The Market for Food Delivery is Heating Up

December, 18 2018

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Simon Gannon
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Simon Gannon

The appetite for app-based food delivery services has risen significantly in recent years. With tech-savvy consumers continuing to place a premium on breakneck speed and efficiency, more and more restaurants are embracing apps to automate food ordering and delivery operations.

Our new research provides insight into this rapidly changing industry, examining the North American and European markets specifically.

In Europe, despite facing stiff competition from Uber Eats, Just Eat remains godfather of the food delivery business, accounting for over 30% of all time downloads and by far the most active users. Having launched its first app in 2012, Just Eat provides the 100,000 restaurants on its platform with the technology to receive electronic orders.

However, unlike rivals such as Deliveroo or Uber Eats, it is not responsible for the physical delivery of the food that is ordered. The company’s traditional model of simply connecting restaurants with diners enables it to spread further afield, while the Uber Eats business model has to concentrate its efforts in densely populated city centres where it can source adequate riders and restaurants.Food Delivery - Priori Data

Despite being the new kid on the block having joined the party rather late in 2015, Uber Eats is arguably causing as much commotion within the food-delivery market as its parent company has in the taxi industry.

Ranking in second place with 23% of all-time downloads in Europe, Eats has already made serious inroads in a short space of time. Building off the firmly established infrastructure of the transportation side of the business, the SoftBank-backed company has a competitive advantage through its dedicated army of drivers across the globe and iconic brand name.

In North America, Uber Eats has leapfrogged US giant GrubHub to become the top food delivery app with 30% of the downloads share. However, the region’s fastest growing app of the year is another SoftBank portfolio company - DoorDash. With 13% of the all-time downloads, the app racked up half of this in 2018 alone. Established in 2013 by four Stanford University students, DoorDash has come a long way from its humble startup roots and now serves 1,200 cities across North America. This is largely thanks to a $535 million investment from SoftBank, along with the Singaporean sovereign wealth fund GIC and Sequoia Capital.

Among the delivery services in North America, Postmates is unique in that it will actually shuttle nearly anything - not just food - from a store or restaurant to a customer's door. Perhaps it is for this reason that Postmates boasts a much higher user base than any of its rivals. Making up 11% of the all-time downloads, the app was launched way back in 2012, giving it a larger existing customer base than many of its rivals.

The veteran of European market is Amsterdam-listed Founded in 2000, the app ranks in third place with 17% of all-time downloads. Despite a solid start to the year with download growth rising steadily, shortly after the company’s acquisition of the Tel Aviv-based online food marketplace LTD in July 2018, the app experienced a sharp decline in downloads as well as both daily and monthly active users.

Looking at the North American and European markets side-by-side, the growth that both regions have experienced over the past year is nothing short of impressive. Market growth in North America surged by 71% while Europe saw a more modest lift of 26% from the previous year.

As the industry of food delivery continues to evolve, we expect many of the existing major players will be shifting their business models to adapt to changing customer demands. For instance, Just Eat is currently making a strategy shift to move away from its roots as a technology platform by offering physical delivery. While this shift poses a threat to Just Eat’s enormous profit margins, it means more previously undeliverable restaurants will become accessible for delivery.

Meanwhile, the introduction of Marketplace + by Deliveroo enables restaurants with their own delivery capabilities to sign up. Deliveroo believes that this initiative will hike the number of restaurants they work with by 50%, spelling bad news for Just Eat.

A further blow for Just Eat would be if the unconfirmed rumours of Uber Eats gearing up to purchase Deliveroo turn out to be true. This would see the two rivals working together to topple Europe’s current market leader. Similarly, in North America, there are whispers that Postmates and DoorDash may be teaming up to take on the top rivals GrubHub and Uber Eats respectively.

Finally, with many companies exploring robotics, the use of drones for delivery is sure to be a game changer for the industry. Uber recently posted a job advertisement pointing to a focus on delivering orders by drone by 2021 under the label Uber Express. This technology sounds promising, but how well will it actually work in practice?

Even with relatively few drones in the skies currently, the number of potential dangerous incidents is high. Only last month, a ‘rouge’ drone was responsible for the temporary closure of Wellington Airport in New Zealand after it was spotted flying extremely close to the runway. Regulators have also pointed out that video-equipped drones pose a threat to our privacy and on top of that, as drones tend to emit a high-pitched buzz, your late-night burrito craving will also be contributing to noise pollution and potentially disturbing your neighbours.

There would be some real benefits for consumers if Uber manage to somehow combat all of these regulatory hurdles and get drone technology ‘off the ground’. In the race to reach the Number One spot in the market, soaring competition within the food delivery industry will inevitably pave way for more experimentation with AI and technology. Here at Priori Data, we look forward to seeing which solutions come into fruition in the coming years.

Food Delivery - Priori Data

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