Rise of competition in the food delivery business

He’s right, of course.

But, by the same benchmark, there aren’t too many examples of the Zomato model working either.

One of the reasons why it’s hard to make money from the ad sales model in food-tech is because you need a large sales team to make it work. The economics aren’t as bad as that of having a delivery fleet, but it’s quite formidable. This is what companies like Zomato and Yelp need to reckon with.

Of course, Deepinder does point out success stories in Japan, and while the jury is out, it’s quite possible the Zomato model may eventually work. Maybe. But it will likely take a while.

Unfortunately, you don’t have time. It’s important you get a working model immediately. So you decide to try something new. It’s daring, it’s risky, but it’s your best chance of success.

You give a rousing speech in the employee town hall about this new strategy. Fifteen employees resign the next day.

But you soldier on.

The Freshmenu model

In food, the biggest margin is inside the kitchen. It’s the difference between the cost of black dal in the market and the price of lentil soup on the menu. This is what funds everything else in the restaurant.

But here’s the problem, if you make the food yourself, you still need to find customers and you still need to make deliveries. So you end up fighting on all fronts, and the only way you can win is if your food is memorable, not too expensive, and reliably available.

It’s hard and it takes a lot of time, but if you manage to make it work, it can solve all your profitability problems. But it requires a massive one-time investment to solve a systemic problem, with the promise of reaping enormous, long-term rewards.

Your investors hear your plan, and point out that you are not the BCCI. They urge you to try something milder. Like a proof of concept. Just to see if it will work.

The Ola Cafe model

One reason why food-tech so expensive is because the customer has too many options which prevent you from doing any preparation. Your typical customer orders Chinese one day, a sandwich the next day and on weekends, he tries to convince you to get him tea and cigarettes on the way.

So there’s a simple way out. If you can somehow narrow down the options that a customer has to order, you can optimise delivery and perhaps start to break-even. If you have four or five options, your delivery guys can stock it with them instead of running to the restaurant for every order.

Remember – preparedness is profit.

Worth trying, you think.

But the bad news is that the Ola model didn’t work for Ola. It was shut down within a year of launch.

Ola Store, the groceries delivery service, and Ola Cafe, the food delivery service have failed to meet Ola’s expectations, said two people in know of the matter.

“It (grocery) is not a profitable business and has huge delivery costs,” said one of the two people cited above, requesting anonymity.

Your try to raise more money, but funding is impossible to come by. So you start shutting down offices in some cities. It’s temporary, you tell reporters, who don’t understand much about food-tech, but understand what drives pageviews perfectly well.

You ask around to find a buyer.

It’s over.

So you finally go for the only model left.

You set up a stall in front of a popular college. People can come and buy. Or not. You don’t care. You refuse to do delivery, even to a car. You claim to have 99 varieties of dosas, but you actually only have 8. The rest are just revolting variants involving pineapple, paan or Red Bull.

But at least getting paid isn’t a problem.

You realize that success in the food-tech business is a hard, long grind – like most other businesses. Sometimes the economics work out, and when they don’t, it’s best to be prudent and try other opportunities. Great products or services work best when customers value them as highly as your investors do. And are willing to pay for them. And often take time. Lots of time.

 

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