The Age of Distrust and The Age for Trust

Loss of Faith
The last few years have seen an increasing ‘loss of faith’ against politicians and media (because all communication happens through offline and online media) thanks to a mix of facts and fakes.
Seen both in India and across the world and has been crystallized by the elections of Trump and to a certain extent Modi.

 Fake news, trickery, fake viral stories etc. have been profligate sparing no one - including Trump, Obama, Modi and many others. It is not surprising that politicians have been the most affected since they have a history behind them closely followed by the media thanks to the ready access to truth and fake information.
Veles, Macedonia emerged as the “world capital” of fake news, being the registered home of 100+ pro-Trump sites, earning its propagators' thousands of dollars in advertising revenues and making it difficult to distinguish between real and fake headlines.

Popularity over Veracity
The authenticity of the news is not determined by the veracity but rather by popularity and this is the case where so-called news sites like Pgurus, Satyavijayi, Beef Janata Party etc. have included news with morphed pictures and false news. Social media propagates most of this ‘news’, not surprisingly thanks to the power of the ‘share’ button.
With this huge infiltration of fake news in the media, there is an inundation of such news on social feeds and for marketing, it has been good news from a content propagation aspect but it has come at the cost of trust and consumer confidence.

The Age of Distrust has begun…
There is an air of skepticism of practically everything, let alone business or marketing in particular. Venture capitalists have been questioned for their investments in various startups, CEOs have been questioned for the way they run their company, marketing has been questioned for flogging every day into a marketable day.
For Millennials, given their attitude, in particular, this is hardly surprising.  What is surprising is the speed at which the older generations are forming similar sentiments.
In the era of high skepticism and low confidence, marketers face perhaps one of their greatest challenges: believability.

Solving it themselves... Consumer Reviews
Surprisingly the solution to this has come from the consumers themselves. Ask other people for their opinions! Hence online reviews form an integral part of most purchasing decisions. A person like you is just as credible for information as experts about a company or brand. Over 50% of consumers are now routinely checking online reviews before making a purchasing decision.
Not surprisingly most e-commerce sites have a review section for each product. Sites like Zomato or Yelp have gone a step further by centering their business on consumer opinions.

Engage
Business leaders will recognize that in this new world they cannot operate with a top-down approach. Rather, a flatter, participatory model is needed, one that isn’t just “for the people” but “with the people.” The best companies are the ones listening to customers and responding to them.
For marketers, it is time to renew their efforts on their existing customers. In the age of a mountain of dollars, the steroid like discounts and undue weightage on customer acquisition at any cost; retaining old customers have been given the go by. Perhaps with the tightening of belts and emphasis on profitability, the scenario will change as their voices, opinions, and beliefs now say much more about a brand than traditional advertising or marketing can. Social media offers the most obvious platform for this kind of marketing, but other forms of social-in-nature content are beginning to take off as well.
Brands that regularly engage with their customers directly through social media, forums, and review platforms are best geared to handle the new age of distrust.  “62% of millennials say that if a brand engages with them on social networks, they are more likely to become a loyal customer. They expect brands to not only be on social networks but to engage them.” The reviews and feedback consumers leave not only generate brand loyalty but also provide potential customers—those who don’t quite trust traditional marketing methods—with the push they need when a purchasing decision needs to be made.

Make a Negative a Positive
Negative experiences that were earlier ignored or responded in a standardized template through IVR or email have now become a tactic for customer acquisition.  Responding publicly to these negative experiences has interestingly shown the brands in a new light highlighting transparency and trust. Only brands that have something to hide will avoid replying or go around in circles.  Research shows increasing customer retention by just 5 percent can lead to a 25 percent to 95 percent increase in company profits. So engage with your customers!
It’s hard to say when consumer confidence will be restored to its normal levels; sins of the past may make that nearly impossible. But like it or not, distrust is now ubiquitous. Fake news is now part of the world we live in. Each and every time it’s disseminated, brand trust dips.

Emotional Rational Brands - Brands with a Purpose

Raksha Bandhan or Friendship Day has seen an outpouring of emotional creativity from brands. This is an indication of social mores as we, as consumers have become more socially aware and also advocacy driven. Even commercialisation has increasingly moved to more meaningful and purpose driven initiatives respecting and giving back to society.   This is indeed a sign of times that commercial interests are seeking a higher plane.

