Currently, the Vietnam food delivery market is dominated by two giants, which are Now Delivery and GrabFood. Any other business is sharing a small market share that warmed the competition level across Vietnam.

However, in the past, there was an app, which had nearly won the competition for leading positions, named Foodpanda. But it suddenly failed due to financial difficulties.

In 2020, the old legend has begun to return with a strong ambition and well-preparation. Unfortunately, it is not a piece of cake for Foodpanda in a location where all the rule has seemingly been settled.

Generally, Foodpanda was initially an online food ordering system owned by Delivery Hero, a German company. Foodpanda first entered Vietnam in 2012; its services rapidly expanded its presence to the five largest cities in the country.

In 2017, it suddenly shut down all activities and closed its brands in Vietnam. According to Foodpanda, at that time, the company had a focus on the market, which had been already profitable.

Although Vietnam was a remarkably potential market due to enormous purchasing power and massive population, it required a large investment that FoodPanda could not afford.

Also Read: Setting new rules for the food delivery industry in a post-pandemic world

After three years of absence, Delivery Hero decided to come back to the Asia market through an M&A transaction with Baemin, which is a leading delivery service in South Korea.

In 2019, it restarted business activities again in Vietnam by launching Baemin, serving citizens with food delivery services. Until now, one year after revising, Foodpanda or Baemin is still struggling with doing their business. So, what are the reasons?

Aggressive war in the food delivery market

Vietnam food delivery market is expected to worth roundly US$300 million at the end of 2020, with over 9.5 million users shared between five key players, which are GrabFood, Now, GoFood, Loship, and Baemin.

Many experts proposed that promotions and innovative menus tend to be the core competitive advantages, deciding the winner in the market.

Now had been leveraging the attractiveness of the Foody platform, which is one of the most popular food ordering platforms. In which, Now has rapidly attracted a large group of loyal customers to its delivery services.

Besides, GrabFood promoted a strategy called “unique food” that connect with local restaurants to provide exclusive dishes. With abundant resources of shippers and food providers, GrabFood tends to catch up Now’s position in the race of delivery.

On the other hand, Baemin introduced its promotion for new customers with 70 per cent off first orders. Also, it provided an attractive remuneration policy to shippers with the purpose of expanding the community of vendors.

With the massive investment, all players confessed that they are getting stuck with challenges coming from customer behaviour.

Struggling with infrastructure

Back to Baemin, its background was from the fried chicken delivery in Korea from 1950. For over 70 years, Korean customers have been educated to be acquainted with food delivery as the norm for consuming restaurants’ food.

Most food stores in this country have attached with online food ordering and at least one shipping service. In fact, roughly 70 per cent of Koreans have already used food delivery.

On the contrary, Vietnamese consumers have experienced this service for roughly eight years, which came up with a lack of online payment transactions. At present, e-banking, e-wallet, or other e-payment methods are seemingly at the initial stages that are only popular with people living in big cities.

Accordingly, cash-on-delivery (COD) refers to the most common payment method currently in Vietnam. In which the habit of using cash payment in the daily orders of most Vietnamese has deterred the growth of delivery apps, especially Baemin.

Also Read: Understanding the economics of food delivery platforms

Additionally, Vietnamese people tend to prefer eating in restaurants as a kind of relaxation and tasting hot foods that also challenge delivery services. This behaviour is due to several dishes commonly using with broth, which are believed to be less tasty when takeaway.

However, with the outbreak of COVID-19 and social distancing, there was a sign of switch in customer behavior in favour of food delivery.

Massive capital requirements

In the past, the main reason that forced Foodpanda to leave Vietnam was lack of financial capacity in the context of economic crisis. With returning plan, Baemin was backed by Delivery Hero so it decided to start burning money in exchange for new customers.

A recent investigation revealed that only 15 per cent of respondents use Baemin, while the number using Grab and Now were 79 per cent and 56 per cent, respectively. Accordingly, Beamin needs to invest more money to attract users.

In fact, the loyalty of Vietnam users to delivery services was estimated at the lowest group among several Asia and EU markets. It means, to retain users, food delivery apps need constantly to implement discounts and promotions. Whereby those activities do require massive investment.

Apart from Baemin, its competitors Grab and Now also pumped new capital to win the market share. Grab announced it will invest more than US$500 million in Vietnam until 2024.

Meanwhile, GoFood has fundraised US$1 billion to its business, which could invest in its delivery business. Although Delivery Hero paid US$4 billion to own Baemin, it still experienced difficulty in using capitals to defeat competitors.

Final words: the food delivery culture in Vietnam came after Korea several decades that Foodpanda is struggling with localising its services to fit with Vietnam users. Besides the expansions of competitors, it also gets stuck with challenges from the purchasing habit of Vietnamese. So, is there any space for Foodpanda or Baemin to grow?

The answer is yes. After all, the core values of food delivery mobile apps are technology and services. Once its leaders use the investment properly to deliver outstanding services and catch up with technology innovation, Baemin can conquest any of the obstinate markets.

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