Beset by high commission fees imposed by food delivery apps and struggling to pay rent and salaries as restaurants in Saigon remain shuttered, many local F&B businesses are looking to apps offering innovative solutions. One such app is Society Pass (SoPa) — a Vietnam-based, commission-free food delivery platform connecting merchants with customers.
SoPa in its current form was born in 2019 after the platform merged with #HOTTAB, a Hanoi-based multilingual P.O.S. and tablet solution for F&B businesses.
With a loyalty program at the core of its business model, SoPa relies on network effects for marketing and growth strategies. Giving merchants more control over their cash flow, the app turns SME business owners into SoPa ambassadors. Delegating delivery to the restaurants ensures that the company is not burning through cash and is investing in its differentiators: the loyalty program and live chat function.
As more aspects of life, including such mundane tasks as ordering food online, are infused with data-enabled services, we ask Sanjeev Sapkota, the Founder of #HOTTAB and Chief Strategy Officer of SoPa, how his company is challenging the status quo of the food delivery industry in Vietnam.
Can you tell us about yourself and the team behind SoPa?
Our Founder, Dennis Nguyen, incorporated Society Pass in the United States in 2018. Subsequently, he built a very robust, India-based backend platform with an integrated loyalty solution, which addresses merchants’ marketing needs here in Vietnam. Dennis is a prominent venture capitalist well known in both the Greater China and Southeast Asia markets. I met with Dennis in 2019 and found him to be the partner I was looking for to build out #HOTTAB and so we merged our operations in the later part of 2019.
The #HOTTAB story started in China — my home for over ten years prior to moving to Hanoi. I remember traveling to Vietnam from China in 2013, an experience that changed the course of my life. Seeing the drive of the Vietnamese people, the youthful energy planted the seed that later grew into my first Vietnamese startup.
I founded #HOTTAB after relocating to Hanoi in 2014. I had this idea for an app that would allow hotel guests to order food to their room in their language of choice, a much more seamless experience than what we’re accustomed to.
It’s less of a problem for bigger hotels who can afford to hire multilingual staff, but can be a real challenge for smaller operations. I saw an unmet need and set out to address it with the launch of #HOTTAB app. The initial hospitality-centric product evolved into a point of sale restaurant management system similar to Vietnammm and Foodie.
But unlike their business model where restaurants are charged a fee, we envisioned one that is commission-free.
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What problem are you trying to address in the market?
Today, food delivery apps charge restaurant ordering/delivery commissions ranging from 25 to 30 percent — a global trend. To be profitable, they can’t go lower than a certain threshold. The question is why would a restaurant choose to be on the platform in the first place, with the middle man cutting heavily into the venue’s profit margins?
Our approach is different. We look after our merchants by waiving the ordering fee up to a certain threshold and charging only for add-on services that are available on SoPa platform. It’s a “we scratch your back, you scratch ours” mentality, so to speak. We don’t want to corner anyone into doing business with us, but want to be a business partner that brings value to the table.
Our ethos hasn’t changed during the Covid-19 crisis now that restaurants are struggling to stay afloat while paying rent and salaries with zero foot traffic. SMEs are the backbone of Vietnam’s economy, and we see our mission in supporting the SME ecosystem. In keeping the economy going.
With #HOTTAB being a successful business in its own right, what motivated the merger with SoPa?
#HOTTAB business did take off but its success was moderate — around 1,600 merchants were using our platform at its peak. We knew we needed funds to invest in marketing to be able to grow. So the merger made sense. Now we have a database of over 15,000 merchants all in all and are working hard to activate each one of them on the platform.
As a standalone company, #HOTTAB’s business model was based on sales of a physical product, thus resulting in a long sales cycle. Now that #HOTTAB has integrated with SoPa’s digital delivery platform, we sign up restaurants at a much higher rate, which results in free marketing for us. Once the relationship with a merchant has been established, integration of the P.O.S., customer relationship management and (CRM)/data analytics products takes place, which drives our revenues.
What are the innovations that you look to bring to the market with SoPa?
The P.O.S. market is very fragmented, offers few cost-effective solutions and what is currently available is out of reach for most small businesses, like family-run noodle shops, for example.
They can’t afford a 1,500 USD P.O.S. and neither do they need something as sophisticated as that. So we built an app that works on any smartphone. No need for a big black screen, no need to print checks. Our technology is eco friendly and easy to adopt.