• Millennial Behaviour

A significant factor that has also influenced brands is the customer of the present/ future called Millennials.  Given the nature of the audience, they are driven by shared values, communities and hence it is imperative that brands be built on existential values.

• Moving Up Maslow's

In my opinion, that brands are moving up the ladder or are shifting from the lower bases of Maslow’s hierarchy to the higher ones. Functional aspects of the brand are shifting to love, esteem and self-actualization.  We are perhaps at the cusp of an evolutionary leap for brands. Some of the brands who are in the safety space are moving to love and brands in the love phase are moving to esteem and so on. This step-by-step process will eventually lead to the ultimate part – self-actualization.

• Functional - Lesser Importance

A pure consumption play is slowly losing its meaning. And hence, while talking on functional aspects are important, brands need to take an emotional lift. It increasingly comes from within, and brands need to look at ways and means of maximizing our lives – a purpose to help contribute a better world.

• Emotionally Driven

90% of our decisions are driven by emotion. So by giving a purpose to a brand, we are conveying a larger story. Stories create an emotional response in the brain and brands that address the wrong part of the brain and by just listing rational features and benefits, are at a disadvantage.

• Being Practical

Putting all the ‘socially good’ initiatives aside, purely from a practical angle it also helps brands and products to move to a plank that has a higher calling and receptiveness. How long can a detergent brand say that it washes whitest? How long can a brand say that it makes life easier by washing better? Innovation has become so rapid that new products are launched every day and with the democratization of technology, newer products are being launched even by upstarts.

• Changed Environment

Over the last few years, the environment has also changed physically and socially. For example – consumers are beginning to recognize that we are facing a using shortage in terms of water and hence water conversation has become an important issue. Whilst it may not totally influence the buying decisions, there is a sense of appreciation of brands which respect the environment. Undoubtedly there will be a trade off but the fact remains that customers are acknowledging and making environmental concerns a part of the purchasing decision process.  Needless to say, influential consumers who have the wherewithal are making this change.

• Increased Ownership and Activism

Very importantly, and partly hastened by the access to news from all across the world, consumers also believe that they have to take responsibility for the problems they are facing and cannot leave it to governments/ politicians to solve their problems. Correspondingly activism has also increased.
So consumers are increasingly expecting that brands also take responsibility for society in a larger sense. Which means that businesses should have a larger stake than just profits, they should improve the economic and social conditions.

• Be True

However, when communicating with customers on this level, nothing is more important than authenticity and integrity. Claims by a brand should be not different from reality. If there is a dissonance, this will anger the consumer and it is not surprising that many consumers are rising against brands, which do not follow the path.

The authenticity will inspire support from customers who share the purpose. Stronger the purpose, the stronger will be a connection to customers. Simon Sinek said ‘people don't buy what you do, they buy why you do it.’ And when customers identify with the purpose, he/she is connecting on an emotional level and as I mentioned before, most customers are emotional in their decision making.
Some brands and their leaders are becoming more purpose-led by rediscovering and rearticulating their core values. More importantly, they are leading with action. Both Howard Schultz of Starbucks and Hamdi Ulukaya of Chobani have been outspoken advocates for refugees (much to the chagrin of Trump). Closer home, Tata Tea has talked about getting consumers to “Jaago (awaken) Re”! – act before it becomes too late.

• Don't Be Untrue

Other brands are taking notice of such transformations and the power of a cause to drive business.

It’s natural to expect that some of these are knee-jerk opportunism and elitist puffery. Uber, on one hand, talks about helping pet adoption but their sexist organizational culture has been detrimental. In fact, Lyft has increased market shares dramatically after the controversy has broken out.

And yet, they seem to be so much more—they are corporate attempts to create brand purpose and evolve it beyond love and esteem on the part of their customers. Well-aligned with purpose.
And therein lies the tension, and opportunity. Brands that want to be purposeful can become a purpose-led brand, but not without intention. An intention, without action, is cowardly.

Is Your All-star Team The Best Team?

