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Shohoz Food Sees Steady Growth And What Shohoz Food Means For Shohoz’s Overall Strategic Ambition

Shohoz launched Shohoz Food in about October 2018. It deliberately started with a hyper-local model and then gradually expanded across Dhaka. “We are going to launch in one area first, stabilize operation and then cover all of Dhaka very rapidly. It is essentially going to be a hyperlocal model.” That’s Shohoz founder Maliha M Quadir in an interview with FS.

Today, Shohoz Food covers most of Dhaka metropolitan. “We are presently covering most of Dhaka Metropolitan area with few pockets left which should be covered by February,” Shezami Khalil, Shohoz’s Director of Marketing, told Future Startup. “We have around 1000 restaurants listed with us and more restaurants are being added on regular basis.”

Shohoz wants to be an “everything necessary” platform. A super app. Food delivery is an important piece of that strategy. It is also an important ingredient of its competitive moat. More on that in a moment. First, an overview of Shohoz Food.

Shohoz’s growing food delivery business

  • Shohoz food aims to offer convenience and ease to customers, partners and riders. “Shohoz food’s ethos are convenience and ease to our customers, partners and our Riders”, Shohoz’s Director of Marketing, Shezami Khalil told us. This is an important statement to understand to the extent that Shohoz food has three customers - people who order food on the platform, restaurants, and riders. Understanding this dynamic goes a long way.
  • Shohoz Food presently covers most of Dhaka Metropolitan area and continues to expand geographically.
  • Up until February 2019, Shohoz Food had around 1000 restaurants on its platform and has been seeing regular growth. “We are doing better than we had expected and the App traffic has seen good growth. The team is experienced and qualified to understand the nuances of the business and bring in new dimension of understanding customer’s and restaurant’s needs”, told Shezami.
  • Shohoz Food has a dedicated team of food delivery riders separate from its ride business. This is understandable. However, Shohoz would eventually try to integrate its food and ride business. “We have plans to integrate our rides and food delivery at some point of time”, told Shezami.
  • Shohoz plans to expand to new areas and cities in 2019 and at the same time, the company aims to bring new innovation to food operation. “Apart from expanding into new areas and cities, we have plans for more complex logistics models for more efficient delivery solutions using AI and complex algorithm”, told Shezami.

As I mentioned earlier, food is an important vertical to Shohoz’s 'everything strategy' for several reasons. First, it is a great business opportunity with immense growth potential. Margin in food is better than ride. Second, it helps Shohoz to create a stronger competitive moat by building a stronger bundle. That food is one more reason for a user to stay with Shohoz or convert to Shohoz. Third, Shohoz wants to build a super app - an everything company, and adding food to is bundle is one step towards that goal. Fourth, all three of these logics are interconnected and influence each other. Let’s dig deeper.

Shohoz's Moat

Food delivery is a different business from ride. The major difference between ride-hailing and food delivery or any other logistics service is the service level agreement that you need to maintain regarding time and speed. Someone ordered a breakfast, you have to make sure that it reaches the customer on time. This is why almost all the food delivery businesses in Dhaka have their own logistics wing in one form or other. This allows them to maintain greater control on the customer experience which is the key to this business.

The other characteristic of a food delivery business is that it tends to be hyper-local in nature. This is also due to time and speed and the tendency of customers. A customer in Dhanmondi is likely to order food from a restaurant in Dhanmondi. Similarly, a hyper-local operation allows you to improve overall efficiency and achieve better timing and delivery cost. HungryNaki does this. Foodpanda does this. And now Shohoz is doing this. That’s why Shohoz Food started with a few locations in Dhaka before expanding to the entire city.

Shohoz Food currently operates independently and has its own dedicated drivers team. But as mentioned earlier, Shohoz will eventually connect its food and other logistics services with its ride-hailing business.

There are a couple of reasons why Shohoz Food is critical to Shohoz’s overall strategy and its competitive moat. First, it will eventually increase the efficiency of both its logistics business and ride business. Once it connects ride-hailing and food, it will improve its driver utilization meaning drivers will get more orders and thus get to earn more, which means they will stay with Shohoz. Ride-hailing is a demand driven business. Drivers will always follow riders and rides. To that end, ensuring more rides for drivers means more liquidity of cars for Shohoz, which also means less liquidity for other players. Second, Shohoz is a venture-funded company and growth is what you sell and Shohoz has an obligation to show that it can grow really big. Third, Shohoz is building its moats by owning more customer interaction points and giving customers more than one reason to stay with it. Shohoz understands and acknowledges this. “In order to build loyalty, you need multiple services.” That’s Shohoz founder in an interview with FS. There are other reasons but these I think are the most important ones to note.

