to 2019 and I wonder what my mum would say today about another idea. What if I said that in the not too distant future, the price you pay for a meal in a restaurant would fluctuate based on the time, the weather and the number of people in the area? Crazy? 20 years ago would you have believed that the price of a hotel would fluctuate by the minute? What about taxis? 10 years ago, would you have thought that the price of a trip would sometimes triple or even quadruple depending on the time of day?
Enter the age of Uber, Amazon and Booking.com and real time, dynamic pricing is now just a part of life, and so it should be. The gross margins built into a meal in a restaurant are generally obvious but the industry average net profit of around 7% is harder to understand. The reasons for this relate to a problem of supply and demand. It isn’t easy to sell a week’s worth of food when you only have customers from Thursday to Saturday between the hours of 6-9pm. Ultimately, you’re paying rent for the whole week, whether or not you have customers.
The truth is that dynamic pricing has been around for a long time. Maybe you took up the ‘weekday special’ at your local diner, gave your taxi driver an extra $20 on NYE or slipped a bar tender some extra cash at a busy bar in the hope you wouldn’t have to wait as long for the next round. Either way, you were part of nature’s own dynamic pricing. With technology, we can make this a lot more efficient and the restaurant industry is calling out for it.
Dynamic pricing for restaurants already exists. It exists in the form of discounts – Groupon (only redeemable weekdays), The Entertainment Book (not for use on Saturdays), TheFork (not during peak times)… the list goes on. If you’ve sat in a popular restaurant, you can bet that someone in there was paying a different price to you. But this isn’t really dynamic pricing, these are just discounts. Unlike dynamic pricing, discounts are not offered in real time. While EatClub is available to everyone that is looking for a meal right now, discounts aren’t democratised and are only available to those that previously accessed the discount. This inequality can have a negative impact on branding and obviously consumer sentiment. Most importantly however, they aren’t dynamic and they very often just don’t solve the problem. That is, right now, it's a cold winter Thursday and I need to fill my tables before the rumps out back go bad. I need something that’s real time and reactive to my needs.
Dynamic pricing, by definition, is reacting to supply and demand in real time. But this isn’t easy. Unlike any other discounting platform, EatClub’s users are looking for a meal now. It is a live marketplace with thousands of restaurants and 100s of thousands of consumers uploading and redeeming pricing offers by the minute. Its shoppers aren’t buying a voucher, they are looking for a meal. The result is that an unexpectedly quiet Thursday is no longer a problem. Just leave a 30% discount up on EatClub for an hour or so and your tables will be bustling in no time. This is the difference and it is making all the difference.
EatClub is still an early stage organisation. The product relies on restaurants considering demand, yield, weather, perishable inventory stores, timing and more and then uploading discounts as they deem appropriate from time to time. There is a long way to go before restaurant pricing is truly ‘dynamic’. Enabling a 2 way marketplace with thousands of restaurants uploading discounts to access a network of hundreds of thousands of hungry customers was step one. With the democratisation of data across POS systems, inventory management systems, payroll systems, food ordering platforms and many other sources, in the not too distant future, restaurant owners will be able to effectively price their meals to maximise returns from their inventory by the hour and the price you pay for a meal in a restaurant will fluctuate based on the time, the weather and the number of people in the area … or maybe we will still be using PDF menus, you decide.
I have a clear recollection of the first significant venture deal I was exposed to. It was the year of the y2k bug and unfortunately for my dad, it wasn’t going well. He had recently decided to double down and literally bet the house on a then little-known business named HotelClub. Mid capital raise the '.com' bubble had well and truly popped and the business, which was still burning cash, was running out of funding options. I won’t soon forget the lively discussions around the dining table as my mother aptly proclaimed: “This is crazy”.
You see, back then, people didn’t want to book hotels online. They wanted to call the concierge and have a yarn about which room had the best view and newest renovation. Fortunately however, supporting Leon Kamenev through the HotelClub journey was a good decision (sorry mum). In the words of the late Henry Ford: “If I had asked people what they wanted; they would have said faster horses.”
Fast forward to 2019 and I wonder what my mum would say today about another idea. What if I said that in the not too distant future, the price you pay for a meal in a restaurant would fluctuate based on the time, the weather and the number of people in the area? Crazy? 20 years ago would you have believed that the price of a hotel would fluctuate by the minute? What about taxis? 10 years ago, would you have thought that the price of a trip would sometimes triple or even quadruple depending on the time of day?
Enter the age of Uber, Amazon and Booking.com and real time, dynamic pricing is now just a part of life, and so it should be. The gross margins built into a meal in a restaurant are generally obvious but the industry average net profit of around 7% is harder to understand. The reasons for this relate to a problem of supply and demand. It isn’t easy to sell a week’s worth of food when you only have customers from Thursday to Saturday between the hours of 6-9pm. Ultimately, you’re paying rent for the whole week, whether or not you have customers.
The truth is that dynamic pricing has been around for a long time. Maybe you took up the ‘weekday special’ at your local diner, gave your taxi driver an extra $20 on NYE or slipped a bar tender some extra cash at a busy bar in the hope you wouldn’t have to wait as long for the next round. Either way, you were part of nature’s own dynamic pricing. With technology, we can make this a lot more efficient and the restaurant industry is calling out for it.
Dynamic pricing for restaurants already exists. It exists in the form of discounts – Groupon (only redeemable weekdays), The Entertainment Book (not for use on Saturdays), TheFork (not during peak times)… the list goes on. If you’ve sat in a popular restaurant, you can bet that someone in there was paying a different price to you. But this isn’t really dynamic pricing, these are just discounts. Unlike dynamic pricing, discounts are not offered in real time. While EatClub is available to everyone that is looking for a meal right now, discounts aren’t democratised and are only available to those that previously accessed the discount. This inequality can have a negative impact on branding and obviously consumer sentiment. Most importantly however, they aren’t dynamic and they very often just don’t solve the problem. That is, right now, it's a cold winter Thursday and I need to fill my tables before the rumps out back go bad. I need something that’s real time and reactive to my needs.
Dynamic pricing, by definition, is reacting to supply and demand in real time. But this isn’t easy. Unlike any other discounting platform, EatClub’s users are looking for a meal now. It is a live marketplace with thousands of restaurants and 100s of thousands of consumers uploading and redeeming pricing offers by the minute. Its shoppers aren’t buying a voucher, they are looking for a meal. The result is that an unexpectedly quiet Thursday is no longer a problem. Just leave a 30% discount up on EatClub for an hour or so and your tables will be bustling in no time. This is the difference and it is making all the difference.
EatClub is still an early stage organisation. The product relies on restaurants considering demand, yield, weather, perishable inventory stores, timing and more and then uploading discounts as they deem appropriate from time to time. There is a long way to go before restaurant pricing is truly ‘dynamic’. Enabling a 2 way marketplace with thousands of restaurants uploading discounts to access a network of hundreds of thousands of hungry customers was step one. With the democratisation of data across POS systems, inventory management systems, payroll systems, food ordering platforms and many other sources, in the not too distant future, restaurant owners will be able to effectively price their meals to maximise returns from their inventory by the hour and the price you pay for a meal in a restaurant will fluctuate based on the time, the weather and the number of people in the area … or maybe we will still be using PDF menus, you decide.