In arguably one of the best sports films ever - "Miracle"; Herb Brooks (played by Kurt Russell) chose 26 players ignoring far more talented and star players. In a conversation with his staff -
“Herb Brooks: Take a look at this.
Craig Patrick: What's this?
Herb Brooks: 26 names. The tough part will be getting it down to 20 before the opening ceremonies.
Craig Patrick: This is the final roster? You're kidding me, right? This is our first day, Herb. We've got a week of this. What about the advisory staff? Aren't they supposed to have a say in this?
Herb Brooks: Not technically
Craig Patrick: You're missing some of the best players.
Herb Brooks: I'm not looking for the best players, Craig. I'm looking for the right ones.”

Just a couple of years after the release of Miracle, during the 2006 World Championships in basketball, the dream team of NBA stars and super successful coaches finished shockingly third losing even to Greece, who interestingly did not a single NBA star. The sports journalists had a field day. Quite obviously, the headlines were not palatable to the stars from the USA.

The failure of all-star teams is not just restricted to sports but to businesses too. There are enough examples of companies with stars but end up falling down and flopping for example - DeLorean Motors, Enron, Kodak and Polaroid some of the companies who had superstars but flopped miserably. 

These stars have been successful in earlier organizations and given their experience and success they should replicate their success but it is not necessary that they do. The reasons are multiple.

• Lack of mutual trust and respect for one another

The moment the word star is used it is assumed that these people come with huge egos and sense of self-aggrandizement. The reason for their bigger ego comes with the successes they have had.  But with the ego comes a lack of trust on others - whether the others can do the job given or simply because the individual concerned thinks that he/ she is better than the other. Either way, since trust and respect for others, is missing, reciprocation from the other side is also difficult. Without trust and respect for one another, the team lacks a foundation on which relationships and more importantly organizations are built on.
Building trust or respecting others is not difficult at all. Speak and act with maturity. Do not pull others down. Respect deadlines and stick to commitments. Very importantly do not be two faced.
Once trust is broken it is very difficult to bring it back.  Hence once trust and respect are developed between teammates, it is easier to reach the organizational goal. The focus of the team is not on individuals and their behaviors. 

• Wanting all the attention to be focused on themselves

Superstars also like to be the cynosure of all eyes.  And they would not like to share the limelight with anyone else. Grabbing this piece of the attention pie could cause a lot of friction.
Many superstars like to hog the limelight and tom-tom all the things they have done. When each individual was to do this at the cost of the other you can expect a team of bickering individuals who are selfish. The result will be expectedly miserable.
Everybody has a place in the organization and in the sun. Give credit where it is due.

• Improper complementary skills and chemistry

Just like Herb Brooks looked for the right players at the right positions, so too should be the requirement from an organizational perspective. When the right players are chosen, there is a balance in the team, which negates the negatives and provides a defense to weaknesses and also play to their strengths.  This criticality that should be addressed is that while the team may have a common goal, the path taken by each person may be different and hence not complement each other. When paths to reach the goal are divergent disaster usually strikes.
It is important to know each and every team member’s strengths, weaknesses etc. This will help understand the team better and complement each other. Team chemistry allows for trust and respect while all members continue to focus on accomplishing their individual and team goals
Lack of shared responsibility and accountability 

Holding each individual or star accountable is the least to be expected, this will lead to each star following a path that is individualistic and pandering to his/ her personal goal, which may not be the same as the organizational goal.  The sum of all individual goals does not add up to the organizational goal.
One of the biggest offenders is the phrase “It’s not my job.” Sitting in an ivory tower is not going to help matters.
The need is to hold each individual responsible for the other. Most functions are linked to each other and hence of one department do not meet its deadlines then other departments will need to chip in. For example, if there is a stock out in a retail store, then not only should the SCM team be responsible but also the marketing and operations team. Additionally, performance bonuses can be a joint one rather than department centric one.

• Poor communication

Talk when you have to. The tendency of stars is to sit in a cocoon and expect others to understand. Communicating internally is extremely important and studies have shown that ineffective communication is the root of most problems.
Eventually, it is the team, which needs to deliver, and not the individual alone. An organization does not deliver mutually exclusive goals rather a sum/ mix of all. At the end of the day, it is not about what individuals delivered but how a team has performed.
The task for stars is to take the “WE” approach. This leads to performance at optimum levels that are necessary for success. Focus on team success. Everyone loves to be a part of a successful venture. As the team begins to trust and respect each other, the process moves more smoothly.
A note of caution though, teamwork is about getting work done and it is not about getting along. If the stars can adapt to each other and get the work done, that should suffice.