Food delivery is a good business

From Deep Dive: These On-Demand Food Delivery Startups Aim To Disrupt How You Eat In Dhaka:

If you take a closer look around you, you will notice some subtle yet profound changes in our society and culture:

  • We are seeing a rapid change in family dynamics across the board. An increasing number of women are joining the workforce every year. The number of nuclear families is on the rise making it difficult for families where both husband and wife work full time to cook and manage food.
  • We are becoming increasingly busy every day
  • Takeout (food) and eating out have become a part of our urban lifestyle
  • Demand and ubiquity of packaged and readymade foods are on the rise

If you take this reality into consideration, food delivery (restaurant food delivery + meal kit delivery and other businesses in this vertical) has a solid future in Bangladesh.

According to industry insiders, food delivery is about BDT 200 crore market in Bangladesh and is growing at over 40% CAGR. That offers a solid business case. For Shohoz, it is even more lucrative space because the overall margin of food is better than ride, at least in the short run, that allows it to develop a strong revenue stream as it grows. The success of UberEats, Go-Jek and Grab offer positive motivation to that end.

Shohoz’s super app strategy

Shohoz has been quite open about what it aims to be. “When we started Shohoz in 2014, our vision was to evolve into the number one online destination for Bangladeshis. We started with tickets, added ride-sharing in 2018, and are now executing on a grander “super-app” strategy,” told Shohoz Founder Maliha M Quadir while announcing its US$15m investment deal early this year, saying that the new investment will help Shohoz to become a super app. Shohoz founder reiterates this strategy in an interview with FS early this year. “Shohoz is not anything transportation, Shohoz is anything and everything necessary. Of course, transportation is a big one but we will have more services on top of it in the future,” she told.

This is a plausible strategy. Being a ride-hailing company, Shohoz certainly, at least in theory, has the leverage to turn itself into an aggregator not only of transportation services but also of other relevant services. First, Shohoz ride is a daily necessity. As a result, people use Shohoz app on a daily basis. Now you can tail more services to that. To that end, Shohoz getting into food is a logical move on its own. I explained this strategy (in the context of ride-hailing business in Dhaka) at length more than once in the past. From Ride-hailing Guidelines, The Business Of Ride-Hailing, And Tech, Aggregator and Technology Policy:

“(Ride-hailing) is an interesting space. It connects both offline and online and does so efficiently. On top of that, transportation is more like messaging in mobile, the ultimate deal in the physical world. When you dominate the nodes of transportation, you can do a lot of other things. Moreover, ride-hailing services are app-based which allow these service providers to have a dedicated space in users’ mobile phones. You can use that for many other reasons. It allows a service provider to become a platform on top of which you can put layers. Go-Jek is a good example of that. In Bangladesh, it is likely that a few ride-hailing companies will try to build layers the examples of which we have already seen.”

Shohoz offers ride - both bike, and car, it has a logistics operation, a ticketing business; and now it has launched food which to some extent is an extension of its logistics business.

If you pay attention, all of these services are similar, if not same, in nature - logistics service – taking people from one place to another, taking products and food from one place to another and delivering tickets. There are intricacies and the dynamics of each service are different but theoretically, they are not much different.

Another key characteristic of all these services is that it makes Shohoz even more powerful as an aggregator and makes its customers reliant on it for more than one reasons. This is what Shohoz aims to achieve. Success in food delivery is important for Shohoz because it will open up other doors for the company and validate its ‘super-app’ strategy. To that end, Shohoz Food is just the beginning.

cover photo credit: Shohoz LinkedIn page

Ruhul Kader is a technology and business analyst based in Dhaka, Bangladesh. He is also the co-founder and CEO of Future Startup and author of Rethinking Failure: A short guide to living an entrepreneurial life. He writes about internet business, strategy, technology, technology policy, and society. He can be reached at [email protected]

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