I still remember a conversation I had with my elder cousin sometime between 2014-15. He was a tech-savvy and a foodie and told me to check out Foodpanda to order food. I was intrigued. I was lured by the food delivery app delivering food at high discounts. However, I never used the app much, surely not as much as I use Zomato or Swiggy.
I am certain that many of you would have a similar story. So, what exactly happened with Foodpanda that it couldn’t take off in the food delivery space when its rivals and later-entry competitors caused a disruption? We evaluate here.
Death Of Foodpanda
Foodpanda was started in Singapore in 2012 and it very soon expanded to several other countries, including ours. It boasted of a robust tech system and restaurant network in the beginning but those very same factors became the reason for its demise.
The situation of Foodpanda, in the end, was so poignant that its initial investors wanted to exit from the company for a $10-15 million buyout, but nobody showed interest in buying the company.
The first and foremost issue was that Foodpanda basically got exploited by its users. The Foodpanda app showed even those restaurants that had closed their shutters, so upon ordering from them when they didn’t receive their order (because there is no restaurant making them), Foodpanda used to offer them a voucher of 40% discount on the next order.
Now, this voucher was used by people for availing heavy discounts on other restaurants. The operations team at Foodpanda realized this very late, and till then it was already duped of a lot of money.
Moreover, their operations were flawed. The restaurant owners were notified very late of the orders (and often the customer had to call the restaurant themselves after waiting for a long time) which made customers unhappy. Even if a user cancels the orders, the restaurants were notified of it very late and till then, the food was prepared, meaning a loss for them.
A Mumbai-based restaurant owner alleged that Foodpanda owed it Rs 1.5 lac but was delaying payment because the startup didn’t have any records. He said, ”
Foodpanda didn’t even know (about the problems). We monitored all the transactions. But on the company’s side, there was A lack of process, lack of ownership. Look, I don’t think its tech is the best, but there was nobody who owned up to this piece and we couldn’t even connect.
Its tech was not user-friendly. That posed another problem. Then, there was always some news coming to light about how Foodpanda delivery boys eat food from the order package. This shook customers’ trust.
All in all, the company was exploited by restaurants (they claimed to have got more food orders than Foodpanda’s records showed), customers, and its delivery personnel alike. All this is because of a poor ops and tech team.
The company used to offer unrealistic discounts. One time, it offered food at as low as one digit amount in a campaign called The Crave Party. It was burning money, with no plan in sight to ever make a profit.
Foodpanda was also acquired by Ola in 2018, which wanted to expand its business and compete directly with UberEats (which also didn’t take off in India). Initially, upon acquisition, it got around 2 lac orders per day. However, they were reduced to mere 5-6 thousand in 2019 when other companies like Zomato and Swiggy started agile marketing.
In 2020, its annual revenue was worth INR 82 crore, but it was suffering losses worth INR 700 crore. It was a loss-making business with poor operations and tech that nobody wanted to invest in.
Once spread across over 45 countries including India, South-East Asia, Russia, and Eastern Europe, it’s almost as if it has now disappeared from the face of the earth. This provides an invaluable lesson to young entrepreneurs to not chase valuations, to keep a check on how much money you are burning, and to keep your operations strong.
What is a failure for one is a lesson for others.
Disclaimer: This article is fact-checked
Image Sources: Google Images
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This post is tagged under: foodpanda death, failure of foodpanda, food delivery app, zomato, swiggy, ola, ubereats, high valuation, customer acquisition, burning money, failure, startup, poor operations team, poor tech, delivery boys, operations, late delivery, unrealistic evaluation, no profit, high losses, ola+foodpanda