[Super HOT] Analyzing the Rise and Fall of Baemin in Vietnam and Lessons from Food Tech Success Stories
Navigating the Dynamics of Food Tech: Lessons from Baemin's Vietnam Exit and Global Success Stories
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Baemin, a South Korean food delivery service, entered the Vietnamese market with a robust business model hinged on technology and customer experience. Founded in South Korea in 2010, Baemin quickly became a household name in its home country, thanks to its efficient service and user-friendly app. The company expanded to Vietnam in 2019, hoping to replicate its success.
Why: Market Potential and Challenges
Vietnam's rapidly growing online food delivery market, driven by a young, tech-savvy population and increasing smartphone penetration, presented a lucrative opportunity for Baemin. However, this market was not without challenges, including stiff competition and complex local consumer preferences.
The food delivery market in Vietnam, as part of the larger Southeast Asian landscape, has experienced a significant surge in growth. According to the Food Delivery Momentum Wars 2023 report, by the end of 2022, the Gross Merchandise Value (GMV) of online food delivery in Southeast Asia reached a staggering $16.3 billion. This marked a remarkable increase, especially considering the boost provided by COVID-19 over the past two years.
This growth trajectory is particularly notable in the Philippines, Malaysia, and Vietnam, countries that have seen substantial expansion in their online food delivery sectors. The report projects that by the end of 2023, the Southeast Asian online food delivery market is expected to attain revenues of $30.12 billion, a significant jump from the previous year.
Looking ahead to 2027, the annual growth rate for the region is estimated at 17.25%, potentially reaching a total of $56.92 billion. In this context, Vietnam's online food delivery market is expected to rank fifth among Southeast Asian countries, following Indonesia, the Philippines, Thailand, and Malaysia. However, its growth rate is projected to be one of the highest, trailing only Indonesia. This positions Vietnam as a key player with immense potential to further develop its online food delivery market in the years to come.
Brief History and Key Success Milestones of Baemin Vietnam
Entry into the Vietnamese Market (2019)
Launch and Initial Expansion: Baemin, a leading South Korean food delivery service, entered the Vietnamese market in 2019, amidst a booming online food delivery sector. This move was part of Baemin's strategy to expand its footprint outside Korea.
Targeting Urban Centers: Initially focusing on Ho Chi Minh City, Vietnam's bustling economic hub, Baemin aimed to tap into the city's young, tech-savvy population that showed a growing appetite for food delivery services.
Strategic Partnerships and Marketing (2019-2020)
Local Restaurant Tie-Ups: Baemin quickly began forming partnerships with local restaurants and food outlets, offering a wide range of culinary choices to attract a diverse customer base.
Aggressive Marketing Campaigns: To establish its brand, Baemin launched aggressive marketing campaigns, utilizing both online and offline channels to build visibility and brand recognition.
Technological Integration and User Experience Enhancement (2020)
App Development: Baemin invested in developing a user-friendly app with features tailored to the Vietnamese market, focusing on ease of use and efficient order processing.
Customer Service Initiatives: Recognizing the importance of customer experience, Baemin implemented several initiatives to ensure quick and reliable delivery services, along with responsive customer support.
Pandemic Response and Adaptation (2020-2021)
Navigating COVID-19 Challenges: Like many other businesses, Baemin had to adapt to the challenges posed by the COVID-19 pandemic. This included enhancing safety protocols and adapting to changing consumer behaviors and restrictions.
Increased Demand for Delivery Services: The pandemic era saw a surge in demand for food delivery services, and Baemin aimed to capitalize on this by expanding its services and ensuring safe delivery practices.
Challenges and Competitive Pressure (2021-2022)
Facing Stiff Competition: Despite its efforts, Baemin faced intense competition from established players like Grab and Gojek, who already had a strong foothold in the market.
Struggle to Gain Market Share: Baemin struggled to gain significant market share, as the competition had deeply entrenched customer loyalty and more extensive local networks.
Exit from the Vietnamese Market (2022)
Strategic Withdrawal: In 2022, Baemin announced its decision to exit the Vietnamese market. This decision was influenced by the competitive landscape, operational costs, and strategic re-evaluation of its global presence.
