Food Tank: How an Algorithm Could Change the World of Food Delivery

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From Food Tank by Lani Furbank:

Gebni, a new food delivery app in New York City, is shaking up the traditional model in an effort to reduce food waste and lower the cost of meals. They do this by adjusting delivery prices based on real-time demand.

Gebni uses an algorithm to discount prices during off-peak hours in order to increase sales. Lower prices should allow lower income customers to order delivery, when they may have previously been priced out of the market. This boosts the customer base for restaurants. At the same time, an increase in sales should lead to a reduction in food waste because unsold food is no longer being thrown away.

They call themselves “the stock market for food,” with the one major difference being that the prices on the app will never exceed the original price. The app is quickly gaining support, with new restaurants and users signing on each week.

Food Tank interviewed one of Gebni’s founders, Mohamed Merzouk, to learn more about the platform.

Food Tank (FT): What was the inspiration for creating Gebni?

Mohamed Merzouk (MM): Gebni was born out of a personal desire to reduce food waste and save money on take-out and delivery. While attending a graduate program at Pace University in New York City, I was also working for the school’s Office of Student Development and Campus Activities. My job mainly revolved around going over student groups’ budgets and payment requests for various events they were having on and off campus. I quickly noticed that the bulk of those event budgets went to food catering and that most of those events—although well attended most of the time—had lots of leftover food that had to be thrown out. Around that very same time, my busy lifestyle had turned me into a real New Yorker who got most of his meals from Seamless. Being a student who lived in the city, it didn’t take long for my deliveries to weigh on my financial budget.

At that point, I started thinking about ways to save more money on food orders, and since my orders were mostly during off times, I thought about having happy hour-like pricing for my meals ordered online during known down times. Having done enough research on food waste to know that restaurants were major contributors, I had the conviction that such an approach would help lower waste levels by allowing priced-out customers to order restaurant meals at lower price points and save money.

FT: Why do you call it “the stock market for food?”

MM: The expression “the stock market for food” was first coined by a friend of mine when I was explaining the mission and story of Gebni. I thought it was the perfect analogy because our platform offers real-time price updates that take place according to new orders and new demand coming in.

Our app is very financially driven, and many features were inspired by the world of finance to help solve the food industry’s most pressing issues. Our Future Ordering feature is another great example of how we incorporate our financial expertise to shape the development of our product features. This feature allows our users to pre-order meals up to two weeks in advance and lock-in a guaranteed discount for doing so. The concept is similar to present value discounting in finance.

FT: What makes it a unique piece of the food delivery puzzle?

MM: Gebni has been able to identify a few key factors and issues that the online food ordering space is struggling with. Currently, the penetration of online food ordering is only US$3 billion, or two percent of the entire market opportunity of US$210 billion, according to a recent Morgan Stanley study. That is one fifth the penetration of e-commerce and approximately one twentieth the penetration of online travel, according to the same report. Morgan Stanley identified that the most important obstacle to further penetration in this space was price and financial power of the United States population as a whole.

Current ordering platforms make it difficult for students and people with lower income levels to get access to restaurant-quality food due to their fixed and full pricing practices. In addition, the extra delivery and services fees that some platforms charge make online ordering even more expensive and inaccessible to a major part of the population. In New York City, the median salary is around US$54,000 a year, which means there are close to two million people making less than that per year. As one of the most expensive cities in the world, this isn’t the kind of salary that would allow one to order restaurant meals on a consistent basis, if at all.

Our team believes quality meals are for everyone, which is why Gebni aims to bridge the gap created by these platforms by applying a real-time market pricing approach. This would lead prices to be discounted when demand is low and appreciate when demand goes up, capturing all possible market participants instead of a select financially capable segment.

FT: How does the algorithm work?

MM: The algorithm analyzes demand of orders coming through Gebni for specific menu items and updates item prices accordingly. Our algorithm scans different time intervals to decide whether an item should be discounted or appreciate in price according to its real time demand. What makes our algorithm unique and effective in fighting food waste is that we do not update prices of menu items as a whole but rather dynamically price major ingredients making up the item itself.

This ensures the model helps restaurants maximize margins on highly demanded ingredients to make up for the lower margins on discounted ingredients due to lower demand levels. If we succeed in making less demanded ingredients more popular through discount incentives, we can deduct that the model would reduce food waste generated from unsold inventory.

I would like to mention that the current version of our software isn’t 100 percent automatically dynamically-priced yet. It is a manual version of it that allows restaurants to manually change prices in real time as needed. We’re finalizing the details of the automated dynamic-pricing versions and will be releasing an update in a few weeks. We’re very excited about that.

FT: How does it help reduce food waste? How do customers and restaurants benefit from the service?

MM: Applying market economics means expanding restaurants’ customer base by discounting less demanded items or the majority of menu items during off-peak hours. This would mean higher sales volumes, lower excess inventory, and lower food waste from restaurant kitchens.

On top of that, restaurants get access to working capital from users place orders ahead of time. We make sure restaurant owners receive money disbursements from future orders within 48 hours. This means that restaurants do not need to invest their own money to finance their day-to-day operations and can rely on Gebni to serve as a financing outlet thanks to this powerful feature.

Customers, on the other hand, get to benefit from true market prices and save on discounted items. We hope this will shift the balance of affordability for customers who could previously not order food online because of lower financial power. This means quality restaurant food at cheaper prices for everyone with a smartphone.

Another hidden benefit is related to decision making and dietary goals. Ordering in advance during a person’s spare time, in a relaxed environment, perhaps, on a Sunday evening, would result in more rational decision making because of the absence of stress and cravings. Studies have shown that schools that implemented an ordering ahead policy have seen a rise in healthier food choices and eating habits. People who already ordered something healthy in advance and locked in savings will more likely stick to those meals.”

Read the rest of the interview here!

Featured photo courtesy of Gebni.