Foodpanda Sees Huge Growth Potential For On-demand Food Delivery In Bangladesh

Foodpanda Sees Huge Growth Potential For On-demand Food Delivery In Bangladesh

Foodpanda started its operations in Dhaka in 2013. Over the past few years, it has grown from a small team to a team of 45 people, launched its in-house deliver operations and expanded to two major cities. The company eyes further.

Food delivery has a solid future in Bangladesh given the rapidly changing socio-economic scenario. Families are getting smaller. More and more women are joining workforce and finding household helps is getting challenging as well. In major cities like Dhaka, eating out and take-out have grown in popularity over the past years. Competition in the space is also growing slowly.

Apart from Foodpanda, there are local players like Hungrynaki, Harriken and Cookups. It can be safely predict that the number of players will grow in this space in the coming days. The chance of international players coming to Bangladesh is also very high.

We recently spoke to Managing Director of Foodpanda, Bangladesh Zubair Siddiky to know more about what Foodpanda and its ambition going forward. He said Foodpanda sees a huge potential for food delivery business in Bangladesh and aims to take the opportunity. While you may read his full interview here, here is a select part of his interview where we discuss foodpanda, its challenges, its current state and the future ambition.

Future Startup

Please give us an overview of foodpanda.

Zubair Siddiky

We started our operations in December 2013. Over the past 4 years, we have grown significantly. We are now part of the largest online food delivery group, Delivery Hero, in the world, having operations in Europe, Asia, South America and the Middle East.

In the past few years, foodpanda has become a household name in areas where we operate in Bangladesh, a feat we are proud of. However, our ambition is higher and we aim to serve the mass population.

We currently cover a significant part of Dhaka. The main locations, which we call zones, are Baridhara, Banani, DOHS, Niketan. Then we have Uttara, another prime area. We have Dhanmondi, Lalmatia as one area and Mohammadpur, Shyamoli as another area. We also cover Shantinagar and Baily Road.

Food delivery is a hyper-local business in nature. You cannot afford long-distance delivery for several reasons: first of all food doesn’t travel well. The second reason is that distance often reduces rider’s efficiency given that Dhaka is a high traffic city. In order to maximize rider efficiency, the ideal average distance for us is between One – two and a half kilometers. We try to put vendors in different zones based on this distance which is a common practice for us in across all of our operations around the world.

There are some areas in Dhaka which we don’t cover yet such as Wari, and Old Town. However, we are expanding our coverage and plan to cover these areas by the end of this year.

Outside Dhaka, we have operations in Sylhet and Chittagong.

We are now a team of 45 people in corporate and we have another 250 riders who manage our delivery.

Food delivery is a hyper-local business in nature. You cannot afford long-distance delivery for several reasons: first of all food doesn’t travel well. The second reason is that distance often reduces rider’s efficiency given that Dhaka is a high traffic city. In order to maximize rider efficiency, the ideal average distance for us is between One – two and a half kilometers. We try to put vendors in different zones based on this distance which is a common practice for us in across all of our operations around the world.

Zubair Siddiky

Zubair Siddiky, MD, Foodpanda, Bangladesh | Photo by Foodpanda

Future Startup

Please tell us a bit about the early days of Foodpanda as well as about your journey to where you are today as a company.

Zubair Siddiky

We started our formal operation in December 2013 with a team of 5 people. We had 4 people in sales, signing up the restaurants and onboarding vendors. One person was doing the accounts, cash collection and rider management and another teammate was looking after marketing and social media. We quickly grew as a team with new hires in sales and operations to meet our growth pressure.

One challenge that we faced initially was that most restaurants in Bangladesh didn’t have the delivery services, which is not the case in our neighboring markets such as India and Pakistan and many other markets where foodpanda operates. Restaurants often have food delivery service, albeit limited scale, of their own that meet home delivery needs. But the scenario was completely different in Dhaka.

When we started, only 3 of our vendors had their own delivery option, that too in a limited scale. Restaurants were not interested in handling delivery which was a challenge for us because we did not want to manage logistics either. Moreover, our operations in other markets did not have any logistics arm at that time.

Initially, foodpanda was only a marketplace that used to connect the consumers and the restaurants. We were not an end to end service provider. In fact, we didn’t want to be an end to end service provider. As I mentioned, we didn’t have logistics in any other countries.