The official announcement on BAEMIN Vietnam Facebook Fanpage on Friday, Nov 24th, 2023. Screenshot from Baemin Fanpage.
Throughout its tenure in Vietnam, Baemin demonstrated a strong commitment to technological innovation and customer experience. However, its journey also underscored the challenges of penetrating a new market with strong local competitors and distinct consumer preferences. Despite its exit, Baemin's efforts in Vietnam contributed valuable insights into the dynamics of the food tech industry in emerging markets.
What: Baemin's Business Model
Baemin's business model in Vietnam was similar to its Korean counterpart, focusing on a tech-driven approach to food delivery. It leveraged advanced technology for efficient order processing, delivery tracking, and customer engagement. Despite these efforts, Baemin faced difficulties in capturing a significant market share.
Business Model Canvas framework of Baemin
Value Propositions:
For Customers: Baemin offers a seamless experience with a wide range of restaurant choices, online ordering convenience, dedicated customer service, and real-time order tracking.
For Restaurants: Assistance in expanding customer bases, an advanced technological setup for order and delivery management, and provision of delivery services.
For Delivery Providers: Flexible working hours and earn additional income from a deal & a tip
Customer Segments:
Users seeking convenience and variety in food ordering, including those who prefer door-step delivery and do not want to cook.
Restaurants aiming to expand their customer base, those without their own delivery services, and those looking to increase online order volumes.
Channels:
Baemin's primary channels were its mobile application and website, which facilitated the ordering process and provided access to a broad range of restaurants.
Customer Relationships:
Maintained through dedicated customer service, the ease of the online ordering process, and the reliability of delivery services.
Revenue Streams:
Commissions from restaurants on each order (ranging from 3% to 15%).
Delivery fees charged to customers, based on the distance of delivery.
Additional income from advertising, with restaurants paying to be listed prominently in customer searches.
Key Activities:
Management of the online platform, including the app and website.
Partnership development with a variety of restaurants.
Coordination and management of delivery services.
Key Resources:
Technological infrastructure for the app and website.
Network of partner restaurants and delivery providers.
Brand and market presence.
Key Partnerships:
Partnerships with a diverse range of restaurants.
Collaboration with delivery service providers.
Cost Structure:
Costs associated with platform development and maintenance.
Marketing and advertising expenses.
Operational costs related to customer service and delivery coordination.
Baemin's model, especially in South Korea, was characterized by a strong emphasis on technology and customer experience, aimed at creating a convenient and reliable food delivery service. This model successfully catered to the needs of both customers and restaurants, which was evident in its significant market presence and revenue generation in the South Korean market
Management Operations Framework
Baemin implemented various operational frameworks, including digital transformation and customer experience strategies, to streamline its services. It used data analytics to understand customer preferences and optimize delivery routes. However, the competition's established presence and brand loyalty in Vietnam made it difficult for Baemin to secure a foothold.
Baemin's USP and STP Strategy
Baemin's unique selling proposition (USP) in Vietnam was its efficient delivery service, user-friendly app, and South Korean brand reputation.
Its segmentation, targeting, and positioning (STP) focused on urban, young professionals seeking convenience. Despite this, Baemin couldn't outshine local competitors who had already established a strong connection with this demographic.
Baemin's STP (Segmentation, Targeting, Positioning) strategy is as follows:
Segmentation: Baemin segmented the market based on lifestyle and behavioral patterns, focusing on customers seeking convenience, such as young professionals, busy families, and individuals looking for a variety of dining options. They also targeted restaurants ranging from small local eateries to large chains that required delivery services.
Targeting: The company targeted urban areas with high-density populations that had a need for quick and reliable food delivery. They aimed at customers who value the convenience of doorstep delivery and a wide array of choices, as well as restaurants that wanted to increase their reach without managing their own delivery logistics.
Positioning: Baemin positioned itself as a user-friendly and reliable service, offering a seamless experience from order to delivery. For customers, it was positioned as a service that offers convenience, variety, and quality. For restaurants, Baemin was positioned as a partner that could help expand their business and customer base without the overhead of managing deliveries.
