Food de­liv­ery apps aren’t able to keep up with In­dia’s bike-rid­ing dab­bawalas

▶ ▶ In In­dia, ven­ture cap­i­tal-backed food apps haven’t re­placed tra­di­tional dab­bawalas on bikes ▶ ▶ “They for­got that they needed to make money to sur­vive”

Bloomberg Businessweek (North America) - - Contents - �Adi Narayan The bot­tom line Food de­liv­ery apps in In­dia raised $120 mil­lion from in­vestors in the past three years but failed to dis­place tra­di­tional meal de­liv­ery­men.

More than 400 food de­liv­ery apps started up in In­dia over the past three years, rais­ing $120 mil­lion from ven­ture cap­i­tal firms and other in­vestors. Lur­ing cus­tomers with pho­tos of tasty cur­ries along with dis­counts and free de­liv­ery, they sought to dis­rupt the de­liv­ery net­works that have ex­isted in In­dia since the 1890s, in­clud­ing Mum­bai’s fa­mously low-tech dab­bawalas, who ferry 175,000 meals—some from cooks’ homes, oth­ers from cen­tral kitchens—to of­fice work­ers and stu­dents daily. The time-tested de­liv­ery­men carry boxes via trains, bi­cy­cles, and push­carts to their hun­gry clients, us­ing a sys­tem of al­phanu­meric codes printed on re­us­able con­tain­ers.

The new ser­vices of­fered some­thing dab­bawalas don’t: last-minute order­ing and the abil­ity to choose dishes from hun­dreds of restau­rants. Dab­bawalas re­quire a monthly com­mit­ment, and cus­tomers are locked into a meal plan for the en­tire pe­riod. Even so, most of the high-tech star­tups have foundered, and dozens have closed. The ones that are sur­viv­ing, in­clud­ing Tinyowl and Food­panda Hellofood’s In­dia unit, are shrunken ver­sions of their for­mer selves. “The story was glo­ri­ous when they had lots of money in the bank, but they went madly af­ter cus­tomer growth and spent it quickly,” says Anil Joshi, an in­vestor and founder of Uni­corn In­dia Ven­tures in Mum­bai, who didn’t in­vest in food de­liv­ery com­pa­nies.

Mean­while, the dab­bawalas ap­pear to be busier than ever. While they have no apps, they’ve man­aged to re­tain mar­ket share. And they’re jump­ing on the e-com­merce band­wagon them­selves— by lend­ing de­liv­ery staff to com­pa­nies such as gi­ant e-tailer Flip­kart and of­fer­ing train­ing pro­grams for new tech-en­abled mer­chan­dise de­liv­ery star­tups such as Road­runnr.

“All th­ese peo­ple got into the busi­ness and of­fered ser­vices for very cheap, but they for­got that they needed to make money to sur­vive,” says Su­bodh San­gle, a co­or­di­na­tor with the Mum­bai Tif­fin Box Sup­pli­ers As­so­ci­a­tion, a union rep­re­sent­ing about 5,000 lunch­box de­liv­ery­men. “We have been work­ing in this field for so many years and know what it takes to de­liver meals at the right price.” The ex­pe­ri­ence of Tinyowl is telling. The

Mum­bai-based plat­form to or­der food from nearby restau­rants started in 2014 and raised about $20 mil­lion in its first year. Its work­force grew to about 1,200 in early 2015, and co-founder and Chief Ex­ec­u­tive Of­fi­cer Harsh­vard­han Man­dad said he planned to ex­pand op­er­a­tions to 50 cities by the end of that year. By Novem­ber the com­pany had let go of 270 work­ers, mostly call-cen­ter em­ploy­ees and de­liv­ery per­son­nel. When one of the co­founders ar­rived to break the news at the com­pany’s of­fice in Pune, a city near Mum­bai, he was taken hostage by an­gry em­ploy­ees who de­manded im­me­di­ate pay­ment of sev­er­ance pack­ages, tech­nol­ogy news site Me­di­anama re­ported. Po­lice were called in to res­cue the ex­ec­u­tive, the re­port said. He didn’t re­spond to calls and text mes­sages seek­ing com­ment. The com­pany now op­er­ates in just two cities, with about 200 em­ploy­ees.

