Why Foodpanda failed ? | Business casestudy | Foodpanda vs Swiggy-Zomato

Why Foodpanda failed ? | Business casestudy | Foodpanda vs Swiggy-Zomato

Imagine you built a company valued at 3 billion dollars. All was going well until you learn that you are going bankrupt. Foodpanda was our favorite, but we hardly remember it today, so why aren’t we using it anymore? You had an amazing team, over 3 billion dollars of evaluation, and operations in more than 45 countries, everything was amazing, but why aren’t we using it anymore? Foodpanda did not fail because of Swiggy and Zomato, as many people believe.

About Foodpanda

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The truth behind the shut down of Foodpanda

Another interesting story arises from the fact that a food delivery company that had more than 2 lakh orders per day suddenly shut down.

What’s s truth behind Foodpanda’s terrible failure? What are those business lessons we can implement in our own businesses?

A group of friends, Ralf, Ben, and Rohit noticed a big market gap four years ago, which was the lack of home delivery options. Prior to 2015, only Domino’s and a few restaurants delivered food to homes. Foodpanda was started to fill this market gap. After a few years, Foodpanda expanded into Malaysia, Indonesia, Singapore, and Hong Kong.

Foodpanda grew so fast that investors were after them. Who wouldn’t invest in a startup that now operates in over 45 countries?

However, how has Foodpanda expanded to more than 45 countries in a span of 3 years?

This is also not possible for Zomato, because they cannot expand organically, so please appreciate this.

Funding raised by Foodpanda

Foodpanda raised more than $ 100 million in funding, but now they have to decide what to do with the money, When companies raise money for expansion, they have two choices: 1) They expand into new territories, do marketing, and capture market share, If you want to expand overseas, you can purchase existing companies in the same field, but there is a twist. When Foodpanda began, hyperlocal delivery was a new concept, and people were unaware of it.

When this situation was created in the  market, one thing spread fast – doubt Companies operating in the food segment doubted that this would work or not in the future, and Foodpanda took full advantage of that doubt. Foodpanda was well funded, so they used to go to small companies and tell them that they were willing to purchase their companies, whether it would work in the future or not. People who had doubts were now scared.

Time by time Pakistan’s EatOye!, Russia’s DeliveryClub, and India’s TastyKhana and JustEat were acquired by Foodpanda, why could the company not succeed in India?

Foodpanda’s Revenue Model

The best way to understand this is to understand Foodpanda’s revenue model. Foodpanda used to earn revenue in four ways:

1) Listing Fee When a restaurant t listed on Foodpanda, it paid Foodpanda a listing fee. 

2) Foodpanda charges restaurants a commission of 23 percent on every order it receives,

3) Customers pay delivery charges,

4) Advertisement Fees Restaurants wanting to be listed higher on the platform pay an advertising fee, but they only earn if they deliver orders. And what if orders were not delivered?

I know you will say How is this possible? 

There is a big difference between order delivery on the app and the delivery of the order through courier services. Foodpanda was delivering over 2 lakhs orders daily.

Now you will tell Bro what his t is this?

Foodpanda was very successful at first, but Foodpanda was very inefficient. Now let’s look at Swiggy’s operations: You order something, the restaurant receives it, and Swiggy is notified; then Swiggy sends a delivery agent to the restaurant, who delivers your order, collects payment, and gives Swiggy the money.

Swiggy gets their money directly if the order was prepaid, and you can also track your order.

Mistakes done by Foodpanda

You placed a food order on Foodpanda, the restaurant received it, and Foodpanda was notified, and they sent their delivery agent to the restaurant. The delivery agent picked up your order, but you didn’t get it because the delivery agent ate it. As funny as this may sound, actually FoodPanda’s delivery boy did the same thing, so the question arises how they were able to do this so easily, so the answer is Unstructured Business Model. 

Foodpanda didn’t follow this. Swiggy and Zomato hired their delivery boys on a salary basis, but Foodpanda used to pay delivery boys per order, Not only this they promised to pay them guaranteed wages, if you work 8 hours, you will get 200 rupees. If 10 hours then 300, 400 for 12 hours.

There will be some money Said to you even if you don’t get orders, Most of you would think this model is better than the salary model, but why does this company fail? No notifications were sent to restaurants early, which resulted in a poor customer experience, cooking delays caused cooking delays, which delayed delivery, and when food was delivered late, it affected customer satisfaction, and the delivery boys ate it.

When a customer has this kind of experience, many doubts are created. ‘Should I use this or not?’ Many doubts are created because foodpanda didn’t have the proper technology to manage food orders and no delivery tracking system.’ 

Foodpanda sold the company to OLA within a year. They lost all their co-founders when the company was sold out in 2016, but if they hadn’t done that mistake, The mistake was predatory pricing, In India, discounts work. And where there is a discount, people buy. As a result, Foodpanda began offering 50off-menu items during Crazy Crave Parties. A 50% discount was not a problem, this would also be offered by Swiggy and Zomato. The problem was undercapitalization, both Swiggy and Zomato as well-funded companies.

Why was Foodpanda shut down in India? 

Although Foodpanda does not care about their cash burn now and in the future, they had very less funds compared to Swiggy and Zomato. In 2020 when Foodpanda made 82 crores in revenue, there were losses of 700 crores. And so OLA had to shut down Foodpanda’s operations in India.