Customer Experience Practices
Baemin's customer portrait likely includes urban dwellers, particularly millennials and working professionals who prioritize convenience and are tech-savvy. These customers tend to have higher disposable incomes and a preference for a variety of dining options. They value efficiency, fast delivery, and the ability to easily order from a wide selection of restaurants.
In building the customer experience, Baemin focused on:
A user-friendly digital interface that made browsing menus, ordering, and payment simple and intuitive.
Robust customer service, providing quick and effective responses to any issues.
Real-time tracking of deliveries for transparency and to manage customer expectations.
Regular updates and feature enhancements to their app based on customer feedback, ensure a continually improving service.
What are the key direct and non-direct competitors of Baemin in Vietnam?
In Vietnam, Baemin's key direct competitors were the other major players in the food delivery market, particularly Grab and ShopeeFood. According to Momentum Works' 2022 report, Baemin held about 12% of the market share, while Grab led the market with 45%, followed closely by ShopeeFood with 41%.
Market share - Food Delivery Industry in Vietnam - Data in 2023
Grab, originally a ride-hailing service, expanded into food delivery with GrabFood, leveraging its large user base and established logistical network. ShopeeFood, a branch of the Shopee e-commerce platform under Sea Group, also expanded its services to include food delivery, capitalizing on its e-commerce strength and familiarity among users in the region.
Non-direct competitors would include any service that meets the same customer needs but does not directly compete in the food delivery space. This could include local restaurants offering their own delivery services, meal kit delivery services, and supermarkets or grocery stores providing ready-to-eat meal options.
These competitors, both direct and non-direct, create a diverse and challenging landscape, demanding constant innovation and adaptation for any player in the food delivery market in Vietnam.
Why Baemin Failed in Vietnam
Baemin's exit from Vietnam, as reported by Tech in Asia, VNExpress, and Inside Retail Asia, was attributed to several factors:
Intense Competition: Baemin struggled against well-entrenched local players like Grab and Gojek, who had deeper market penetration.
High Operational Costs: The high costs of maintaining quality service and aggressive marketing strategies weighed heavily.
Market Saturation: The Vietnamese market, though large, was already crowded with established competitors.
Critical Success Factors (CSF) in the Food Tech Industry
Local Market Understanding: Tailoring services to local tastes and preferences.
Scalable Technology: Investing in scalable and robust tech solutions.
Brand Loyalty and Customer Retention: Building a loyal customer base through excellent service and engagement.
Lessons Learned from Baemin
Baemin's experience in Vietnam highlights the importance of deep market understanding, the need for localized strategies, and the challenges of entering a market with strong incumbents.
Baemin's Withdrawal from Vietnam's Food Delivery Market
Baemin's exit from the Vietnamese market after four years highlights the intense competition and shifting consumer preferences in the region. Despite a significant initial presence and distinctive branding, the company couldn't compete with the likes of GrabFood and ShopeeFood, who dominated the market with a combined share of 86% in 2022. Baemin's focus on solely food delivery, without integrating additional services, limited its appeal in a market where multifunctional platforms thrive. The COVID-19 pandemic further altered consumer behavior, emphasizing safety and economic caution, which Baemin and other food delivery services had to navigate.
Grab - Super app in Vietnam and Asia - Giant tech company
Key Points:
Baemin faced stiff competition from GrabFood and ShopeeFood, leading to a minimal market share.
The company's service offering was limited compared to competitors who provided multifunctional platforms.
Consumer behaviors shifted during the pandemic, prioritizing safety and cost, impacting the food delivery market.
Baemin's offerings lacked sufficient incentives to attract and retain users.
High commission fees and additional costs presented challenges for restaurant partners on food delivery platforms.
Baemin's departure opens market opportunities for remaining and new food delivery services.
Implications for the Market:
Baemin's withdrawal is expected to benefit existing market leaders and presents an opportunity for emerging players to capture the left-over market share. The food delivery service market continues to be an integral part of urban life, and as it evolves, companies will need to adapt to multifunctional service demands and consumer value sensitivities to succeed.
