In this new normal, online food and grocery delivery has become common, and a safer and more convenient alternative to physically going to the store. This is the convenience that q-commerce platforms provide to consumers who are looking for services that can meet their daily needs in just a matter of minutes. And one of the names that truly stand out in this field is foodpanda, which has proven to be a game-changer during the pandemic.
Leading the company towards unprecedented growth – despite the challenges posed by COVID-19 – is their managing director, Daniel Marogy, who helped propel the company to expand even more and set its footprint as the leading quick commerce digital platform in the country.
Coming from the banking and investment industry, he moved to the tech and e-commerce space in 2015 which eventually led him to join foodpanda. With his years of experience, Dan is well versed with the ins and outs of the industry, which he shared in our interview. Sporting a look that was very far removed from his previous life in the investment sector, wearing jogger pants, a t-shirt, and sneakers, Dan very much looked the part as the MD of one of the fastest-growing tech companies in the country. But he definitely sounded the part too, as he shared his view on the growth of the digital economy, foodpanda’s business ecosystem, and his vision for the future of foodpanda in the food and digital space.
Before joining the tech & e-commerce space, you worked in investments, right? Can you walk us through that journey before joining foodpanda?
My background is primarily in asset management, with a focus on making investments in the consumer space, with a specialization in grocery. In the last investment role I had, I was managing an investment in 7-11 and eventually joined as an advisor to CEO Victor Paterno. The initial task was to architect a digital strategy for the business, which eventually led to the birth of the CLiQQ business, which I see as the “plumbing” upon which much of the Philippine digital ecosystem rides on. It’s a beautiful business; quiet, low-key, but immensely powerful in the role it plays in enabling digitization of the Philippines, acting as the physical bridge to the digital world, which in a market with underdeveloped infrastructure (primarily finance and logistics), has become something like a utility that virtually every digital player needs to interact with to perform daily operations. I’m hugely grateful to have had the privilege of working with an incredibly talented leadership team that included Philips Yu, Jason Ngo, Gary Lauriano and of course Victor Paterno.
At some point, you look for the next challenge. I felt hyperlocal businesses such as foodpanda weren’t so attractive in emerging markets such as the Philippines, because they require customers to pay a premium such as a delivery fee in exchange for convenience. This business model can work in markets where incomes and urbanization rates are high, but much harder in developing markets such as ours, where customers tend to be time rich (a product of underemployment) and cash poor (low-income levels). That said, the potential for an outstanding customer experience is there; who wouldn’t want quick, convenient deliveries? I became intrigued in how one might go about evolving the hyperlocal business model to suit emerging markets, which led to me joining foodpanda with the admittedly lofty ambition of figuring out how to take the quick commerce model from niche to mass market.
Although both companies are in the tech and e-commerce space, CLIQQ and foodpanda are quite different in terms of business models. What are the lessons that you have learned from both companies?
There is of course something to be said about moving and executing very quickly. For tech companies like foodpanda, speed has been the right way to go about things historically as capital has been cheap and abundant for perhaps the last 15 years or thereabouts. So move fast, learn and pivot has been the name of the game in the recent past. Again, that approach makes sense given all the cheap capital that has been available for well over a decade, since this is inherently an expensive way to go about things (partly explaining why most tech companies still don’t make any profits).
But with more established companies like 7-11, you need to be more strategic and deliberate in what you’re doing, since the investor base signed up for a traditional business with more predictable cash flows, so anything a bit left field such as positioning 7-11 as a key player in the tech ecosystem is understandably going to be met with plenty of skepticism! As a consequence, there is virtually no room for error, meaning business model, strategy, and capital efficiency must be the way to deliver value to customers. The flip side is focusing too much on strategy and too little on execution is unlikely to build anything valuable, especially in operationally complex businesses such as e-commerce, where you have to deal with the complexities of inventory management, deliveries, customer service, and the like.
The right approach would be to balance strategy and execution, knowing that one cannot succeed without the other, and this is probably the key takeaway I have from foodpanda and CLiQQ. Today, in a world where capital is becoming more expensive and investors are scrutinizing opportunities far more closely, this is more true than ever, and we are already seeing this globally with the sell-off in tech companies, especially those who do not have a clear path to sustainable profits.
What do you think were the challenges of digital adoption pre-pandemic in the country and how has it changed now given that digital adoption has improved?
There are three challenges for any tech company or platform that are usually present in any market where you’re starting to build a digital world: (1) change consumer habits, (2) educate the market and merchants, and (3) build trust in your platform. Even if the pandemic accelerated digital adoption in the Philippines, those three are still applicable and must be taken into account if you want to succeed in that area.
At the same time, we expect consumer behavior will continuously evolve. Right now, there’s been a trend for shorter and shorter delivery times to make the experience as seamless as possible and it will probably continue. However, I don’t believe it will become the only e-commerce model because there are so many different demands coming from the customer, and this will only increase with time. The future will see customers expecting more convenience, selection, and value across an ever-increasing number of channels. I don’t believe any one player can ever fulfill all the needs of all customers, so there is room for many different players specializing in different areas of the customer experience.
