KARACHI: foodpanda plans to integrate with Pakistan’s instant payment system ‘Raast’ to expand its food and grocery delivery network across the country, leveraging the growing use of digital payments, CEO Muntaqa Peracha says.
Raast is a major driver of growth in digital transactions, enhancing accessibility, efficiency and security of transactions in Pakistan. According to figures from the State Bank of Pakistan (SBP), during the third quarter of the last fiscal year, Raast processed 140 million transactions totalling Rs3,437 billion, showing a notable increase from the previous quarter.
The SBP expects further growth momentum, especially with the launch of person-to-merchant (P2M) payment services, which enable physical and online merchants to accept payments through various modes including unified quick response codes, Raast aliases (such as mobile phones), bank accounts and request to pay. “We are currently working on integrating with Raast and collaborating directly with the SBP for this purpose. The central bank and its key partner, Bill and Malinda Gates Foundation, have held workshops with us and other stakeholders to discuss the integration objectives and design. They are also reaching out to all e-commerce players to determine the next steps for P2M,” Peracha said in an interview with The News.
The CEO believes that this integration will help connect new consumer segments with the company’s extensive merchant base, making the payment experience easier for all. The integration with Raast is expected to be completed by next year, allowing customers to make payments through Raast without any added costs. foodpanda operates in 35 plus cities across Pakistan, serving numerous users, riders, customers, and merchants. During the pandemic, the food delivery industry benefited greatly, but this trend decreased as consumers began reducing their spending due to rising inflation. As a result, meal delivery companies sought to attract more customers while also satisfying their investors’ profit expectations.
“I wouldn’t say there was a food delivery sector boom during the pandemic; rather, there was an increase in the adoption of digital financial services,” he says.
Generally, anything related to digital apps saw a rise because everyone was at home and couldn’t go out. Whether they needed essential items or some form of entertainment, it was all accessed through online apps, he adds.
“The government was kind enough to allow us to operate and acknowledge us as a critical service provider for times when people couldn’t go out, whether it was for pharmacy, grocery or food shopping.”
“I would say that we jumped ahead by 1-2 years during Covid. What we expected to achieve in two years, we accomplished within months,” he says.
He claimed that since the summer of 2022, things had gotten a little dire. Nobody knew when things would get worse -- whether it was inflation increasing or foreign exchange reserves depleting -- because the situation had not been stable.
“This affected people’s pockets and we saw a bit of rightsizing, where people started to rationalize their spending,” he says. “This resulted in a slight flattening of growth, which had previously been steep. However, we never saw a decline.”
He states that as the country’s economy begins to show signs of recovery, the situation has now stabilized. Interest rates have fallen during the last few months, and inflation has dropped to single digits for the first time in several years. The adoption of digital payments has benefited from this. It does not, however, imply that economic considerations are the only ones at play.
Peracha thinks that over the last three to four months, there has been a remarkable improvement in experience on foodpanda’s platform, which is reflected in customer service metrics, with the net promoter scores hitting extremely high levels. It is back to being consistent. Item frequency has increased, and people who previously placed one item are now placing many orders. Thus, the growth narrative is still continuing.
Connecting people, food, and technology
Food delivery is the primary business of foodpanda. Traditional restaurants and home chefs are the two key components of this. Traditional restaurants are the ones everyone is familiar with and can easily access. Homechefs, on the other hand, are individuals who cook from home and have the option to sign up with the company. These home chefs include both men and women, with about 70 percent being women.
It expanded into the delivery of groceries, using two different business models. The first is through its own dark warehouses, known as pandamarts, located in commercial areas. At present, there are about 35 of these locations in Hyderabad, Islamabad, Lahore, and Karachi, each having 6,000-8,000 stock-keeping units. The second model involves existing shops, where customers order from physical stores like pharmacies, grocery shops, and fruit vendors through the app.
