Foodpanda and Bangladesh

Most of us today know about foodpanda. When we hear foodpanda, first comes to mind ordering food through the internet. If you still don't know about it then let's know what Foodpanda is and the challenges it faced during the growth time through this case study.

Foodpanda is a Berlin-based company owned by Delivery Hero. It offers online food and shopping delivery. Foodpanda, which has its headquarters in Singapore, is Delivery Hero's main brand in Asia. With operations in 12 cities throughout Asia, it is currently the biggest food and grocery delivery platform in the region outside of China. It's CEO is now Jakob Angele. 

How foodpanda started in Bangladesh?

Foodpanda's journey started at the hand of Zubair Siddiky who is now Co-founder & Managing Director at foodpanda Bangladesh

Zubair Siddiky graduated from the north-south university majoring in economics. Then he jointed a development organization funded by the US government where I worked for the next two and a half years.

There were some friends of his already working on e-commerce. So they were discussing possibilities of e-commerce in Bangladesh. Spend 3 years in a development organization and there he had some friends and discussed e-commerce possibilities. 

There they wanted to launch a daily deal site. The site will allow users a massive discount deal on different restaurants, hotels, and airways.

Like as thinking, they started a website named "OScom BD" In 2012. That site didn't get much response according to their expectations. The supplies weren't built for the sustainable growth of that startup. They raised their funding from a Germany-based company.

Soon, they shifted to an e-commerce business. At that time ajkerdeal.com and ekhanei.com were their competitors in the e-commerce industry sector.

Their OScomBD startup was converted into an e-commerce company. They were running the company with initial funding.

At that time, Pendrive was high selling product as well as a phone. They realized the e-commerce potential in the future. People were spending money. Cash on delivery. Not many online payments. They had a shared office with clickBangladesh b2b business company. 

Most of their funding was from bootstrap, from some angel investors from Bangladesh, and the majority from Rebate networks German based. Mainly because their co-founder sifat managed the funding from the middle east.

The First Accusation

In 2013,

They could not manage that much funding for running an e-commerce business. At that time there was a funding problem and some internal issues as well. 

Rocket Internet a Germany-based incubator launched much successful e-commerce sites like Daraz, and Foodpanda at that time.

They saw the potential of online food delivery rather than focusing on e-commerce.

Luckily the German-based company Rocket internet reached out to them and ask them if they were planning to work in food delivery in Bangladesh, why not start with foodpanda which was recently launched in India? 

They offered to use the brand name of foodpanda and do business and in exchange, they would provide all technical support and some initial funding as well. 

In December 2013 Foodpanda delivery was inaugurated. 

Although they didn't have any delivery technology. Technology was only ordering food through online. Zubair Siddiky and his team had different plans. They wanted to deliver the food all by themselves (Foodpanda). The reason behind this is that time in Bangladesh most restaurants didn't have the capability of their own delivery system. So they had to consider this and planned to deliver by the Foodpanda itself in establishing logistics support 

So a third-party logistics service company named Aramex was contracted for the delivery of food on behalf of Foodpanda. But this delivery system experience from the customer was not up to the mark. Food delivery was delayed always.  

As the delivery process is dependent on a third party so Foodpanda didn't have any control over it.

The Beginning

On the first try, they succeed to contract 5-7 restaurants with foodpanda. Foodpanda will deliver the food itself

The first order was on December 10, 2013. It was a test run. That time order was passed from the Foodpanda call center manually. Again rider would get a message manually as well. It was running only in the Gulsan area. The very first order was delivered within one hour. It was the first success of foodpanda. First order Dec 2013 (started launching discussion 3 months before)

Foodpanda was running manually like that for one year and the service coverage area was only in Gulshan, Banani, and Dhanmondi areas.

In the first year, 2014, Foodpanda signed with almost 150 restaurants, and the daily order from customers was also 100-150 each day. 

The very first orders from the customer were mostly early adopters. They wanted to explore Foodpanda services. Foodpanda was operating by mobile application which gave a big advantage while its competitors were operating only by the website.

Needless to say the payment procedure with the restaurant was the manual first time and it needed many days to pay the credit. So after taking this problem seriously, Foodpanda changed its payment strategy. Foodpanda adopted a new strategy by giving the payment immediately to the restaurant. The strategy was Rider would pay the bills for the food and delivery to the customer. Although it was a difficult cash flow, still Foodpanda took the chance to face this challenge.

Logistics and call center

First logistics support was not effective for Foodpanda. Only after 3 months, Foodpanda signed with SpeedX. Owned by one of Zubair Siddiky’s friends. Later in 2014, foodpanda fully acquired logistics-based startup speedX to control the delivery system fully. That time investment was heavy, Foodpanda had to buy motorbikes on its own for the delivery. Almost 150 motorbikes were brought initially.