With q-commerce, it’s more of a narrow assortment being held as close to the customer so you can have a quick delivery. Whereas with the more established Amazon e-commerce model, you have a broader assortment where customers can shop for absolutely anything, but the trade-off is that the products may not be available in your country or near your area, so customers get a longer delivery time.
I think those two models will co-exist for both types of demands. If a customer wants something very niche, they will have to wait longer for the item to arrive. Essentially, the different models will fit the different profiles and serve different customer needs.
From your perspective, what should be the perfect balance between brick-and-mortar businesses and e-commerce services?
Brick-and-mortar businesses like malls and supermarkets are here to stay. They may need to be recalibrated and modernized but there will always be shoppers who enjoy going to malls so they can shop in-store with the full ‘touch-and-feel’ experience. I don’t think it will change anytime soon; but longer term I would expect physical stores to be more experiential, serve as points for pick up and returns, whereas product discovery and convenience may bias towards online.
In that case, digital will just be an additional channel rather than an altogether new channel that will eliminate others. I think that the click-and-collect model – where you see the intersection between online and offline channels because you order online and pay at the store – will get even bigger in the foreseeable future. At foodpanda, we’re now offering that through our dine-in and pick-up feature and we will increasingly develop products where the customer journey starts on the app but the experience is in a restaurant or store, rather than at home where we have focused in the past.
Understandably, there is a tendency for offline players to see online as a direct threat but this should not be the case. Stores and large warehouses/commissaries already exist in the offline world, and the incumbents are experts at operating these assets. At foodpanda, we are experts in technology and quick deliveries at scale. In my view it makes no sense to try to build what the other side has; it would be expensive, inefficient and involve a very painful learning curve. Each side should look to form close partnerships and leverage the other’s strengths; I expect to see more partnerships, alliances and joint investments between offline and online players.
foodpanda has a very wide and complex ecosystem – how do you ensure that each stakeholder is well taken care of (customers, partner riders, vendors) and why is it important that those three work well together?
A marketplace like foodpanda is interesting in the sense that for most businesses, you only have one customer and it’s the person who buys whatever you sell. In our business, we have three customers – the vendors, riders, and the hungry person who buys the food. And because we are a platform, our role is to bring all those sides together and to make sure we have a balance on all sides of the market.
If the customers are happy with your service, then the restaurants themselves will get many orders. This means they will have more interest in doing more business with the platform. And if the volume of orders is high, the riders will earn more. Since it’s more like a domino effect, you need to find an equilibrium within that ecosystem which I think is an extra challenge that we have that most other businesses don’t. If one side of the ecosystem is winning but another is losing, eventually things will fall apart. So balance is key; the vendor, rider and customer must each find value in the platform, and at the same time we need to deliver that sustainably which means finding a way to keep all sides engaged and happy whilst generating a profit. Without all of those things working in concert, the ecosystem will fail long-term.
We also have a fiduciary duty to the vendor that is quite unique; our rider delivers their product, so our merchant partners are effectively trusting us to act as the custodian of their brand. So we have to ensure that our delivery experience is up to the expectations of our vendor partners, and this of course becomes increasingly challenging at scale.
Given your business structure is quite complex, is it critical that you work hand-in-hand and closely with regulators and government agencies?
Since e-commerce is still relatively new in the Philippines, we want to work hand in hand with the government agencies to hear their perspective because we do recognize how delicate the industry is. If it goes unregulated, it might pose a more serious concern that can eventually affect the entire industry. At the same time, we also want to provide our perspective from the business and operator side.
On our end, we’ve been actively supporting policies and decisions by the government that work well for both us and our stakeholders. Hopefully, we can find that sweet spot that will be beneficial for all parties involved.
foodpanda has proven its leadership in the q-commerce space with all of its pioneering initiatives. What else should we look forward to?
We are obviously very passionate about food – not just the usual food from our customers’ favorite restaurants, but also our groceries and dine-in.
We want to make a leading contribution to the modernization and digitalization of the food space in the Philippines. We want to work within the broader food industry and with more communities to help move the industry into the digital age.
I am so excited about the many initiatives we are currently working on to help farmers bring their products closer to the market using technology and integrated logistics, and also finding ways to connect traditional businesses such as Sari-Sari stores to digital customers. Such initiatives are not usually associated with food delivery companies, but to reach the total population (not just affluent urban customers), we recognize the business model must develop to tailor for the unique needs of the local market. These needs will be very different to developed markets such as the US or UK, and for me that’s such an exciting challenge; how do we make our services available to everyone in the Philippines, wherever they are and whatever their income level.
In a market like the Philippines, the biggest and most attractive segment in the digital space is food where the vast majority of average consumer spending happens, far more proportionately than in developed markets. For foodpanda, we are dedicated to digitizing the food space in the Philippines and will be committing all our energies towards realizing that goal.
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