Choosing the right people

But, how do you know if someone is “right”?
People make a business a success or a failure, hence getting the right people is important.  And from experience getting the right people is not easy. We have a tendency to get swayed by credentials and past successes.
The importance of properly identifying and selecting the right people is paramount. A commonly used term - Knowledge, Skills, and Ability (KSA) is used why creating job descriptions.  However while organizations can identify people based on JDs, they do not do a good job of assessing behaviors. There are multiple tools/ assessments to measure this and it is for the HR team to leverage this.

Came across a very interesting equation which stated that
Right People = Right Position + Right Time + Right Things + Right Way
In other words, you know you have the right people when they are in the right positions at the right time doing the right things in the right way.
Right position = person has the appropriate skills and knowledge necessary to correctly perform the duties of the position
Right time = the person is in the right position at the right point in his or her career
Right things= the person understands how to apply his or her skills in the most productive and efficient manner
Right way = the person is producing at the highest level possible in a manner consistent with the core values, beliefs and principles of the organization while achieving fulfilment

Recruiting through Data - How Big Data Helps Recruit the Right Talent

For most companies, people costs would be the single largest expense. No amount of automation or systems can remove the need for people in any organization – it can reduce but not remove completely.

Why does a person in a similar role outperform the others? Why are some people good team players and some individual contributors? How do organizations decide what makes good managers and further on good leaders? How well do organizations truly understand what drives performance? Why certain leaders thrive and others flame out? Can we accurately predict whether a candidate will really do well in our organization?

The answer to most of these questions is ‘don’t know’. Most recruitment, performance and rewards decisions are made qualitatively – through a combination of gut feel, personal experience, and corporate belief systems.

The time has come to reduce the subjectivity. This calls for scientifically designed systems and processes backed by information & knowledge. In today’s parlance, this information stems from Big Data. Data and talent analytics together helps organizations take informed decisions, minimizing qualitative evaluation and subjectivity.

The importance of big data has been all-pervasive touching all aspects of corporate functions and it is no different with human resources. Here are some reasons to why HR should adopt analytics:

• Better Recruitment Practices

A quick check with some of the HR managers revealed that many of them rely on gut feel when it came of hiring. While intuitiveness is good, it is more important to back it with data that a manager can use to avoid a bad hire. A survey from CareerBuilder found that 27% of employers believed a single bad hire could cost them as much as $50,000. Reduce the possibility of hiring the wrong person for the job, and you can save the company significant amounts of money in the long run.

• More and better insights

Talent analytics serves as a window into employees’ professional lives. By tracking, analyzing and sharing employee related data like employee demographics, employee satisfaction surveys, team assessments, and performance related data, HR gains more insights on employees. It is possible that by applying the insights obtained, employers can identify top performers, along with stragglers. Scientific remedial solutions like training, coaching, skill development etc. can be then suggested.

• Better retention levels

As we mentioned earlier, the cost of replacing a good employee is high. A significant advantage of using data is to understand what works within a workplace and what does not. Talent analytics can throw up information on why employees leave and why they stay. Apart from the tools mentioned before, and with the addition of data from employee engagements, exit interviews etc., HR can avoid attrition by taking informed decisions on the same.

• Relevant training/ coaching

Training programs are typically designed with a ‘one size fits all’ strategy. While we are not against this, not all training programs are relevant to all employees; programs have to be designed based on individual capabilities.

• Optimum utilization of funds

With talent analytics, not only is it possible to analyze employees profiles but it also helps measure the effectiveness of training programs. It can make sure that employers are making correct and effective investments. The intention in most cases is to optimize what the company spends on its people.

The bottom line: big data can help organizations gain more insights on existing talent to better retain and train their valuable resources.