But in Dhaka, we came to face a different scenario. We realized that it would be difficult to grow without fixing the logistic challenge. Initially, we came up with a quick fix by entering into collaboration with a third party logistics company. We knew the company from our previous experience. Otherwise, it was hard to find a reliable third party for logistics back then. While they provided us initial support, they failed to meet our growing scale need. Moreover, the performance was not what we were looking for.

After much thought, we decided to start our own logistics arm in the middle of 2014. It was a difficult decision because none of our operations in other markets had logistics operation at that time. We had to convince our investors that this is something we need here in Bangladesh if we want to continue our business and grow.

We put together a solid proposal to our global team and suggested that if we do not start logistics arm in Bangladesh, we will have to face a life-threatening challenge in the future and may have to close our operations. We had to convince our Global management team that the investment we are making in logistics now would pay off in the future.

That’s how in 2014, we finally launched our logistics unit with about 100 bikes. We hired riders and started expanding our areas. I think Bangladesh in that regard was the first country to start logistics arm and manage end-to-end of customer experience.

We initially started with Gulshan and Banani area. Then we slowly expanded our coverage to Dhanmondi, Uttara and other areas in Dhaka and then outside Dhaka.

But the challenges did not stop there. While launching our own logistics arm solved a critical problem for us, it also created other new challenges. While we started logistics, we didn’t have reliable technology or data to manage the logistical operations properly. We were doing everything manually. For instance, once you placed an order, we passed it to restaurants and informed a rider, then what was happening from there to end customer was out of our control.

The reason was that we didn’t have technology at that point. We were dispatching riders through SMS or calls. We could not know locations of our riders and as well as could not map delivery timing for our customers. We could not also see who got the orders delivered and when. The result was simple: we could not control overall experience of our customer that we were badly trying to control and improve and we struggled with efficiency.

In order to fix the challenge, we started working on developing logistics software in the beginning of 2015. The software, called Urban Ninja, was developed by our Global team and formally introduced in 2015 which has made our job easier and efficient since. We believe that logistics will be a big part of the game in Asia.

At the same time, we focused on automating our restaurant management system. Before we used to call up restaurants every time we receive an order, now orders directly goes to the restaurant if the customer address is verified. We started automating the restaurants from 2015 which we finally completed at the beginning of 2016. Restaurants now either use our restaurant app to receive orders or get the orders via foodpanda printers.

Today, we have managed to improve our process and make it even more frictionless for our customers. We have made order verification system simpler for repeat users who don’t require verification every time they place a new order. For new customers, we send a verification code when they place an order and as soon as a customer verifies the mobile number, we send the order to the designated restaurant. The restaurant can accept it or decline depending on the availability of the product. The notification or confirmation is sent directly to the customers.

We have also launched our new logistics software which has auto dispatching capabilities.

The new technology introduction has accelerated our growth directly and improved customer experience. We have seen a huge lift in the order acceptance right after the introduction. Our order acceptance time went down from 8/9 minutes to just 2 minutes on average.

We now can monitor the delivery time of our riders accurately. We can also monitor the order preparation time of a restaurant. This allows us to better understand the entire process.

We can now see exact time requirement in different points of the entire process starting from a customer placing the order to restaurant preparing the food and the pickup time by the riders. When a rider picks up an order from a restaurant we call that his pick-up time. The difference between pick-up time and order acceptance is the cooking time for the restaurant. This helps us to identify inefficiencies in the entire process and manage it accordingly.

We have a separate team for vendor services and operations who deal with restaurants in order to increase restaurant efficiency. The whole food delivery business is basically about how fast you can deliver foods. There are many challenges that affect overall delivery time. Riders are one factor of the whole experience. The other factor is the restaurant compliance which means whether restaurants are giving the foods to riders on time. If they are compliant, it helps to cut the delivery time.

For instance, some vendors may face capacity problem on a certain day that can hamper entire delivery schedule. We also face challenges at times. If it is a rainy day then riders may not show up on time or all riders may not show up. Data helps us to deal with these contingencies more effectively. Since we have data, we can anticipate things and make more efficient decisions ahead of the time. We are seeing a direct result of this as our delivery time is coming down on a month-to-month basis.

In terms of operations, we have come a long way. From the manual system of running the business, we are now fully automated. It makes the entire operation transparent and efficient.

As an organization, we have become much more structured and efficient over the past few years. This is an outcome of relentless technology adoption as well as continuous experiments with new processes and systems.

We have grown as a business in every possible metrics. Our app download has grown manifold. Our order numbers, new customers, and returning customers, all have increased significantly. Since we are part of a public company, I can’t disclose any numbers, what I can tell is that we have grown substantially and are doing good business-wise.