In 2015, they had a larger call center team. Most of the order was from early adopters who had some experience with food delivery systems. Sometimes Zubair Siddiky himself has delivered food to the customer sometimes for trial 

They were thinking to automate the whole process including the call center using SOP and the delivery process by using Urban ninja. But using Urban ninja, some systems were still partially automated not fully automated. The dispatching agent wasn't built at that time and it was manual. Although most of the competitors used manual dispatchers.  Foodpanda's service was one step ahead.

The dispatching feature is a technology that is commonly used today by the Uber ride-sharing company. 

There were lots of challenges at the beginning as a new startup. 

In 2015-2016, their investor company "Rocket internet" was going through a tough time. As a result, the decision was raised about selling Foodpanda's Asian region share to a larger food delivery company. Still, Foodpanda's employee was getting salary & remuneration. 

Final Accusation by Delivery Hero

Finally, At the end of 2016, a larger Germany-based food delivery company Delivery Hero acquired Foodpanda and early investors got existed. By realizing the potential food delivery service in Bangladesh & Pakistan. As the accusation happened Foodpanda was getting better with new technology. 

Delivery Hero is a company which is one of the largest good delivery companies around the world. At that time, Delivery Hero had the plan to go share market and IPO, that's why they made some accusations specially foodpanda and Yemeksepeti from Turkey. After the accusation, Foodpanda was running fully automated.

The automated process was like when a customer order some food through the app, a request goes to the restaurant parties if they want to accept or decline the offer. As soon as the restaurant accepts it, the request automatic dispatched to a nearby rider. This automated process was an algorithm machine learning tool & it was continuously evolving. As a result of the automated process, the delivery process time was reduced from 45 minutes to 22 minutes on average. Thus customer experience was improving vastly and their daily customer was almost 1200. 

Foodpanda Bangladesh noticed there were some potential customers who were out of bounds because of the pricing. Then they came up with a new strategy. They change the lowest order rate from BDT 150 to BDT 50 only. Outcome was Office going public found it a daily necessity. Lower and Middle-class people found it comfortable with their budget.

As a result customer accusations increased notably. Business service territory was expanded. 

From 2018-2020, the business growth was continuing upwards. The growth was four digits. Daily order was nearly 10,000 times.  Although Foodpanda was not making a profit but investing cash flow was coming continuously from Delivery Hero, as the investor company delivery hero itself was an experienced food delivery company and it knew all the challenges Foodpanda could face.

Another reason delivery hero was doing this was because they saw the path of profitability in Foodpanda's growth. The growth scale was always upward. The graphs said all.

Foodpanda wasn't doing much brand marketing in 2019. They were mostly relying on digital marketing like Facebook ads, google display ads, SEM(Search Engine Marketing)

During these years (2018-2019) the growth was 1200% per year. Another interesting thing, Foodpanda Bangladesh was doing far better than Philippine and Pakistan markets. Obviously, the large market and population in Bangladesh were behind it.

At the end of 2019, They were already operating in 13 cities in Bangladesh. 

They were investing a lot in subsidiaries and operations. The home delivery was also free of cost. 

The rider challenge and Solution

During the 2015-2016 delivery process was quite challenging. They had bought motorcycles for their rider. Then they asked the rider to bring their own motorbikes. But the response was not good. At the end of 2017, they decentralized the rider hiring process. The rider would deliver only in this designated area. The different zone had also designated area managers for operating businesses in that zone. 

Different area operations were running through small hub offices all over the country and the rider recruitment process as well. The rider recruitment process is now based on a referral program and the referral giver gets a referral bonus. That's when started massive level hiring. Thus a branded rider force was built by Foodpanda all over the country.

COVID-19 challenge

Earlier in 2020, everything was fine. Sales were daily 25000 to 30,000 each day. The business was growing very well. But everything changed when COVID hits in March 2020. The business was going down a downtrend. As Foodpanda was dependent on restaurants, Government shut down all the restaurants after 6 pm. 

First few months, demand was down as well as supply. After 3-4 months it started changing. E-CAB, ICT ministry of Bangladesh, police decided a fixed time from 8 pm later 10 pm. In May, restaurant opening becomes a priority as there was a huge demand. People tend to start ordering food through Foodpanda and made payments online using mobile banking(bkash, nagad), and avoided COD (Cash On Delivery) as much as possible. With this flow, Nagad and Bkash were also growing for this ecosystem.

That's all for today. Suggest to me if there are any mistakes or any things that could be improved as it is my first Business case study. Thank you. {Ajmain Sourov}