Wednesday, May 22, 2019

Deliveroo poses growing threat to Just Eat‘s dominance


Deliveroo, the food delivery service launched in February last year by an ex-hedge fund analyst, is quickly becoming a worthy adversary to its more established competitors, such as Just Eat and Hungry House. Deliveroo has already signed up 270 restaurants in London and plans to have complete coverage of the capital by the end of the year.

With £2.75 million in growth capital secured through fundraising led by Index Ventures, Deliveroo plans to roll out the service to Birmingham, Manchester, Edinburgh and Leeds within the next 12 months. It also plans to improve its delivery platform and logistics technology.

Unlike other food delivery companies, however, Deliveroo has adopted different strategies in an attempt to increase its market share. It has focused on helping more upmarket eateries break through into the takeaway business for the first time, and has already signed up well-known brands such as Carluccio, Brindisa and Gourmet Burger Kitchen. Deliveroo founder, William Shu, says: “Just Eat and Hungry House have educated people about food delivery but their options are downmarket”.

The idea was formulated by Shu when he moved from New York, where virtually all restaurants and eateries offered a takeaway service. On arriving in London, he was dissatisfied at the limited selection on offer, and decided to create Deliveroo in response to this gap in the market.

Another key aspect of Deliveroo‘s USP is that it handles the delivery of the food, rather than the individual businesses themselves, as is the case with its competitors. According to Shu, this gives Deliveroo a huge advantage in terms of the execution of their service. For Just Eat, he says, “There‘s no transparency over delivery times because those companies don‘t actually deliver the food.”

The “hyper local” approach of Deliveroo, however, has meant delivery times average only 8 minutes, and customers pay Deliveroo an extra £2.50 in addition to the food bill for the privilege. Deliveroo is aiming to reduce the time from placing the order to delivery to 30 mins, and the efficiency of the service so far has led to excellent customer retention.

This also has benefits for the eateries, because all they have to do is accept the order and not worry about the delivery. “It‘s a way for these restaurants to create extra throughput in their kitchens without adding any costs”, says Shu. Partners of Deliveroo are reporting an increase in revenue of between 10 and 20 per cent.

That is not to say that the progress of Just Eat is showing any signs of slowing down. After the company floated in April it has topped the FTSE 250 ‘gainers‘ board with a 29p rise in share price, and already has about 20,000 takeaways on its books. There is also a potential market of over 50,000 restaurants that currently offer a collection-only service but could be added to Just Eat‘s directory. Since 2011, it has also acquired various players in other markets, including Brazil, Canada, India and several countries in Europe.


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