Tinyowl’s big­gest ri­val was Food­panda, a restau­rant de­liv­ery provider owned by Ger­many’s Rocket In­ter­net. With op­er­a­tions in more than 25 na­tions, it en­tered New Delhi in 2012 and rapidly ex­panded to more than 30 cities across In­dia, with a work­force swelling to 1,300 by late last year. While the com­pany spent heav­ily on TV ads and dis­counts to woo con­sumers, its op­er­a­tions were plagued with poor tech­nol­ogy, ac­counts of swin­dling by fake restau­rants, and theft by em­ploy­ees and con­trac­tors, the Mint news­pa­per re­ported in Septem­ber.

“The chal­lenges on the ground are far big­ger than any­one can imag­ine,” Food­panda In­dia CEO Sau­rabh Kochhar said in an e-mail. “We face is­sues from mind­set to in­fra­struc­ture to ca­pa­bil­i­ties.” He said the com­pany dis­missed 15 per­cent of its work­force as part of its move to au­to­mate op­er­a­tions. Lo­cal me­dia re­ports said lay­offs were more than dou­ble that per­cent­age. Kochhar de­clined to com­ment on the com­pany’s in­ves­ti­ga­tion into the fraud al­le­ga­tions. The com­pany has weeded out fraud­u­lent restau­rants and con­verted its sys­tem to a “very, very tightly man­aged mar­ket­place,” says Ralf Wen­zel, global CEO for Ber­lin-based Food­panda. “In other coun­tries, you could have been much more open. But not in In­dia.” Still, the In­dia busi­ness is “bet­ter than ever,” he says, deny­ing lo­cal me­dia re­ports the unit is for sale.

Part of the prob­lem is that the com­pa­nies ex­panded too quickly, hir­ing scores of de­liv­ery per­son­nel and call-cen­ter em­ploy­ees. That’s led to a “quasi-cri­sis kind of sit­u­a­tion” as salaries for de­liv­ery staff have risen al­most 70 per­cent in the past year, says Ri­tu­parna Chakrabort­y, se­nior vice pres­i­dent at re­cruit­ment con­sul­tant Teamlease. Up­starts in­clud­ing Swiggy have skipped hir­ing de­liv­ery staff al­to­gether, in­stead re­cruit­ing part­timers for each de­liv­ery.

Even sea­soned play­ers have strug­gled to make food order­ing work. Seven-year-old, Se­quoia Cap­i­tal­funded Zo­mato Me­dia is In­dia’s big­gest ag­gre­ga­tor of restau­rant menus. It got into food de­liv­ery last May, along with a new cashless pay­ment ser­vice. But in Novem­ber it fired about 300 peo­ple, 10 per­cent of its staff, and ditched the cashless ser­vice.

The com­pany said in a blog post that it had over­spent on the pro­gram, in­clud­ing hand­ing out free ipads to thou­sands of restau­rants. In De­cem­ber it said it was shut­ting down on­line order­ing in 4 of 14 cities where it op­er­ates. “De­spite Zo­mato’s re­cent mar­ket­ing ef­forts, in­clud­ing tele­vi­sion ads, it didn’t see a sig­nif­i­cant in­crease in the or­der vol­umes in th­ese few cities,” co-founder Pankaj Chad­dah said in a state­ment.

For restau­ra­teurs such as Ra­jiv Ramb­hia, who runs the Lo­cal Bites restau­rant in Mum­bai, the flush of food-order­ing apps has been a mixed ex­pe­ri­ence. There was the ini­tial boom when Tinyowl, Food­panda, and oth­ers lured lots of cus­tomers by of­fer­ing dis­counts of as much as 50 per­cent. Then the dis­counts started dry­ing up, and the app com­pa­nies started charg­ing restau­rants com­mis­sions of as much as a fifth of each or­der. “Ob­vi­ously, if you of­fer them a 50 per­cent dis­count, peo­ple will come,” Ramb­hia says. “When the of­fer stops, those or­ders also stop. My busi­ness hasn’t re­ally gone up be­cause of th­ese guys.”


Num­ber of meals de­liv­ered to of­fice work­ers daily

La­beledlunch con­tain­ers

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