The food delivery industry in Bangladesh transformed significantly, witnessing the rise of Foodpanda as the dominant player with local startups facing fierce competition in the dynamics of the market.
In the delivery industry of our country, food delivery services have acquired significant popularity. Online food delivery is a blessing for those who enjoy fast food from the convenience of their own homes, without worrying about table manners or the jumbo burger falling apart and staining their good clothes. The desired cuisine can now be delivered to a person’s doorstep with just a few taps and scrolls.
The evolution of food delivery apps in Bangladesh
Bangladesh’s growing preference for online shopping has contributed to the rapid development of food technology there. In 2013, platforms such as HungryNaki and Foodpanda revolutionized food delivery to the doorstep, swiftly becoming market leaders and servicing millions of customers per month. Other competitors such as Pathao Foods, Uber Eats, and Shohoz Food followed suit, contributing to the exponential growth of the industry. In 2019, the industry delivered 25,000 orders per day, with the top companies accounting for 90 percent of the market.
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The Covid-19 lockdown accelerated the trend of online food delivery, with deliveries tripling in a single week. People who were confined to their homes ordered food and groceries through digital platforms. People became more accustomed to the convenience of online food ordering as a result of the pandemic, leading to a moderate growth in the industry. Customers’ reliance on the efficacy of digital food ordering was bolstered by the collaboration between delivery companies and restaurants to ensure seamless operations.
Foodpanda, supported by Delivery Hero, dominates with a 65% market share as 2023 approaches, ten years after the industry’s inception, while HungryNaki has lost its former prominence. Uber Eats and Shohoz Food, once dominant actors, ceased operations during the peak of the pandemic. The impact of the pandemic has accelerated the transformation of consumer behavior and the landscape of the food-tech industry, highlighting the importance of online platforms in meeting changing demands and defining the future of food delivery in Bangladesh.
The duopoly of food delivery
According to industry insiders, only Foodpanda and Pathao Food have performed exceptionally well in acquiring and retaining new consumers in recent years. This may indicate that despite the size of the market, there is no room for more than two elite competitors to compete head-to-head. In the past 15 to 20 months, daily online food delivery orders have fluctuated between 35,000 and 40,000 in Dhaka and Chattogram, and around 60,000 nationwide. Pathao Foods serves the remaining third of the market. Foodpanda has the largest network in the nation and services approximately two-thirds of the market.
Foodpanda’s recipe for success
Foodpanda’s success on the Bangladeshi food delivery market can be attributed to substantial investments and a deep purse. As a subsidiary of Delivery Hero, Foodpanda has access to a wealth of resources, tools, and information. The company made substantial investments in campaigns, marketing, and a user-friendly app for ordering and payment. Customers have been won over by their aggressive pricing strategy, emphasis on quality control, and expedient delivery. In addition, Foodpanda’s well-organized and well-trained delivery chain network reduces order cancellations and ensures prompt service.
The company’s substantial expenditures have discouraged competitors, with some ventures incurring annual losses between Tk 150-200 crores. Following in the footprints of successful global giants like Amazon, Foodpanda’s strategy centered on customer retention, acquisition, and business growth.
Pathao Food’s unique approach
Pathao Food has been able to remain competitive despite Foodpanda’s market dominance. Pathao Food, based in Bangladesh, has cultivated a robust network of local restaurants and taverns, offering exclusive deals with upscale establishments.
Pathao Food, unlike its competitors, refrained from aggressive pricing, averting price fluctuations that could alienate customers.
Pathao Food is still profitable and has maintained a substantial market share despite Foodpanda’s dominance.
HungryNaki to exit soon
HungryNaki, which Daraz Bangladesh acquired in 2021, was anticipated to close by the end of June. While still operational for now, its closure appears imminent, unless a significant investment comes through. Even if it closes, customers will continue to be served through the Daraz app, as the brand and app may cease to exist.
“This could probably be a strategic decision from Daraz’s end, and they are perhaps thinking this move will earn them new customers from the Daraz app, but it might not essentially be a good idea,” said Mohammad Ruhul Kader, the founder of Future Startup, a digital publication covering the startup and technology scene in Dhaka.
According to him, HungryNaki has already reached its peak, and integrating its service into the Daraz app may not result in significant success.
Regarding food delivery services, consumers desire a seamless app experience, which the current Daraz app is unable to provide. In addition, online food delivery services, which typically generate revenue through commissions from restaurants and delivery fees from customers, are not in the best of health.
Why local startups fail to sustain?
Local startups in the food delivery sector of Bangladesh confront significant obstacles to their growth and sustainability. They are at a disadvantage compared to global competitors like Foodpanda due to their limited access to substantial investments and resources. In an effort to compete, entrepreneurs frequently resort to unsustainable discounts, resulting in long-term financial difficulties. Local entrepreneurs face additional obstacles due to the market’s intense competition, which necessitates hefty investments in customer acquisition and infrastructure growth.
Moreover, the food delivery market in Bangladesh remains relatively limited, urban-centric, and driven primarily by discounts. This discount-driven strategy raises questions about the business model’s long-term viability. Operational obstacles, such as a lack of drivers and the maintenance of solid relationships with restaurant partners, exacerbate the difficulties.
Effective delivery logistics and high-quality service are essential for success, but local startups may find it difficult to establish a robust supply chain network in comparison to larger competitors such as Foodpanda. To prosper in the face of intense competition, local startups must develop innovative solutions, differentiate their services, and prioritize customer retention. In Bangladesh, the success and growth of local food delivery enterprises will be contingent on overcoming these obstacles.
Market dynamics and future prospects
During the pandemic, when consumers increasingly turned to internet delivery services, the food delivery market in Bangladesh has experienced substantial growth. According to Statista, the online food delivery market will generate $987.70 million in revenue by 2023. It is important to note, however, that this figure includes grocery delivery, which accounts for $842.50 million of the market volume. The projected market for ready-meal delivery, excluding grocery delivery, is $145.2 million.
To attain sustainable growth, companies that deliver food must provide more than just convenience. Attracting and retaining consumers requires competitive pricing, superior service, and attention to a variety of customer requirements. Adapting to market dynamics and obstacles is essential for the industry’s long-term success. Local startups need to build strong borders and differentiate themselves to survive amidst fierce competition from global giants like Foodpanda.
Developing solid relationships with restaurant partners and delivery drivers is essential to achieving success. A dependable and efficient delivery network is essential for providing consumers with a seamless experience. As the market matures and consumer awareness grows, it is anticipated that high customer acquisition costs will go down. Brand loyalty and unique experiences can assist businesses in retaining users and increasing consumer lifetime value.
To carve out a niche in a market dominated by multinational corporations, local startups must identify and cater to specific consumer preferences. By focusing on customer satisfaction, providing unique services, and collaborating closely with restaurant partners and drivers, local startups can gain a competitive advantage and flourish in Bangladesh’s dynamic and constantly evolving food delivery market.
In conclusion, in Bangladesh’s ever-evolving food delivery market, businesses will face evolving market dynamics and must innovate to meet diverse consumer preferences.
