In a world where on-demand services are popping up left and right, a homegrown company called DeliverEat, which started up in Penang, has made waves in the Malaysian food delivery market.
Led by Leong Shir Mein and Tan Suan Sear, the team operates the food delivery startup that was established in 2012 and were the pioneers of food delivery services in Penang.
Since 2017, they have expanded out of Penang and into Kuala Lumpur, taking on the likes of FoodPanda, GrabFood and HonestBee.
In an interview with local startup-focused content creators 米雷牛 Millennials, DeliverEat’s founder Tan Suan Sear shares what the team looks at to expand into new markets.
“When we first started, we delivered food by partnering with different platforms. Then, we built our own platform for our customers to place orders,” said Suan Sear.
They now have their own system for restaurant partners to view orders and riders to check on orders, the whole end-to-end system is built by themselves.
During DeliverEat’s second year of operations in Penang, they realised that a lot of restaurants are looking beyond food delivery to customers.
Suan Sear said, “They requested for delivery of ingredients from their central kitchen to other outlets. So we thought other than providing services to our customers, we can provide services to our partners as well—a B2B service.”
Thus they created DeliverLah, which offers companies and customers non-food delivery options such as documents and parcels.
“Our key differentiator is same day delivery. Unlike other logistic companies which arrange for next day deliveries, we offer same day within 3 hours to deliver to customers.”
“Our business model will focus on the delivery service. At the end of the day, it will still be a delivery service, just that we are not only providing food delivery but [also] non-food delivery. Our core will still be food delivery,” Suan Sear said.
Expanding Into New Territories
Before even thinking of expanding out of Penang into KL or any other state, DeliverEat had to make sure that they were the market leader in their own base first and that the business model concept had been proven and is profitable.
“We used four years to select our business model and salary scheme to make sure our operational cost can be minimised, up to a level which makes our business profitable,” he added.
DeliverEat started the business in a small area of Penang. As soon as they saw the business performing well in that area and started to gain demand from customers, only then did they decide to expand to other areas in Penang.
“When your business is still small you will be able to analyse your costs, as you will have rider costs, operational costs and margins earned from the restaurant and customer side. You will then be able to calculate whether the business model is working.”
The Importance Of A Working Business Model
When questioned between which of the three is more important—business model, market share or profitability—Suan Sear said that the business model is most important as market share can fluctuate easily.
“You can own 100% market share today but it may change tomorrow as it depends on the customer behavior and the offerings provided by competitors. Market share will not belong to you forever, but if your business model works then it will bring long-term benefits,” he said.
He stressed that the business model must be profitable at all times as there are some companies that have a non-profitable business and focus on getting more customers only. He notes that this type of business model has a higher risk; after all, at the end of the day, you still need to have revenue and profits.
Suan Sear explained that as long as you don’t make a loss, it will be fine to expand. You will have two choices: you can save every month until there is sufficient capital to expand, or you can choose to raise funds. The latter allows for faster expansion, but you will need a proven and profitable business model first to convince investors.
DeliverEat expanded with the second method as they had a strong business model and investors believed in it. They managed to raise funds and then expanded into Kuala Lumpur.
KL was the destination of choice as it had a bigger population and most of DeliverEat’s restaurant partners had outlets in KL, and there was already demand there for food delivery services.
One might think it would cost a lot to expand in KL, however Suan Sear said that they had already spent a decent amount when they were expanding in Penang, as they were the first online food delivery service there. They mainly had to educate the public through roadshows and communities so that they understood about the delivery services offered.
The process was tough but in KL, they don’t face the issue above as other players in the market have already done the hard work in educating customers. Thus, it gave Suan Sear and his team a clearer path in terms of acquiring customers and restaurant partners as they are already well-versed with food delivery.
If you would like to learn more about Suan Sear’s advice on expanding into new markets, check out the video below:
Feature Image Credit: DeliverEat/ 米雷牛 Millennials