(This was also published as an article in Impact - the Pearson Talentlens Newsletter)

When The Going Gets Tough, The Tough Gets Going - The Positives During The Bad Times

“ When the going gets tough, the tough gets going” was a chart busting song by Billy Ocean in the 80s. He would have never expected it to be relevant in tough economic conditions far removed from the romantic overtones of the song.  But I do admit the difficulties of romancing do infact display an indication of the hard times. However more relevant is a sports team. When everything is good, all blemishes are glossed over but when it hits a tough phase, that is when all problems are highlighted.

The old adage is only the fittest survive is fitting. During a downturn, the weak and feeble will fade away and the stronger ones will survive and live to fight another day.

Having said that there are some good points in the bad times. Everything is not gloomy and there are many bright spots. Organizations need to leverage that to furrow a successful path.

1. Human relationships are a clear indicator,  in the good times a successful person/ organization will have many friends/ partners but in bad times, fair weather friends/ partners will cease to partner or associate. This gives an indicator who will stay by the organisation.
2. Lesser Competition: Most industries look good in favourable economic conditions. When there is no shortage of capital, competition will mushroom. As there is tightening of the belt, the weak and frivolous competition will throw in the towel.  So the positive is you have lesser competition. On the other hand however, be prepared for organisations that are strong enough to rough it out.
3. Lesser access to funds: the sign of the tough times are when there are lesser funders/ financiers to bank roll investments. And the ones who are interested will be extra cautious. So chances of competition getting funded is lesser but so is the case with your organisation
4. Identify the weak links in your organization: since competition is less, now is the time to focus on the deficiencies/ gaps and bridge them. This is a chance to shore up your defences faster and better.
5. Present players are susceptible/ vulnerable too:  all players have chinks in their armour. So it will be to you to identify them and expose the weaknesses.
6. Lesser cost:  during the bad times when economic growth is stunted, businesses employ all means to get business and primarily by reducing costs or discounting their products. Simply put, things cost less. Your vendors charge less for their supplies, you can bargain for better credit terms etc. It is a great time to renegotiate a deal that will benefit you even after the downturn ends. Even employees are more keen on saving their jobs and hence demand less and the newer ones a lower salary. It is hence a great time to optimize your costs.
7. Higher employee retention and stability: During the boom, the employees have better bargaining power.  Attrition rates are high and at the drop of hat they leave for other pastures. There is also a huge cost of also training new employees and also need time to settle down. Since there is lesser churn in down times, the time can be used to plan and pursue long-term goals.
8. Good people are looking for work: In the boom times, let alone finding good people, getting just employees is tough. In a downturn, highly qualified, talented and effective individuals can be found much more easily. A great time to pick and choose. And more importantly to build a strong team
9. Optimum team & organisation – A mix of the good older and new employees will form the basis of an organisation which is fit and fine to fight it out take the organisation to the future – a lean fighting machine (it does not have to mean!)
10. An organisation which negotiates
    
    
    the bad time is geared for the future: bad times don't last and hence the processes, systems and people which the organisation has should help the organisation even better when the curve moves north. For example in most cases there is a fair amount of belt tightening and this should  stand the organisation in good stead when things improve
11. More focus on long term goals: for some strange reason, during the boom the focus is very short term in fact month to month. Given the fact that there is lesser competition, good team, and other reasons it gives the organisation time to think long term and take steps to reach those goals.

Bad times don't last and hence a efficient, smart and dynamic organization will be the stepping stone to success.

Hype ? - about Hyperlocal Grocery

At around $350 billion, India is in the top grocery markets of the world.  This is approximately 70% of the Indian retail business which is around $500 billion. Modern retail accounts for 10 - 20% of this pie.  E-commerce or hyperlocals are obviously a tiny part of the pie just yet. Most companies, therefore, are still at a stage where they have to prove their business models and change consumer behaviour. These type of businesses are expected to reach around 2% of the grocery market by 2020, creating a potential market size of around $10 billion (Rs 60,000 crore).


The hyperlocal on demand grocery has mainly two models -
a) A large player like Big Basket offering localised services. Inventory is carried by the company.
b) An aggregator using the local retailers to source products and handling the delivery
c) An aggregator using local retailers to stock and deliver

It is a no-brainer that an aggregation model, as it is asset-light, is less capital-intensive than the inventory-led one. But having said that, there are merits and demerits in all models

Offline Grocery Stores
1) Offline grocery stores are still the preferred choice for customers with the touch & feel and human interaction.
2) These stores can deliver the products quickly and at times even I have experienced gratification in half an hour. This is far faster than the online grocer
3) Further more due to the physical presence of a retailer, there is a certain amount of trust.

