Homegrown startup honestbee dominated the headlines last year. A few months after they opened their glorified “new generation retail” supermarket, their business went downhill.
When Honbebee stopped delivering food last year, the company was “fiercely competitive” in Singapore's food markets as it faced competition from companies like Cold Storage, NTUC and RedMart.
To reduce operating costs, the grocery business was discontinued to focus on its core food business.
It's clear that juggling both industries at the same time is difficult, but food shipping company foodpanda has made its way into the online grocery delivery market.
Foodpanda enters the online grocery delivery room in S’pore
Foodpanda is the newest kid on the block, with existing players like Lazada-backed RedMart, e-commerce giant Amazon Prime, and local supermarket chain NTUC FairPrice already dominating the space.
With a bang, it entered the online food delivery room and started two different services: Pandamart and Pandanow.
Already in October last year, foodpanda piloted its on-demand delivery service for food, flowers and household items.
It's called Pandamart and offers goods from over 1,000 partner retailers across the country (including well-known names like FairPrice Xpress and Cheers) that promise a delivery time of 25 minutes and below.
On the other hand, pandanow is "Singapore's only 24/7 platform for on-demand delivery of food and household items". Unlike Pandamart, it promises delivery in just 15 minutes.
With its fast delivery time, it sounds like a great service for consumers, but why does Foodpanda offer a food delivery service after honestbee's obvious failure?
Diego Pinto, Director Retail at foodpanda Singapore / Photo credit: Vulcan Post
According to Diego Pinto, Director of Retail at foodpanda Singapore, the delivery of food has been on their business card for a long time. You just "waited for the right time" to start it.
He said they have received many requests from customers over the past eight years to expand their service beyond food delivery.
"We spent time ripening our infrastructure," he said, referring to a strong customer base and fleet of drivers.
"Technology is (also) very, very important for this to work," he added.
Why Foodpanda differs from its competitors
Credit: Vulcan Post
You'd think they'd be intimidated by the tough competition, but Diego firmly believes that Foodpanda is in a unique space.
They do things "differently," he emphasized. In fact, there are four pillars on which your service champions are based: speed, range, affordability and 24/7 availability.
“I think what we have here is a very interesting proposal. The speed is great and it's great (that we deliver groceries) in 20 minutes, ”he said.
“Our range is also much larger than what you can find in normal convenience stores. We are also very affordable, with prices similar to those of the supermarkets. "
The fact that the shops are open around the clock makes it even more convenient for customers to buy what they need after the supermarket's opening hours.
However, is there really a demand for 24/7 grocery delivery?
Diego only said that they had a good understanding of their customers, but did not conduct market research to justify the 24-hour service.
Regardless, Diego announces that Foodpanda has been “well received” by users of both Pandamart and Pandanow, but refuses to disclose numbers.
He reasoned that customers are satisfied, as foodpanda has continuously optimized their service based on user feedback they received during their pilot project in October.
How they deliver in 15 minutes
Unlike Pandamart, which delivers from various stores, Pandanow stores its goods in a warehouse and carries out the packaging and delivery from there.
In other words, Pandanow is operated and supplied by foodpanda's own inventory.
“We are entering into a buyer-supplier relationship with large suppliers like Coca Cola, PNG and Unilever. We buy from them and they deliver all the supplies that are here (in our warehouse), ”said Diego.
The advantage of owning your own inventory is that you have control over the range and can flexibly adapt the range of certain products to the needs of users.
While foodpanda is adding products to its range every day, Diego said "this is not the end of the entire range" and pandanow aims to have more variety in store in the coming period.
He added that pandanow's selection is carefully curated – they are doing a market study to understand what people bought the most.
For perishable products such as bread and milk that have a limited shelf life, foodpanda donates the unsold stock to charities.
“(Since) we as a sustainable company are very against waste, we donate to people who actually need these items. One company we work with is called "Free Food For All" and donates all the bread and fresh products we have to neighboring communities, "said Diego.
Pandanow currently has five warehouses in Singapore that serve "high consumer density" areas, such as: B. Woodlands, Yishun, Geylang, Kallang, Novena, Katong and Bukit Batok.
What is surprising is that there are no drivers on site who can react quickly to orders.
“We use the same pool of 8,000 delivery drivers from our food delivery fleet. Once an order is placed, our intelligent algorithm assigns an order to the next available driver, ”said Diego.
The assigned driver then goes to the warehouse to pick up the order that was manually packed in "less than two minutes" – this is made possible by the small size of his warehouse.
Although the promised delivery time is 15 minutes, Diego said that it is "dynamic" and subject to fluctuations. The different times when I signed up for the app were between 20 and 35 minutes.
The discrepancy at the time of delivery is due to external factors that "(they) sometimes cannot control" such as bad weather, heavy traffic or a sudden increase in order.
What is crucial, however, is that they update their app in real time to reflect an accurate delivery date so that users can manage their expectations before placing an order.
Money matters: is it financially viable?
In addition to the fast delivery time, pandanow currently offers free delivery with no minimum order quantity and publishes promo codes for cheaper orders.
All of this sounds great to consumers, but it raises the question: how do they want to stay financially viable in the long term?
As explained in a previous article, we found that the margins for the delivery of online food are very small due to the competitive environment.
You also need tremendous economies of scale to at least offset delivery charges before you even think about earning margins to cover operating costs.
Diego announced that pandanow's primary costs include warehouse lease, product purchase, and personnel costs. How do you expect these costs to be covered since they do not charge shipping costs?
Diego merely said that making profits is currently not their main focus. Instead, they commit themselves to "let this grow".
“In the first phase of Pandamart and Pandanow, our focus is on reaching as many people as possible and motivating them to try out the new services. With this in mind, foodpanda has built a comprehensive and efficient infrastructure in Singapore to support promotions such as free delivery and discounts, ”said Diego.
"We are also pleased to have the support of our parent company Delivery Hero as we continue to test new services and innovations that our customers will enjoy."
When asked if they have a “formula” to track online grocery delivery in Singapore, Diego said that you have to have a “unique selling point” first to be competitive.
“And of course it is a matter of course for us as a company to always be on the wave of innovation. We will always keep moving, ”he added.
30 Pandanow warehouses by the end of 2020
What's next for food panda?
According to Diego, Pandanow currently serves many neighborhoods, so their selection is tailored to this population group.
Beyond the heartland, they want to serve other areas such as the Central Business District (CBD), Tiong Bahru, Tampines / Pasir Ris and the "far west" such as Jurong East and Boon Lay.
Pandanow camp / Photo credit: Pandanow
Diego also announced that Pandanow plans to set up 30 warehouses for island-wide coverage by the end of this year.
"If we serve the CBD, we may try to curate our selection and offer things that are more suitable for people who work in their office from morning to night."
“This is part of our commitment to always work towards a perfect range for different environments. Every Pandanow camp meets the needs of those around them. "
Selected image source: Vulcan Post