Challenges for SCB’s Robinhood
By: Chayanin Jakranukul
Tags: Startup, Thailand, Food Delivery Business

“I often see early-stage marketplace founders, during the idea picking stage, focusing too much on the needs of the supply side. Suppliers in [industry] need better monetization, more data, lower fees, etc, which is why we’re creating a marketplace that helps them with this!. Instead, great marketplaces started with acute, widespread demand problems. They honed in on user needs that already existed — for affordable places to stay and convenient transportation — that were poorly or insufficiently met, and leveraged underutilized supply to fulfill the latent, excess demand” — Li Jin, Partner at Andreessen Horowitz

Pic ref : https://www.thumbsup.in.th/food-delivery-grab-lineman-foodpanda-get

1.Owning demand

Robinhood aim to solve supply’s problems, too high commission rate, additional cost, long payment cycle, you name it. However, the question remains what’s the most important thing for supply to be active on a marketplace or platform? The answer is Incremental orders or sales (additional demand). You can solve thousands of problems for supply but feeding an incredible amount of demand is not one of them. You are going nowhere. Imagine Grab offer 0% commission but few users request rides. Over time, drivers will churn and leave the platform. Supplies mostly are economically motivated. They will beat a path to meet demand.

Do Robinhood own the demand (competitive advantage) or have a demand generation strategy. The answer to the former is they DON’T

Goldman Sachs analyst Rod Hall reckons Google pay $9B to Apple to remain iOS’ default search engine — an amount that could go up to $12B (source). By comparison, Microsoft’s search engine Bing generated $7B in revenue in 2017. So Apple’s “search engine business” is 28% larger than Microsoft’s — all while, you know, having no actual search engine. Apply own the demand, Safari

In short, if somebody successfully inserts themselves between you and your customer, they can exercise tremendous control over you, including taking a big chunk of your profits or outright killing you. Do SCB ? No

The answer to the latter is I’m not too sure that they are willing to invest. I’m not talking about how-to-win strategy in the food delivery business. I’m talking about SCB’s strategic purpose to serve as a scalable distribution channel for SCB’s payment and financing products. They need to come up with distinctive distribution strategies to gain massive usages.

“Poor distribution — not product — is the number one cause of failure. If you can get even a single distribution channel to work, you have great business. If you try for several but don’t nail one, you’re finished,” Thiel writes.

Ref : https://www.straitstimes.com/lifestyle/food/7k-a-month-as-a-food-delivery-rider

2. Classic problem remains unsolved sustainably

2.1 Delivery time

Supposedly SCB inject a large sum of money to generate a substantial amount of demand, they are onto the next problem, delivery time. SCB partner up with Skootar to serve consumers. A problem is solved? Not at all

Picture that a consumer finds an interesting restaurant and places an order. Estimated delivery time is like 45 mins or more than market leader’s. People drop off and order on another application

Time to deliver is an important metrics for food delivery business. Grab spend substantial time improving the metrics over time since they know that the increase in the number of drivers makes faster pickup that drives more demand. It’s a growth loop.

Speaking of more drivers, I’m pretty sure that the number of drivers on Grab, Get or Foodpanda are way more than those on Skootar. Simple reasons : more demand.

To be in more detail, more drivers are not literally correct. It should be more ACTIVE drivers. Acquiring a driver can be easy. Keeping them on a platform over time is much harder. Any re-engagement or re-activation strategy, Robinhood? Skootar?

Ref pic : https://andrewchen.co/ubers-virtuous-cycle-5-important-reads-about-uber/

2.2 Delivery fare

Biggest bottleneck in ecommerce and food delivery businesses

“People hate paying for shipping. They despise it. It may sound banal, even self-evident, but understanding that was, I’m convinced, so critical to much of how we unlocked growth at Amazon over the years.

People don’t just hate paying for shipping, they hate it to literally an irrational degree. We know this because our first attempt to address this was to show, in the shopping cart and checkout process, that even after paying shipping, customers were saving money over driving to their local bookstore to buy a book because, at the time, most Amazon customers did not have to pay sales tax. That wasn’t even factoring in the cost of getting to the store, the depreciation costs on the car, and the value of their time.

People didn’t care about this rational math. People, in general, are terrible at valuing their time, perhaps because for most people monetary compensation for one’s time is so detached from the event of spending one’s time. Most time we spend isn’t like deliberate practice, with immediate feedback” — Eugene Wei, former product manager at Amazon

Delivery fare impacts demand. Lowering the fee increases the user’s adoption and purchase frequency. It helps flush out the invisible asymptote. Amazon identified the shipping fee as invisible asymptote. Where their growth would flatten if they did not change their path was, in large part, due to this single factor. Subsidizing it as promotional purpose is a temporary solution and the players claim it as long-term use-case-creation(create new behaviour) strategy. Unprofitable for now. Hope to be profitable when they manage to fend off competitors. Schibsted, which has a global portfolio of online classified marketplaces, found that across their portfolio, the profitability of one of their marketplaces came from how much bigger the #1 was vs the #2.

In other words, dominance in a market, not aggregate GMV across many markets, is the goal of any marketplace and ultimately what determines equity value.

Ref : https://www.straitstimes.com/lifestyle/food/7k-a-month-as-a-food-delivery-rider

SCB may have the best group of engineers in Thailand to produce the best UX but for food delivery business, there is offline experience (delivery time and delivery fee) that makes or breaks the business.

3. Liquidity

“Chicken-and-egg” becomes “Supply, demand, supply, supply, supply.” Translation: identify a user problem, then bootstrap enough supply to make the marketplace valuable to initial users. Once there’s product/market fit, focus on scaling the supply side to meet all the demand. — Li Jin, Partner at Andreessen Horowitz

The food delivery business is a three-sided marketplace. Solved a demand problem already? Onto the next one : Marketplace liquidity

Liquidity is the lifeblood of marketplaces. It is the efficiency with which a marketplace matches buyers and sellers on its platform.

Fill rate is the most important metric to measure marketplace liquidity once you nail the demand part. This metric is simply measured as the percentage of searches or requests that result in completed transactions.

SCB claim that they are competing with no one but it’s unavoidable that they need to win over driver’s time on their platform to build liquidity(match every demand). SCB and Skootar do compete with Grab, Lalamove, Line man, Foodpanda and Get (not just food delivery players).

To win driver’s time means two dimensions 1. They can earn more per job 2. More number of jobs in total. It’s a fierce competition. How do big players solve the problem?

Incentivizing drivers to be on a platform and dynamic pricing are common tactics. However, a big player like Grab have more advantages because they have multiple services which mean they create more use cases for drivers. Classic supply problem. Drivers are like restaurants. They are financially motivated, they stay for money they earn in total and money generated per trip. Great platform makes sure of that.

Are Skootar up to the challenge?

Even though SCB may have lots of restaurants on the platform but with too long delivery time and pricey delivery fare, this doesn’t matter at all. Given not owning demand too. In the long run, restaurants will not be active on the platform and it affects new restaurant’s acquisition because of poor word-of-mouth. SCB will learn the hard way facing the challenges to build Robinhood as an effective distribution channel. There is a lot of factors to become successful. Of course, it’s not just “build it and it will come”. SCB can learn from China. Alipay and Wechat Pay play a long game in product distribution. Great read, https://ecommerceiq.asia/alibaba-southeast-asia/

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