The founder of Shanghai-based Food delivery service Sherpa’s, Mark Secchia, believes China’s tech savvy middle class are very pedantic about their food.
“[Chinese] customer demands are higher than outside of China. For example, in the U.S., customers are happy with the delivered hamburger if it’s hot. But Chinese people want fresh and quality food,” said Mark Secchia, the founder of Sherpa’s Delivery Service, in a Startup Grind event held in Shanghai last Wednesday.
At the same time, the Chinese government’s crackdown on food safety has brought attention to highly popular services including Ele.me, which was issued a penalty ticket for their poor food quality.
“High-end food consumers account for the top 5% of the whole population, while the customers that Ele.me and Dianping are targeting account for 70% of the market. Their market is bigger than us,” Mr. Secchia says. “We don’t compete with them. People already know what service they want to use, based on occasions. If they have 16 yuan they will order on Ele.me, and when they have some friends invited to your house, and you have 400 yuan to spend, they will order on Sherpa’s.”
The expat-founded company originally began as an MBA internship project in 1999. Mr. Secchia launched the website in 2001 and started the food delivery call service mostly for foreigners living in Shanghai. In 2008, customers could order food online. Later on, Chinese food delivery services Ele.me and Dianping launched and seized the market, backed by tech behemoths Alibaba and Tencent, respectively. Last year, food delivery saw consolidation as Tencent-backed Dianping and Alibaba-backed Meituan merged to form an O2O giant.
Mr. Secchia says he has learned a lot about the food delivery market as he has run the business for 16 years.
“First, people have more money, more stress, and less time. Second, it’s economic pressure. Sherpa’s sales depend on the economic situation, because people wouldn’t order high-end food once they lose their job. Third, when expanding to other cities, there is high competition for local carrier staff. For example, when food delivery services reach out to the new area, they push the couriers wages higher,” he says.
The company now has 500 restaurants registered on its platform, operating in Shanghai, Suzhou and Beijing. It was not easy for a foreign company to expand to other cities, Mr. Secchia says.
“We gave up Hangzhou, because it had 1% of Shanghai’s sales, but needed 20% of the resources that Shanghai needed,” he says. “Shenzhen completely banned motorbikes and two-wheeled transport is illegal there.”
Mr. Secchia also tried a range of product deliveries such as dry cleaning, film, flowers, magazines, event planning and cakes, but found that it’s better to only focus on food delivery.
“When people are hungry, they tend to make spontaneous decisions to order food and ignore the price. We discovered that sales of the products we provided were not as big as we expected, so we decided to focus on food delivery,” he says.
The company does not have a mobile application yet. Mr. Secchia said the company will soon be launching an app and throwing $3 million yuan ($463,000 USD) on technology development.
Image Credit: Startup Grind