Online Grocery Stores
1) Stocking of a large number of skus is difficult. A local mom and pop store can carry perhaps 2000 skus which is difficult to satisfy the needs of all customers in a particular area.
2) With increasing rental costs, offline grocery stores are becoming difficult to manage.
3) Many customers are also familiar with the regular products they buy and hence will not have any hesitancy in buying online negating the impact of touch and feel to a large extent.

The Issues with Hyperlocal

1) Effective Margins - Having said that product based models earn 2-20% margins depending on the category. And there in lies the problem. The selling point for e-grocery is that it offers more convenience than the neighbourhood store; but to be sustainable they have to do this cost-effectively. And that is not the easiest job to pull off.

2) Managing Inventory and delivery - Normally e-commerce works with a delivery promise of a certain number of days however  with grocery it has to be within a few hours if not immediate. Indians like to be serviced so they need the product to be delivered to their door step. (Internationally, pick-up-point-based delivery models are popular). The key reason is that customers order groceries online to avoid the hassle of going to the store, and a pick-up will undermine the convenience factor.  So a fresh delivery infrastructure has to be created which is different from the existing e-commerce one.

3) Typically people go to the supermarket for their monthly purchase and then do tops ups from the local mom and pop stores on when it is required basis. And the local kirana is just a call away. 
4) Additionally there is a monthly credit and 
5) Delivery is done within an hour.  
6) The lack of 'touch and feel' in the case of online perishables  are pre-packed,
7) Moreover there is always "I can return it" if I don't like it.
8) Scaling up - One of the key issues with online hyperlocal grocery is that it is a locality-specific operation. Every time you add a new locality it is similar to launching the business afresh. This makes grocery a more difficult and challenging business to multiply

Arguably and for good reason margins can be improved. For example:
a) Offer premium products like imported products
b) Increase the basket size
c) Smart sourcing
d) Increase perishables but then again stocking is a big issue.
e) Open offline depots like Grofers

Even with all the pluses I am not convinced whether all hyperlocal  operations are viable.

The basic issues are:

1) Can they generate more revenue per order from customer than the cost of delivering one order? From personal experience it seems these hyperlocal grocers are incurring huge costs in delivering an order as compared to the revenues being generated by an order making it unviable. Even at Rs 20 delivery cost per order that means in a Rs 200 order it is 10%.  There is a certain ceiling on how more the delivery team can be efficient. 

2) Unlike other businesses customers want their orders delivered in half an hour but given the economies of (small) scale it is not possible.

3) Companies like Grofers are opening localised warehouses. Whilst margins will increase, there is a limitation on goods which can be stocked, costs like rentals, manpower etc. will add up significantly

My suggestion

I am inclined to go with an Aaramshop who follow a hybrid, asset-light  aggregator business model. It fulfils orders with a retailer closest to the customer, who will deliver at the consumer's doorstep within a couple of hours of placing an order. This way the cost of delivery is with the retailer. For a small transaction fee (around 0.2%) plus value adds of inventory management, integrated sourcing, analytics, promotional revenue etc.

For high transaction stores I would even partially reimburse the costs of the delivery boys thereby tying in the retailer to the platform. 

Food Gone Good - Food (Delivery) will Work

The 'hot' business till a year ago is seemingly ' hot to handle' now. There is a pervading sense of fear exacerbated by the closure some famous start ups in food delivery business. However, the naysayers will not question the potential in food delivery-

1. The organised food business in India is worth $48 billion, or Rs 3 lakh crore, of which food delivery is valued at $15 billion (Rs 94,755 crore).
2. In developed nations, takeaway and home delivery contributes to about 35% of the food business. In India only about 10% of the orders are for takeaway and home delivery. Furthermore, 80% of the orders are made through phone calls.  Eateries like Dominos, Pizza Hut etc. alone get 50-60% of their sales through eCommerce.

 At last count there were around 120 start ups in this space, all jostling for the same customer in the same areas.  Given the low entry barriers and healthy wallets of investors start ups have mushroomed. That is reason enough to have these all players playing with their back to the wall.