We can now see exact time requirement in different points of the entire process starting from a customer placing the order to restaurant preparing the food and the pickup time by the riders. When a rider picks up an order from a restaurant we call that his pick-up time. The difference between pick-up time and order acceptance is the cooking time for the restaurant. This helps us to identify inefficiencies in the entire process and manage it accordingly.

Future Startup

You charge the restaurants a commission, right? Is there any uniform commission or it varies?

Zubair Siddiky

Well, the commission/success fee that we charge new restaurants now is quite uniform but it wasn’t the case when we started the business. The way we charge commission is quite complex and depends on a few factors. We also maintain a rating of restaurants that also affect their commission.

Apart from that, we have a sponsored restaurants option which is basically ad space that any restaurant can buy. Restaurants can buy a spot for a fee which allows them more visibility and put them right on the top of the restaurant listing page.

Future Startup

How many vendors do you have now?

Zubair Siddiky

We have around 550 vendors at present. We initially had over 900 registered vendors. The number often goes down because we do regular vendor clean-up in order to make sure that best ones are getting enough attention.

We have a Business intelligence department which provides us performance data of every restaurant that we have which party guide our clean-up mechanism.

We have a list of criteria that a restaurant has to maintain in order to be on our platform. We go through the checklist and let the low-performing ones go. This is a regular process which allows us to serve both our customers and restaurant partners better.

As I mentioned before, we look at the order data of a restaurant, if a restaurant is not generating enough orders for 6 to 9 months, then we let them go as well. We don’t see a point in expanding the vendor base for sake of a long list if it is not useful to our users.

We also look at the operational performance and reviews. If the performance is subpar and often fail to meet the time requirement of orders and the reviews are consistently bad, then we drop the vendor.
We have let almost 400 vendors go who failed to meet these criteria over the past years.

Future Startup

How many riders do you have now? How do you manage riders?

Zubair Siddiky

We have around 250 riders now. The operations department manages and monitors them. We have riders for each hub who work for that alone.

Our riders mostly work on a contractual basis, as freelancers. We have two shifts for riders. Around 25% of riders work both shifts and the rest 75% work one shift.

We receive relatively slow orders post-lunch which affect our riders demand and we plan accordingly. Our number of orders goes up in the dinner time and that’s when we employ most of our riders. This allows us to control our cost and put our resources into best possible use.

Moreover, we do planning and scheduling for the riders beforehand. We have the data of our orders which allows us to forecast and then assign or allocate the riders in different shifts and schedules.

Future Startup

How do you find riders since they don’t work full-time for you?

Zubair Siddiky

This is always a challenging affair for us. Moreover, riders handle payment for us and carry large cash which requires us to be careful in selecting riders.

We hire riders through both online and offline ads and activities. We have a simple application form that riders can use to apply for the job. We have two dedicated persons in the team who are responsible for the recruitment and other rider related activities.

Additionally, we have a rider recommendation program that offers benefits to current riders if they recommend new riders, which is, in fact, our biggest offline recruitment activity. Other than that, we do flyers and posters for the recruitment of riders.

The referrals and facebook posts are so far the most effective mediums for us to hire riders. We hire about 30 to 40 new riders every month.

Future Startup

You are part of a global operation, how does your operation in Bangladesh work? How do you collaborate with the global team?

Zubair Siddiky

We collaborate with the regional team sitting in Singapore and Thailand. We also collaborate with the global team sitting in Berlin.
Our collaboration with the regional team is quite regular and happens all the time since a lot of the processes are similar and interdependent. In many instances, the only difference is location and legal and cultural issues.

Apart from daily communications, there are global management summits that take place twice or thrice a year where all the heads of different countries come together and share knowledge and experiences.

We have functional summits that bring together heads of functional departments of all the countries to share the best practices and lessons from their own country. For example, marketing summits bring all the marketing people together and allow them to share knowledge, lessons, and strategy with each other. Same goes for the operation, finance, accounting and all other functional heads. These functional summits take place almost twice a year.

This is one of the greatest learning opportunities for our people as they get to meet people from diverse backgrounds, cultures, and countries and learn best practices from around the world. It also offers a wonderful platform to exchange your ideas and share challenges with others.

Future Startup

How do you reach out to your customers? Please tell us about your marketing efforts.

Zubair Siddiky

A large part of our communication strategy is designed in collaboration with our regional team. Our marketing team works closely with the regional team on a near constant basis.

