Supply: One of the most important factor of a successful market

While Swiggy and Zomato have taken this deal as a call to arms, Uber is stunned.

The company has been running on autopilot for a while and this has not shaken the company into action yet. Employees within the company say that there is not a lot happening at the US-based ride-hailing company as Dara Khosrowshahi, Uber’s new CEO is still trying to deal with the mess at the company.

What is the scope of competing?

Immediately, Foodpanda will not compete with UberEats in any market except Delhi-NCR. It is the only major city, out of the seven it is present, where it has a strong presence. In other cities, like Mumbai and Bengaluru, UberEats will be rendered irrelevant unless it snaps out of its stupor.

If you talk to Ola, the answer to why they got into this is simple. Food delivery is a huge market. There is a lot of money to be made here. According to the Kotak Institutional Equities, the food delivery/takeaway market is set to grow to $29 billion by 2021 with the number of orders going up to 51 million a month. There is a humungous room to grow.

“For Ola, the synergy works perfectly. It has the tech to determine where the restaurants are and the best route it can take to deliver,” says Siddhartha Pahwa, former CEO, Meru Cabs.

But there is a little more to this. Funnily enough, Ola has been dropping clues on this as well. The supply for Ola has stagnated.

Recently, Shalabh Seth, Ola Fleet’s CEO resigned. The former SAB-Miller managing director had been hired in January to boost its fleet size through leasing. “But the drivers don’t stick around. Every few months the number of drivers keeps dropping,” adds the Ola executive. Seth, the executive explains, just didn’t think the demands from Ola were realistic and he quit.

The cab business has been built on a simple model, if there is supply, there will be demand. And right now, as the supply in its cabs stagnates, the daily rides haven’t gone up too much either. And to remedy that Ola has been trying really hard to increase its volume and one of the tricks it has used is getting autos onboard.

Moving to the international markets

“Autos are getting great numbers but it is an Rs 15 game. But investors like the numbers Ola Auto shows in tier 2 cities,” says an Ola executive, who asked not to be identified as he is not allowed to speak to the press. The company is even going to international markets such as Bangladesh and Sri Lanka to increase its volume. And the pressure on Ola is increasing.

Getting into food tech is also a backdoor to relaunching its bike taxi business. The company had experimented with it before but various state governments had outlawed bike taxis and Ola had to shut it down. “I think they will try again.

Once they have the neighborhoods all marked up, Ola will talk to the government again to restart this service,” says a former Ola executive, who is still privy to the inner machinations at Ola. He says that the bike taxis will be its next business vertical and it will further push the ride numbers higher.

“There is also valuation pressure on Ola. It has raised a lot of money and now, along with profitability, it needs to show volume,” says the senior executive from a rival quoted above.

To justify its valuation, the company needs to expand its use cases. It means getting into parallel verticals slightly detached from its core even if it has to burn a few hundred million dollars getting there.