Baemin's Market Limitations and User Adaptation Challenges
Baemin's focus solely on food delivery services proved to be a significant limitation in a market where competitors offer a suite of integrated services. This specialization hindered its ability to attract new customers and expand its market presence. Even with strong marketing and brand recognition, Baemin couldn't motivate a change in user behavior towards its platform.
Baemin was limited to food delivery, lacking additional services like ride-booking or parcel delivery.
Other platforms' multi-service offerings outcompeted Baemin, limiting its market growth.
Baemin's late adoption of card payment features indicated a technological lag.
Necessary changes and improvements were too slow to enhance user experience effectively.
Baemin's inability to quickly innovate and match the multi-functional utility of its competitors left it trailing in a fast-evolving market. Customers preferred platforms that consolidated various services, which ultimately influenced their loyalty and choice.
Explore to the world: Success Stories in Food Tech in the US
Vietnamese Food Tech Successes: Local players like Grab and Gojek thrived by understanding local consumer behavior and preferences, offering diverse local cuisine options, and maintaining an efficient delivery network.
Doordash and Uber Eats in the US: These companies succeeded due to their extensive network, diverse food options, strong brand recognition, and technological prowess.
Their Differentiation and Business Model
Doordash and Uber Eats stand out for their customer-centric models, technological innovation, and extensive partnership networks with restaurants. Their business models focus on convenience, variety, and reliability.
Business Forecast and Global Expansion Potential
Looking ahead, the food tech industry is poised for growth, with increasing demand for convenience and technological advancements. Companies like Doordash and Uber Eats might continue to expand globally, provided they adapt to local markets effectively.
As a business consultant analyzing the success of DoorDash and Uber Eats in the US market, we can focus on several key factors:
Market Understanding and Adaptability: DoorDash and Uber Eats have a deep understanding of the US market, including regional preferences, spending habits, and the regulatory environment. They adapted their services to cater to local tastes and managed to offer a wide variety of options that appeal to the diverse American palate.
Brand Positioning and Marketing: Both companies have invested heavily in marketing and brand positioning. DoorDash, in particular, has positioned itself as more than just a food delivery service; it's a technology company that connects people with the best of their neighborhoods. Uber Eats leverages its parent company's already well-established brand presence in the ride-sharing market.
Customer Experience: They prioritize customer experience, from the ease of ordering through their apps to the delivery experience. Features like real-time tracking, order customization, and an intuitive user interface are the hallmarks of their customer-centric approach.
Technology and Data Analytics: DoorDash and Uber Eats use sophisticated algorithms to optimize delivery routes and times, reducing costs for themselves and their customers. Data analytics also helps them understand consumer behavior, enabling personalized marketing and promotions.
Diverse Revenue Streams: While both companies primarily earn through delivery fees and commission from restaurants, they've diversified to include subscription models (like DashPass and Uber Eats Pass), corporate catering, and even merchandising.
Partnerships and Integration: They've formed strategic partnerships with a wide range of restaurants, from fast-food chains to high-end eateries, which has broadened their appeal. Integration with other services (like Uber's ride service) offers convenience and cross-promotion opportunities.
Logistics and Operations: Efficient logistics are central to their business models. Their delivery networks are dense and responsive, ensuring quick delivery times, which is a key expectation in the US market.
Scalability: Both DoorDash and Uber Eats have demonstrated the ability to scale up rapidly and efficiently, a key advantage in the expansive US market.
In contrast, Baemin, while successful in South Korea, faced challenges adapting to the Vietnamese market, which could be attributed to the intense competition, different consumer behaviors, and perhaps a less tailored market entry strategy. To benchmark against the likes of DoorDash and Uber Eats, Baemin would need to have a similarly deep understanding of local market nuances, establish strong brand positioning, and offer an exceptional and localized customer experience.
Conclusion
The rise and fall of Baemin in Vietnam offer crucial insights into the dynamic food tech industry. Success in this sector requires more than just technological innovation; it demands a deep understanding of local markets, customer-centric strategies, and the agility to adapt to rapidly changing consumer behaviors. As the industry evolves, the lessons learned from both successful and unsuccessful ventures will continue to shape its future trajectory.
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Image source: internet
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