Medium-wise, we do both online and offline communication activities. That said, digital remains the dominant medium for us. We use google, facebook, SEO and some other tools.

For offline, we have recently launched a campaign of handing out discount vouchers through hand to hand flyer, particularly targeted to new customers. We have promoters who distribute the flyers in different parts of the city.

While it is an offline effort, we have put together a tracking system in order to measure the ROI of the overall campaign as well as the performance of individual promoters. We assign promoters in different areas and use unique ID numbers on flyers and each promoter distribute a range of these codes/flyers. Now when a customer uses a code we can immediately know where and from whom he got the code.
This also allows us to monitor the active new users. The challenge with any offline activity is that measuring ROI is difficult because data is hard to come by. Before launching an offline campaign, we wanted to make sure that we have the capability to measure the ROI.

We have started this recently and we are excited to see the result and are in the process of scaling it up. Our goal is to turn this into one of our biggest customer acquisition channels in the future.

Apart from this, we have been running activations in different university campuses for a while now.

Over the past years, our communication effort has been largely niche because we were trying to reach out to a niche group of people in Dhaka. Now that we are growing and our aim is to become a mass brand, we have plans to go into mass media engagement.

Future Startup

What do you think about the competition in your sector?

Zubair Siddiky

At present, the competition is not hurting us that much. We are quite comfortable in our place. The past few years have been more about creating the market and awareness about the service. In that sense, having a few competitors is good for the growth of the overall industry.

That said, we are in no sense complacent.

Since the market is relatively mature now, the competition is going to be a matter of concern in the coming days. There are chances that new player may come into the market and competition may intensify. That said, we are not worried about competition. We have already taken measures in order to maintain our market share and growth, in case new challenge appears in the market.

We are a business of essential items. Given the cultural shift that we are seeing over the past few years, there are opportunities in the food delivery space. We are excited about the future and at this moment, we are competing with ourselves to improve our service every day.

Future Startup

How does your user demography look like?

Zubair Siddiky

Young professionals and housewives are the two major groups for us.

Future Startup

Do you have any plan to launch anything specific for the corporate customers? I think there is a solid business opportunity there.

Zubair Siddiky

We are about to officially launch a separate platform for businesses call corporate.foodpanda.com.bd. We have already signed a big client.

We already have this corporate operation in a few other markets. We plan to offer special benefits to businesses when they come onboard with us such as specialized menu cards, a dedicated Accounts Manager and call center facility along with monthly or weekly payment option.

We have already received some really good responses from the market. We think that the response will be even better when we launch the platform.

We plan to offer two options where one user can order on behalf of an entire company like a Super User where we will charge the company. The other is Allowance basis, which is quite popular in abroad where employees are given allowances from the company for food that they can use to buy food from restaurants. We are considering both options.

Future Startup

Tell us about your organizational culture at foodpanda, how do people work and collaborate?

Zubair Siddiky

As I mentioned earlier, data is a key aspect of our culture. This applies to how people work and operate as well. Our individual performance is closely monitored and is judged based on data and performance indicators.

Initially, it was a challenging job to build a mindset around it since this is not a dominant culture in our country. The advantage, however, we enjoy is that we are a fairly young team – our average age is about 28 years – and we adapt quickly which has made it possible to be very quantitative.

The company culture is open and friendly. We maintain an open office without any individual chamber or room. The employees can approach freely to anyone and everyone. Even the riders walk into the office to see things and get their job done. Whenever we have an issue, we talk together and solve it.

We work hard and we play hard as well. Being a startup, it is only natural to work really hard which our entire team does. But at the same time, we enjoy our work and make sure that we have fun at work.

Future Startup

What are the future plans for foodpanda Bangladesh?

Zubair Siddiky

Growth, in all possible directions, is a key priority going forward. We want to expand to and cover more locations in Dhaka and outside Dhaka.

Our ambition is to become a mass brand and serve millions of people. We believe that food delivery is and should be a mass thing. Our plan is: “If there is a restaurant, foodpanda should be there”.

Future Startup

Any plans around product and expansion?

Zubair Siddiky

We have just launched a major rebranding initiative with a new color, theme, and a new front-end for all devices and a new identity. We are very excited to see the response of our customers.

In order to reduce friction around refund and payment, we are working on a mobile wallet as an added feature through which we will be able to easily refund our customers which is quite cumbersome in the existing voucher system. In the mobile wallet, the refund will be stored which customers will be able to use for a later order.

Personalization is another area where we are investing. We are working on advanced features around personalization which will show our customers a personalized feed of what they want to see.

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