Startups Beware….


What are the Pitfalls that a food startup needs to be careful of?


Food is a basic necessity of all and hence, it may seem that it’s the most profit making business that one could start.. It’s a fact that food services are publicized to be a $50 Billion market, growing at 16-20% year on year. In India too, the market size is expected to reach Rs. 42 Trillion by 2020, says BCG, however as rosy as this looks to venture into in, there are few crucial aspects that often miss consideration and can lead to shattered hopes within no time of your startup launch.

Many established food-tech startups like Dazo, Eatlo, SpoonJoy have been shut, while TinyOwl, FoodPanda and Zomato are battling to stay afloat in troubled waters by shrinking their workforce, reducing operations or shutting down outlet branches. This industry may seem like a sinking ship for many, but if the ones planning to divulge in this business can avoid a few primary pitfalls missed by their predecessors, their food startup will be on a course for victory.

Here are a few pitfalls to avoid :

1. Cook Experts run great food startups:

While you may be great at cooking delicious delicacies, but if that’s the only reason for you to launch your food startup, it’s time for a reality check. There will be long working hours, managing fussy customers, meeting financial demands, planning marketing efforts, training staff and more. While great tasting food is a mandatory component for a food startup, but you need to know way beyond just the right ingredients for your dish.

2. Hiring the wrong people and struggling to retain them:

To gain a huge number of customers, you will hire employees quickly and end up getting the ones who only need a salary, but who are not aligned with the vision of your company. Hence instead of focusing on expanding your business, your efforts and energy will be constantly tangled in an endless loop of recruiting people and then letting them go.

3. Focusing on design first:

Beware of the creativity trap, or else you’ll end up paying more attention to the features or designs of the website and application, rather than focusing on their functionality. Making food and selling it through technology alone will not scale the business if there is no innovation in the kitchen, ordering experience and quick delivery of delicious food. Ultimately if the customer fails to order food through your well-designed web & app for the first time, it’s very unlikely that he will return back to you.

4. Menu nightmare:

Dish names difficult to pronounce or recall, a huge list of menu items, lack of descriptions or dish images lead to confusion for the customers and waste the valuable time of your employees. Why complicate the menu, when you want your food to fill more tummies in a day.

5. No clarity on why customers should choose you first:

When you think of your unique selling point (USP), you can’t just say you make tastier food and offer great service, that’s what everyone else promises too and customers won’t notice what makes you different if you only talk about that. You want your customer to not only notice you, but also remember you, so evoke their emotions and make sure you provide them an experience they will never forget.

6. Disastrous unit economics:

Customers always want great food at a nominal cost. But even if you make great food and get high repeat orders, the unit economics could drown you. So whether you provide daily meals or serve on-demand needs of customers, you will end up spending more than you earn for each order delivery if you fail to consider every financial aspect that’s involved in getting the order ready for the customer to eat. Don’t just calculate your profit and losses for a month or year, do it every week.

7. Inventory mismanagement:

Managing the inventory is of primary importance when you run a food startup. You need to strike a balance between having the right ingredients in right quantities. The more you store, the more space it takes, leading to chances of being mishandled, spoiled and ultimately wasted. Plan it right because the less you waste the more you earn finally.

8. Find and nourish repeat customers:

If you do not direct your attention to who is your repeat customer and only keep promoting discounts, offers and expanding your business, you will end up with customers who will only come to you once. Food industry can easily achieve a high repeat rate but if you only focus on customer acquisition, you’ll simply end up burning more on your marketing spends.

9. Over-Advertise, Under-Deliver:

Bringing in new orders is not that tough and there are myriads of avenues available today through which food orders can be increased. Consider the fact that each order needs to be prepared, packaged and delivered in a span of 30-60 minutes. So be reasonable when you advertise.

10. Lost without feedback and analysis:

To be successful in the long term you need to know about how to build on your strengths and do away with your weaknesses. There’s no better way to know it, than knowing it directly from the customer’s mouth itself. If you don’t know what they think about you, you will end up building a house on sands. So talk to your customers, gather the data, analyse and tweak for success.

There’s no better time than now to enter into the billion dollar food industry in India. So design a unique concept, cook delicious food, work out on the unit economics and cherish the customers who made it possible for you to pull it off as you begin your entrepreneurial journey in the challenging food startup space.

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