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.
FT: How successful has the app been so far, and what sorts of reactions have you received from users and participating restaurants?
MM: Most of our users see the clear benefit of using Gebni, with many of them reaching out directly to us to tell us how much they loved the concept and how it was long overdue for something more cost-effective and budget-friendly to come around. Our users also care about environmental sustainability, and our app allows them to combat food waste, one meal at a time.
While participating restaurants were initially concerned with the order volumes Gebni can generate for them, they quickly decided to come onboard when we explained the purchasing power of our target users (individuals who are left out of the average ordering platform, such as college students and entry to mid-level professionals).
We’ve also had many restaurant owners expressing that a dynamic pricing technology was actually a smart approach given the time value associated with food and the urgency to sell it before it is too late.
FT: How do you hope to see the platform grow in the next one, five, and ten years?
MM: In the short term, we just want to focus on building a great product and making sure we develop features around our core values and mission. We hope to be successful at educating both users and restaurants about market economics and how to use them to their advantage. Our goal for the next year is to help change New Yorkers’ minds on pricing practices from inefficient, fixed prices to dynamic, demand-adjusted ones.
In the near future, we hope to see Gebni become a major player in New York City and a few other major U.S. cities. By then, we hope that the notion of dynamic prices is prevalent in most restaurants and that people would get adjusted to thinking about changing menu prices according to a demand-adjusted model.
In the long run, we hope Gebni becomes one of the top food delivery platforms in the U.S., with an international presence in a few other countries. Our long-term goal is to really exploit the opportunity around online food ordering by furthering the penetration of online orders relative to the entire market opportunity.
Lastly, my co-founders and I agree that we started Gebni with the mission to lower financial entry barriers for people to enter the online food ordering space and to combat food waste. Our company was founded on a strong social responsibility platform, and our intent is to keep it that way by incorporating environmentally responsible decisions into our daily lives. Our ultimate goal would be to achieve that and do our part in making the world a better and healthier place.
FT: Why does Gebni have the potential to make a difference in improving the food system?
MM: Gebni is tackling food waste generated at the retail and consumer level by helping restaurants optimize their pricing practices and streamlining operations.
Food waste, as we all know, is a prevalent issue that weighs on major aspects of lives. Landfills are known to be the third largest contributors to greenhouse emissions in the U.S. With a number as high as 45 percent of all food produced going to waste, we can deduct that food waste directly impacts our environment.
We also believe that one of the main issues of food waste is the lack of education and awareness. We hope to educate our partners and users to fix the broken food system together by applying market economics. Gebni’s job would be to prevent food waste from even happening in the first place by making sure surplus inventory (supply side) is met with appropriate demand by creating a real time marketplace applying real-time market pricing.