The point of tech is automation, and the point of automation is to keep costs, like headcount, low. So why did foodpanda Vietnam, a tech company founded by Rocket Internet, reportedly have to lay off 100 people when it closed last week?
People inside the company say that it was always too big to succeed.
Not about relationships but about head count
Since food ordering is a relationship-based business; some accounts took over a dozen meetings to secure, according to former salespeople. And successful deals with international chains offered foodpanda opportunities well beyond Vietnam.
The company knew this and moved. foodpanda Vietnam locked down the big names first: KFC, Burger King, Pizza Hut, etc. Rocket Internet drove the team to get over a thousand restaurants signed, and the members pounded the pavement till they got there. The sales team managed to negotiate favourable contracts with restaurants, taking higher cuts from every order in exchange for prime-site placement.
“But then the site would change!” complained the former salespeople.
Every one of Rocket’s 50 foodpanda sites was the same: designed in Europe and difficult to customise. Communication usually went one way in the company, if that.
“One day we would just have a new product,” they said.
And problematic tech was common in the company. A glitchy app turned users off early on, and GRPS printers — the device that prints online orders at restaurants — were a constant source of stress.
Though they were told to sign as many restaurants as possible, Rocket often left the team underprepared to handle big accounts. It never had enough of these printers, which were either being rationed by Rocket across its 50+ teams around the world or were held up in customs.
“We needed them to automate our system, otherwise we’re just an order-processing company, and that’s how the head count gets high.”
The salespeople were getting frustrated just talking about it.
Chasing the wrong thing
They didn’t last very long, but another officer I spoke to stayed with the company to see a stream of managing directors with little operational experience and no connection to the country it was operating in. For all its claims of being a relationship-based business, most of the people who led foodpanda Vietnam had never even stepped foot in Vietnam before.
Rocket is unabashed regarding its churn rate and encourages a lot of cash burn and the same happened here.
Rumours put the foodpanda MD’s salary at around US$6,000, but with little equity. This situation was perfect for mercenaries, but not missionaries, and only fuelled the company’s leadership carousel, which invited a host of management inconsistencies and problems.
Chasing the fast growth Rocket’s Founders, the Samwer brothers, were promising their investors, foodpanda Vietnam eventually hired around 100 full-time employees, almost all of whom got laid off when the company shut down.
Labour in Vietnam is not expensive, but putting the cart before the horse is a lesson in common sense, not economics.
Also Read: Rocket Internet to shut down Lamido
Why it got acquired
Vietnammm allegedly cost less than a month’s of the foodpanda MD’s salary to build… and just bought the company.
Problems inherent in Rocket’s strategy are becoming more noticeable with every piece of bad news out of Berlin and even Vietnam just saw its own incubator model fail.
One has to wonder if foodpanda Vietnam getting shut down and sold isn’t a result of the parent company’s stock market woes, with investors growing more impatient and less confident with “the world’s largest Internet platform outside of the US and China.”
If the company was serious about making money, it could have done so with its nearly 1000 orders a day for the country’s biggest chains. But it followed the Rocket formula instead and refused to take baby steps before breaking into a sprint.
What remains to be seen for online food ordering in Vietnam is what Vietnammm inherited from foodpanda and how well it converts.
What remains to be seen for Rocket Internet in Vietnam is what this means for the incubator’s other ‘proven winners.’
The views expressed here are of the author’s, and e27 may not necessarily subscribe to them. e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested in sharing your point of view, please send us an email at writers[at]e27[dot]co