The food delivery industry in India has been on the rise in 2018, after two years of dwindling business. The sector saw several consolidations and shutdowns, resulting in a few strong incumbents. The daily order volume rose from 3.7 lakh in 2017 to 15 lakh in September 2018. This sudden resurgence could be due to a variety of reasons. Some of these are: high discounts due to the massive inflow of money from investors, rising per capita income, growing digitalisation, changing culture.
Raghul Karthik
GV Subashree
Given that 80 per cent of users are less than 35 years old, the rise of technology and internet plays a critical role in the growth of the food delivery industry. A tremendous opportunity is available in tier-II and III cities and the home-food industry (messes),where there are no active players yet.
Though the food delivery segment is buzzing, the takeaway market in still only 3 per cent of the overall food market. Hence, it is not the question of market availability but, rather, whether the firm has the competence to differentiate itself and boast a competitive advantage. The core competencies of Ola being a deep understanding of the Indian consumer needs, strong partnerships with driver partners, and past learnings from Ola Café, we believe that this is the right time for Ola to re-enter the food industry.
Cloud Kitchen model in tier 2 and 3 cities
Currently, more than 80 per cent of the orders that come from food tech platforms are from the top five cities. By expanding to these markets, companies not only gain the first-mover advantage but also raise the entry barrier for rivals. Cloud kitchens offer margins of 35-45 per cent, which is significantly higher than 10-15 per cent offered by the current models. Hence more and more firms are adopting the cloud kitchen model, especially in the metros.
But we believe that multi-brand cloud kitchen models can be created in the tier 2 and 3 cities. A multi-brand model would allow the players to choose leading brands according to regional taste preferences and introduce new varieties that are not yet available in those cities. These delivery-only kitchens result in a higher variety, lower operational costs and an increase in the user base.
On the way pick-up
A new feature that can be introduced by Ola is intertwining the service offered by Ola and Foodpanda. When a user books a cab via Ola, a new tab on the Ola app can list out all the restaurants along the route to be taken. The users can then order food and pick it up along the way from any of these restaurants. This feature especially benefits the working population who come back home via Ola/Uber and then order dinner separately via a different platform. Integrating these activities will help in achieving:
(1) Higher margins due to the elimination of delivery charges
(2) Higher traffic on Foodpanda by leveraging customers of Ola.
Bringing aboard messes, home kitchens
Being a home-grown firm, one of Ola’s core competencies is its deep understanding of the Indian population's mindscape and culture. Traditionally, Indians prefer healthy, home-made food. Also, age groups above 35, who have disposable income at hand, prefer eating healthy food due to increasing health concerns.
By bringing well-known messes and home-kitchens on to the platform, Ola would be addressing the needs of the older generation, opening up a whole new target consumer segment. The app can be customised to have a separate tab that only displays messes and home-kitchens.
Brand-building
To look beyond the current set of competitors and gain market-share, brand image is extremely important. Indians are price-sensitive, and gaining a customer base based only on promotional offers will not be feasible in the long run. Ola needs to go beyond and delight the customers so as to increase repeat orders. Some of the ideas are:
· Language-customised app that allows users a choice of languages for UI interaction
· Gifts with apology messages for dissatisfied customers
· Surprise cake delivery to loyal customers on special occasions, such as birthdays and anniversaries
· For Ola Outstation customers , help them discover best cuisines and restaurants at their travel destinations. A link can be given in this promotional mail to order the same via Foodpanda.
Part-outsourced, cross-functional delivery fleet
Logistics efficiency is at the heart of gaining trust and market-share for any food delivery firm. On-time delivery, ease of order tracking and cancellation, and good customer support are critical to gain a user base.
Given that the orders peak during lunch and dinner time, it bodes well to have a flexible fleet by partly outsourcing the logistics. Considering that Foodpanda has expanded to over 100 cities and Ola is present in most of them, the combined fleet can cross-function based on the traffic on each of the apps.
(The Fourth Runners-Up are in the First Year of PGP at IIM Bangalore.)