Why Foodpanda Failed in India

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Foodpanda was started in Germany in 2012. Lukas Nagel and Rico Wyder established the food delivery company in Berlin. The company quickly spread internationally and in 2015 entered India by acquiring the local food delivery company TastyKhana and later JustEat.

The company was based in Gurgaon initially and was active in over 200 cities in India.

Then malpractices and mis-management surrounded the company and by 2010 RocketInternet India was looking for a buyer.

How Foodpanda Worked

The Foodpanda business worked through the foodpanda app which could be downloaded from Google playstore and Apple store.

They had listing of restaurants that offered various food items to customers. Customers could order food through the app.

Foodpanda took a comission for the order and delivered the food to customers.

Their monetisation strategy

Foodpanda charged 20-25% from restaurant for each other. They also collected advertising cost from restaurants who wanted to be placed higher on their app listings.

They also took affiliate income from payment companies. The would show ads of various credit card companies at chekout and charge the company once someone took their offer.

Why foodpanda failed in India

Initially Foodpanda got great response. People were ordering meals in lakhs per month and the company was flying. Then the problems in foodpanda slowing became apparent and the company went down.

It was a classic case of business operations mismanagement. The whole food delivery process was greatly affected by severe mismanagement.

Miscommunication.

First, miscommunication between customers and restaurant courtesy their app. Orders from customers would arrive late on the restaurant. Consequently delivery would be late. This created bad experience for customers. And the price was never returned.

Foodpanda listed restaurants which were already closed. Nobody bothered to check. As a result people would order food and the delivery failed.

Lack of technology infrastructure

Their technology stack one of the poorest at that time. Technology infrastructure was not good. App was not created properly. They could not even tell which restaurant was open and which was closed.

Many times the closed restaurants showed up in listings and customers ordered from them. Obviously the orders were never delivered. It was a bad customer experience.

Things ordered on the app would reach the hotel late. On top they did not have system in place to track the orders served by any particular restaurants.

This was a point where some restaurants got wise to later and took advantage of Foodpanda. They would serve 10 orders and then say that they served 20 orders. There was no tracking to determine if the restaurant was telling the truth or not

Their discount policy.

Their discount policy was killing the company. Company was making 15% – 20% per order but discount was 40%. It was loss making per order out of the gate.

What is more – later, customers started taking advantage of their gift vouchers. A customer would order from only closed restaurants. Delivery obviously failed!

But the customer got 40% off voucher in the next order! Foodpanda could not detect that those restaurants were closed. They issued 40% vouchers!

The delivery process.

The complete pick up and deliver system was a mess. Nobody seemed to know where there delivery executives were at any point of time! The calls to deliver boys were left unanswered mostly.

Their delivery executives would reach the customer house and if the customer did not pick up the phone after one ring or if the delivery executive faced some difficult in delivering the order then the executive would eat up the order and report it as delivered as there was no system to keep track of that either!

Unstructured business model

Their business model was not structured and did not operate under any SOP. It was a totally messy affair where parties involved did not have a clear path of execution. And it got more messy with more customers and executives added in.

Undercapitalization

Foodpanda was losing money from day one. Say someone places an order of Rs. 100. Foodpanda would take 20% comimission on that.

So they would collect Rs. 100 from customer and give Rs. 80 to restaurant. But that is not the full story. They would give a discount of 50% which meant that they collected only Rs. 50 from customer and had to pay out Rs. 80 to the restaurant!

They were already losing money!

This model works only when you have very deep pockets and investments are huge. This was not the case with Foodpanda.

The co-founders exited early by selling the company to RocketInternet and there was nobody who could understand its history and mode of operations fully and take charge.

RocketInternet too acquired it to exit someday and did not employ any competent person to manage the messed up affairs.

Poor customer care

Customer care of Foodpanda was rank bad. I mean real bad. You had to call them several times for a simple query.

Even then it was luck and chance that someone would pick up the phone. Nobody seemed to know where others were working.

The delivery executive was always missing. Order a food at 9pm and till 12am nobody could trace the executive!

The whole operation was chaos and the chat executives always ended with an apology. But they customers do not want apology, they need their orders delivered right?

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