Think you made a startup whose evaluation crossed 3 Billion Dollars, Everything was going well but you come to know that you are going to be bankrupt. What condition will be of you? The food delivery company which was our favorite, now hardly we remember it – Foodpanda Great team, more than 3 Billion Dollars evaluation and operations in more than 45 countries. Everything was amazing then why today we don't use Foodpanda? Many people think Foodpanda failed due to Swiggy and Zomato. But this is not the case. .
The story is different. The question arises that a food delivery company who had more than 2 lakh orders per day Why did it suddenly closed? What's truth behind Foodpanda's terrible failure? And most importantly what are those business lessons we can learn and implement in our business? So the story starts in 2012, 3 neighbouring friends Ralf, Ben and Rohit- this 3 friends observe a big market gap. The gap was Limited Food Delivery Option. If you go back before 2015 then except Dominos and 2-3 restaurants delivered food at home. .
To fulfill this market gap they started Foodpanda. Time by time after 2 years they expanded in Malaysia, Indonesia, Singapore, Hongkong. Foodpanda grew so fast that investors were after them. Everyone wanted to invest in Foodpanda. And who won't do in a startup that in 3 years expanded in more than 45 countries. Won't you do? But the question comes how foodpanda in 3 years expanded their business in more than 45 countries? Zomato is also unable to do so. The reason is Inorganic Expansion. So understand this carefully. .
When Foodpanda started they raised more than 100 Millions Dollars funding. Now they got money but where to use it. Whenever a company raises fund for expansion they have 2 options 1) They setup operations in territories, do marketing there and capture their market share. 2) Acquisition In whichever country you are expanding purchase existing businesses of same domain. But there's a twist. When Foodpanda started hyperlocal delivery system was a fresh concept. People neither knew about it nor supported it. .
And when this situation is created in market, one thing spread fast in market – Skepticism In simple words to doubt decision. Most of the companies operating in food segment had a doubt that in future this would work or not. And Foodpanda took most advantage of it. As Foodpanda was well funded company so they used to go to small companies and tell them 'See, You can sell your company to us whether it would work in future or not. You can even get destroyed.' People who had doubts were now afraid. .
Time by time Pakistan's EatOye!, Russia's DeliveryClub and India's TastyKhana and JustEat were acquired by Foodpanda to become global giant. So the question comes if everything was amazing and speedy then how did this company failed? So to understand this you need to understand company's revenue model. So Foodpanda used to earn by through 4 ways – 1) Listing Fee Whenever a restaurant will list on Foodpanda they had to pay some listing fee to Foodpanda. 2) Order Commission Foodpanda used to charge around 23% commission from restaurants on every food order. .
3) Delivery charges which was taken from customers. 4) Advertising Fee Any restaurant if wanted to upper list them on platform then advertising fee was charged from them. But any company would earn only if they deliver orders. And what if orders were not delivered? I know you will say How is this possible? Foodpanda was delivering more than 2 lakhs orders per day. So there is huge difference between order getting delivered on app and actually getting order delivered. .
Now you will tell Bro what is this? 😣 So Foodpanda was very successful from first sight but truth is Foodpanda was full of inefficient processes. Now understand this carefully. So this is Swiggy's operational process. You ordered something, restaurant recieved that order and simultaneously Swiggy got notified, then Swiggy sends their delivery agent to restaurant and then that delivery agent from restaurant and deliver your order to you, collect money from you and give to Swiggy. And if order was prepaid, Swiggy get their money directly. And you can also track your order. .
And now see foodpanda's delivery process You placed order on Foodpanda, restaurant recieved and Foodpanda got notified and they sent their delivery agent to restaurant. After that delivery agent picked your order but you didn't got the food 😨 Delivery Agent ate that food. I know it's funny but actually foodpanda's delivery boy did this. So the question arises how they were doing this so easily. So the reason is Unstructured Business Model. You go in government office, they will tell you to go to 10 places but more likely your work won't be done. .
This is not b'coz they are lazy but b'coz there is no fixed structured process. Business be Tech or Traditional, if no fixed process then you won't manage operations. And this happened with Foodpanda. So Swiggy and Zomato hire their delivery boys on salary basis. But foodpanda was not doing this. Foodpanda used to pay delivery boys per order. Not only this they promised to pay them guaranted wages. If you work 8 hours, you will get 200 Rs. If 10 hours then 300, 400 for 12 hours. .
If you don't get order you will get some money. Most of you would be thinking this model is better than salary model. Then why this company failed? The reason is Cumbersome Tech Infra. Many restaurants say that when something was ordered its notification was very lately sent to restaurants. Due to this customer experience was bad. Notification late so cooking late, cooking late so delivery late. And when delivery late customer experience very bad. And many time delivery boys ate the food. .
This was happening b'coz foodpanda didn't had proper technology to manage food orders and no delivery tracking system. When this type of customer experience is there, many doubts are created. 'Should I use this things or not ?' And its responsibility of that business to solve this doubt. For example there are lots of talking about cryptocurrency. Some say its banned and some say not. Reality is that Government has not passed any laws regarding crypto. So to buy, sell and trade them is permitted. CoinDCX our today's partner say that Crypto Market is not one time money making plan. .
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And if you use my coupon code saini100 you will get 100Rs Bitcoin. Invest on CoinDCX b'coz this is the future. If doubts are not cleared then beliefs are killed. So people due to Foodpanda's inefficient operations used to doubt them. But to solve this problem no one came forward from company. So the question is WHY??? So the reason is Buyout Exits. Till 2015, RocketInternet was foodpanda's biggest investor. And in 2016 they sold their company to DeliveryHero. .
They ran that company but then sold to OLA within 1 year. In 2016 when company sold out all co-founders existed from company. But yes everything would get solved but if Foodpanda didn't did this mistake. The mistake was Predatory Pricing. In India discounts works, where there are discounts there are customers. So due to this Foodpanda started Crave Party where they gave dishes for 50% off to their customers. This 50% discount was not a problem this would also be given by Swiggy and Zomato. The problem was Undercapitalization. Swiggy and Zomato are both well funded companies. .
They don't care about cash burn now and also in future. But Foodpanda had very less funds comparitively to Swiggy and Zomato. In 2020 where Foodpanda did 82 Crs Revenue where there loses were more than 700 Crs. And so OLA had to shut down Foodpanda's operations in India. And most importantly what are those business lessons we can learn and implement in our business? 1) A Company is as good as its people Any business expands when there are set processes but people run that processes. If company's people only stop trusting company then surely they would sink it. In Foodpanda's case, all its co founders existed from it. .
In this situation company lacks strong management and vision. This brings us to second lesson. 2) Marketing without operational backing is commiting Sucide Strong marketing can bring customers to business but customers will stay with you if your service is good. For good customer experience its important to have operational excellence. Think that you booked plane ticket at train price, but then nobody asked you for water nor let you use washroom. So will you sit again in that flight at very low price? Similarly, Foodpanda attracted customers by discounts but due to bad service they shifted to Swiggy and Zomato. And here comes third and most important business lesson .
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