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Food delivery pioneer foodpanda says it's no endangered species

It sees service quality, ordering frequency and restaurant partners as keys to success

Mr Andreani says that competition indeed "is definitely going to heat up before cooling down" but adds that foodpanda is ready for those headwinds.


THE app-based food delivery space has grown greatly in recent years, with players coming and going, but one constant in Singapore has been foodpanda.

Speaking to The Business Times, foodpanda Singapore's managing director Luc Andreani says: "When we started in 2012, we were alone and fighting to build the food delivery service which had not existed before and trying to convert customers to that service for the first time."

Six years on, while Singapore has high levels of Internet penetration and mobile phone usage rates, "it is still very much a conquest market", he adds.

foodpanda's competitors now include a mix of regional and international players, and crossovers from other parts of the gig economy such as Grab, which started out with ride-hailing services.

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Others in food delivery include London-headquartered Deliveroo (see amendment note) and Singapore's Honestbee. The latter first emerged as a provider of online grocery delivery services.

The competition is welcomed by foodpanda, which is owned by German-listed Delivery Hero. Mr Andreani explains: "If anything, we are welcoming competitors to Singapore as it helps us to increase the market size and customers are still in the process of transitioning to food delivery as a service."

Indeed, despite the increase in competition, foodpanda's market has also grown. According to Accounting and Corporate Regulatory Authority filings by foodpanda Singapore, its revenues doubled from S$20.8 million in 2016 to S$42.2 million in 2017.

Competing firms elsewhere in the gig economy have often engaged in strategic marketing activities to acquire customers through offline and online channels to gain market share. In food delivery, these include discounts for customers and incentives to the riders who deliver.

But such moves are often costly and Mr Andreani believes that in the long run, it is factors such as service quality, ordering frequency and the restaurant partners that will set apart the top players from the rest.

As foodpanda grows in size, "it is more about building up and maintaining order frequency", he says, particularly as the impact of marketing drives diminishes over time.

With that, customers can also benefit from economies of scale, which results in lower delivery fees. foodpanda customers pay a flat fee of S$2 per delivery or may have free deliveries in cases of promotions with restaurants.

Says Mr Andreani: "We are focused on acquiring more vendors and being the most affordable brand in the market.

"We are already efficient and the average amount of orders we have per rider is extremely high but we need to keep improving on this because that's the only way you can run a healthy and sustainable business."

With the advent of "super apps", some businesses have combined a number of ancillary services into a single app.

As Mr Andreani sees it, the move is "not impossible", but the complexities that firms face can be huge, due to the difficulty of cross-pollinating different services into a single app.

He explains: "While a firm may find great success in one field and have a strong customer base, it does not necessarily mean that it would translate to success in another area and does not guarantee its customers would (buy in)." But he does not count out such a move in the future.

Subscription services are also on the rise but while foodpanda does not currently offer such a service, it is already a part of the LiveUp alliance that includes companies such as RedMart, Grab and Lazada. This, Mr Andreani notes, is "pretty much a subscription programme as well".

That said, foodpanda is currently exploring having a subscription-based service. But finding the right mix is crucial for success, Mr Andreani says, as it has to be viable for the company while incentivising customers.

Non-financial initiatives such as loyalty programmes are also on the cards for foodpanda.

And since November 2018, its customers here have been able to place their orders on the app for pickup.

"It is very useful for beating queues at lunch time or on the way home and is just another service that we want to offer," says Mr Andreani.

"Pickups are also good for us as a company as we do not incur logistics costs, making them a good profit driver for us," he says.

While the gig economy has done wonders in opening up flexible job opportunities for individuals, the size of the Singapore market presents challenges from a logistics point of view as there just aren't enough riders, especially against the backdrop of an increasingly competitive environment.

And looking ahead, Mr Andreani says that competition indeed "is definitely going to heat up before cooling down" but adds that foodpanda is ready to tackle those headwinds.

"We will be here to stay; I believe our logistics set-up is very efficient and we are confident in it. It is going to be very aggressive in 2019 but we are ready for it."

Amendment Note: In an earlier version of the article, Deliveroo was listed as an Australian-headquartered company. This is incorrect as Deliveroo is headquartered in London. The article has been amended to reflect this. We apologise for the error.

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