Another vertical offer is ‘pickup’, which is essentially pre-ordering food for takeaway. Customers can place an order via the app and pick it up on their way home or to work, allowing them to skip lines and pay online for added convenience. foodpanda also has ‘dark kitchens’, which provide restaurants with a cost-effective way to expand into new areas. Instead of investing millions to open a new outlet, restaurants can use the company’s facilities to operate a delivery-only business, with it providing the infrastructure.
It introduced ‘Panda Go’, which has two key functions. First, it allows businesses to fulfil e-commerce orders by leveraging its delivery network, reducing wait times from days to just an hour. Second, it offers person-to-person parcel deliveries, where a rider can pick up an item from one location and deliver it to another within 30 minutes.
Food and grocery delivery sector has enormous growth potential
Looking towards the future, there is still immense growth potential in the food and grocery delivery sectors in Pakistan, Peracha says.
“We’re serving about 40 per cent of the country’s population, but we’ve only scratched the surface. The market remains largely untapped, with plenty of room for expansion,” he says.
“Our focus is on providing affordable options so that people new to digital products don’t feel they have to pay significantly more.”
“We’ve already captured key tier-one cities, but we haven’t fully penetrated second-tier cities yet. However, we are there because the demand exists. Our goal is to eventually reach 100 cities across Pakistan,” he says and adds whether we achieve this in one year or several will depend on a variety of factors, including the economy and smartphone accessibility.
Fortunately, Pakistan has a strong foundation for a digital economy, according to Peracha.
The penetration of smartphones and 4G is excellent, thanks to efforts by telecom companies, smartphone manufacturers, and the government. Banking services are also increasingly accessible, which has laid the groundwork for us to grow. The infrastructure is in place, and we are well-positioned to continue expanding our services throughout the country.
“Our target market is primarily the youth, ranging from 16 -18-year-olds to mid-career professionals,” he says. This demographic is ideal for us because they value convenience and urgency, and they simply don’t have the time to handle tasks like cooking or grocery shopping. The real challenge is driving new customers to place their first order. This is where the company is investing -- both in marketing and in converting people from offline to online platforms.
Helping expand financial inclusion and creating an inclusive digital economy
foodpanda is contributing to the shift from cash to the digital economy in a significant way. Interestingly, many of its riders no longer deal in cash -- they make payments on the go using digital platforms. This shows the trust they have developed in the system, understanding that it’s convenient and secure.
All the businesses the company partners with, whether restaurants or shops are part of this formal, documented system. Many of them, especially in smaller cities, didn’t even have bank accounts when they first started working, so foodpanda helped them open accounts, linking them with banks, both conventional and Islamic, so that they could transition into the formal economy.
Its riders, too, are a part of this financial inclusion. Most of them have mobile wallet accounts like Easypaisa, JazzCash, or HBL Konnect. Every one of our riders has at least one mobile wallet, and it has onboarded over 200,000 riders in the last six to seven years.
This has been especially empowering for women home chefs, many of whom had never opened a bank account before. Through us, they can now show a source of income, gain access to finance, and become financially independent.
“Our digital economy and e-commerce operations now account for approximately 50 percent of our gross merchandise volume, with nearly half of our transactions conducted online,” says Peracha.
According to him, no other company in Pakistan can claim this level of contribution to the digital economy. Although it might not be the first name that comes to mind when people think of financial inclusion, its impact over the past four years has been profound.
“We are seeking more partnerships where riders are required to upgrade their bikes or phones, which serves as a source of income. Additionally, we have partnerships with companies that provide our vendors and restaurant partners with access to working capital, thereby assisting small businesses,” he says.
Peracha mentioned that over the past four to five years, a few companies have entered the market in Pakistan, but none have survived on the food delivery side. Our industry involves three stakeholders: the customer, the rider, and the vendor. It’s necessary to achieve a certain scale before significant growth can occur.
“We have small delivery service players, some of which operate regionally and others within a city. In the grocery sector, there is more competition, with one major player, Krave Mart, and others like Deal Cart,” he notes.
As for the food delivery side, it’s hard to gauge the level of competition, as every restaurant handles its own deliveries. “Therefore, we don’t consider ourselves to be in direct competition with them since they are our partners.”