Then we brought CRM/data analytics into the equation as a way to give merchants a detailed overview of their business, based on the P.O.S. transactions. It doesn’t have to be a giant leap; even a small innovation makes a big difference when it’s meaningful.
Now that we’ve taken care of the merchants, let’s shift the focus to the merchants’ customers. The money the restaurant is saving on delivery fees then trickles to their customers via our own universal Society Points.
Can you elaborate more on the universal Society Points and its relevance for users and merchants?
One of the biggest issues facing the F&B and hospitality industries is their reliance on repeat business. So, naturally, they go out of their way to retain customers. But as a business owner, how do you keep track of customer engagement? How do you measure customer satisfaction? You can’t be in the restaurant all the time, so you rely on your manager and your floor staff to recognise your loyal guests, to show you value their custom by offering a cappuccino on the house, for example. But with deliveries, how do you address that?
Traditionally delivery platforms act like the middlemen and hold their cards (and customer information) close to their chest. SoPa, on the other hand, crunch customer data for you and present it in an actionable format.
We get in touch with the merchant and say, hey, listen, this customer dined at Urbino 20 times this month and this is how much money they spent with you and this is what they ordered. So when said customer has a birthday or the restaurant is running a promotion, Urbino can simply look the customer up on their CRM and surprise the person with a free cake or a two-for-one voucher.
The SoPa App also makes it easy for the customer to redeem loyalty points and keep track of promotions and special deals.
How are you marketing this app to users?
SoPa accumulates market power through network effect, when the value of a product or service increases geometrically or even exponentially according to the number of others using it. So the more merchants are using the platform, the more customers flock to it to take advantage of the many deals offered through the loyalty program. As the number of customers grows, so does the number of merchants who want to have access to these customers, and so on.
Also, the fact that merchants can save on training new staff. With customer information at his/her fingertips, the business owner doesn’t have to rely on the employees to collect, sort and analyze data. The app does it for them.
So to clarify, users, besides being able to place an order online, can also communicate directly with the merchant on SoPa?
Correct. We are working on a feature that will allow customers to talk directly to the restaurant. A chat function. Right now, this option is lacking on most delivery apps, and we want to address this gap.
How is SoPa different from competitors it could be mistaken for?
First off, what sets us apart is our partnership-based business model where merchants are not charged commission up to a certain ordering threshold.
Second, we are not a service provider, but a F&B platform that offers add-ons like access to customer profiles and marketing and business management tools. All changes to product descriptions, special offer content etc are made by the merchant directly on the app.
And of course, the fact that we are building a two-way communication channel for merchants and clients to talk to each other. This is a very unusual proposition in the market and one that gives restaurants more control over customer engagement.
In such a competitive segment, merchant- and user-acquisition can feel like a cash sink – what is your approach in ensuring the longevity of SoPa?
It’s important to understand that SoPa is not a logistics service company. Our partners rely on their own delivery system. It makes sense, as each business is a specialist in delivering a particular type of food, like pizza for example. Delivery platforms can’t guarantee that your pizza will arrive piping hot every single time, and there is a large group of SMEs that are not present on delivery platforms for that reason.
They find SoPa very appealing, as with us they have full control over the delivery process. At the same time, the restaurants who are already using delivery apps are tempted to try us too, given our commission-free business model.
Once signed up, these merchants start marketing SoPa to customers because unlike with delivery platforms, with us they are actually saving money. So it’s a no-brainer. On our website, the ordering process is very straightforward. Payment method is cash on delivery.
So, in a nutshell, our sales team markets the app to the merchants, who, in turn, spread the message to their customers.
What are some of the technical challenges SoPa encountered and how did you move to solve them?
Now that we are branching out into retail, loyalty program integration has emerged as one of our biggest challenges. It’s a technically challenging task that we have approached as a multi-step process and now we are well on the way to completing the merger.
Then, there is the challenge of managing a large remote workforce of tech talent, with the vast majority based in India, as they have the skill set required to build #HOTTAB. With #HOTTAB, I worked with a team of 100 developers to build the product that I wanted.
Our goal is to create a network of Vietnam-based coders and backend developers so we are less reliant on overseas talent.
What does the future look like for SoPa?
When I mentioned retail, this was more of a mid-range plan. A more immediate goal is to iron out the kinks in our app and to focus on marketing strategy for the F&B sector, and only then to move into retail.