Having said that, there ‘seems’ to be some insurmountable flaws that are causing such businesses to fail. On closer scrutiny here are some flaws, which I have identified:

• Definition of the Business

The very nomenclature of the business by the various brands is perhaps the biggest stumbling block. Most businesses today have a kitchen (made to their requirements) that prepares food. And by that investment it is not merely a delivery business but a food & logistics business (pretty much like a airline catering business). The task is then to sweat the real estate and not look at just delivery since obviously the size of the delivery market is not large enough.  

Some points which these start ups need to ponder are:

1. Am I able to serve food in other parts of the day - breakfast, morning/ pre lunch snacks, evening snacks etc.? 
2. Can I get corporate/ B2B bulk deals?
3. Can I serve this food to canteens or other restaurants?

These are not a comprehensive list of questions but some pointers, which indicate that these businesses are not in just food delivery alone but food as a whole.

This model has been proven by QSRs largely which have been in this business for many many years. This is perhaps a key learning for new food delivery brands that tend to narrow their focus on delivery alone.  The QSRs have dine in and delivery which caters to the customer either in our outside of their outlet.

• The Logistics Angle

I have sampled food from various food delivery companies and there is a blatant misuse of delivery boys. More often than not (and in peak time) one delivery boy will travel 4 kms just to deliver one order. This shows that there is very little effort put into managing deliveries. If the same delivery boy were to deliver just one more order then the costs of delivery alone would come down by half. This is not to say that there cannot be single deliveries but proper route mapping and planning needs to be done.

A related example can be when a high loader from an airline catering company depending on the time and load may actually service between 1 and 4 air crafts thereby optimising costs and efficiencies.

An alternative would be to outsource deliveries to specialized delivery companies - no costs of manpower and only incremental costs.  I would personally recommend a mix of both.

Sceptics may mention that the location can be anywhere within a 5 km radius. Look at airline catering companies, they have to reach the food within the same distance too. And yes! An hour after preparation is a long time to deliver. Food needs to go hot and reach the customer hot!

• Food Quality

I have heard that one of the biggest problems of the food delivery brands has been consistency of food quality. I have heard employees tell me that it is really difficult to maintain consistency. Frankly this is a feeble excuse for the lack of systems and processes. 

Some of the biggest issues which these start ups are not doing are

1. Non - standardization of recipes
2. Lack of detailed SOPS. And if there are, then poor adherence to them. 
3. No menu sampling of food amongst the kitchen staff prior to introduction
4. Non-availability of key ingredients due to improper planning

This is contrary to how a food business should be run.

• Recruitment

Such a cliche but alas it is true. Getting the right people for this business is absolutely necessary.  I happened to see some recruitment listing that looked for professionals from premier schools to manage their kitchens. While the role is interesting, I do sense fatigue setting in very soon. There is nothing glamorous about this job infact a lot of dirty work. (Been there!).

The Larger Opportunity

• Surplus capacities of existing eateries.

Unfortunately most food delivery companies are competing with existing restaurants/ eateries. The biggest advantage has been low entry barriers, which in turn has also been the biggest disadvantage. They are creating a business that rivals the existing businesses.  There are huge surplus capacities in most popular cuisines namely Indian, Chinese and Continental. To top this, walk ins are reducing over week day lunches and to a smaller extent for dinner.

• Opportunities

1. Marketplace

There are large players already like Swiggy and Tiny Owl that serve this segment wherein the players list eateries and then facilitate the ordering and delivery.

2. Curated  Standardized Marketplace

The market place model has some demerits, the quality from many restaurants have been questionable.  In this model, the standards like recipes, hygiene, menu, packaging etc. are decided by the aggregator, who in turn will facilitate the ordering and delivery. There is perhaps only one company with this model - Cookaroo

While I am a strong believer in both these models,  I am inclined to explore more of the second model. Here the aggregator will have a lot more control without capital investments and lesser manpower costs.

Parting Shot

Lack of understanding, lack of processes and a myopic view can never be answers for writing off a business. Coupled with this is the same model being followed by multiple players especially since the entry barriers are low. There will be shakeout and consolidation. And it has already started! But don't write the business off.