“The company has made a decision to reinvest as much as possible into supporting restaurant owners right now. When asked about profitability, Grubhub spokesperson John Collins pointed to its first quarter 2020 earnings call, during which CEO Matt Maloney said that the pandemic has been a “net tailwind” but that the company is not focused on profitability during the pandemic. “At some point, delivery drones and robots may reduce the cost of fulfillment, but it will be a long time before the capital costs and ongoing operating expenses are less than the cost of paying someone for 30-45 minutes of their time.”Īnd while Grubhub’s “active diners” increased by 24 percent during the first quarter of 2020, the company still reported a $33 million loss. “Bottom line is that you need to pay someone enough money to drive to the restaurant, pick up food and drive it to a diner. In other words, like many tech companies, GrubHub is primarily an advertising company. Instead, delivery was just a “means to an end”-getting restaurants to sign up on the Grubhub platform and then upselling them on “marketing” benefits, like greater visibility in Grubhub’s search results. In a letter to shareholders, the company revealed two things: Customers were “promiscuous,” or not loyal to the Grubhub platform, and the delivery part of the business was fundamentally not profitable. Still, it lost more than a third of its value after revenue fell below investors’ expectations in the third quarter of 2019. Grubhub, which also owns Seamless, is publicly traded and the only one of the big four that has achieved profitability. Meanwhile, other companies have been ditching the food delivery business: Yelp sold Eat24 to Grubhub, Square sold Caviar to DoorDash, and Amazon shut down its Amazon Restaurants delivery service. Postmates did not respond to a request for comment. Postmates, the smallest of the four companies by market share, was privately valued at up to $2.4 billion in 2019 but delayed its IPO filing after investors started drawing comparisons to grossly overvalued WeWork. DoorDash declined to comment on that estimate or its path to profitability, but regarding the latter CEO Tony Xu told Fortune in February that “we’re working our way there.” In early March, DoorDash filed to go public despite losing an estimated $450 million in 2019, according to The New York Times. When asked about the profitability of Uber Eats, Uber spokesperson Sarah Abboud referred The Markup to the company’s 2020 first quarter earnings report. “While Eats growth is accelerating, the business today doesn’t come close to covering our expenses,” he wrote. Uber CEO Dara Khosrowshahi acknowledged that Uber Eats is not yet profitable in an email to employees in March after its parent company laid off more than 3,700 employees. In August 2019, analysts from the investment firm Cowen estimated that Uber Eats was losing $3.36 on every order and would continue to lose money on every order for the next five years. ↩︎ link Even Before the Pandemic, Things Weren’t Looking Great It doesn’t work for the third-party delivery provider.” “Their current models don’t really work,” said Dan Fleischmann, a vice president at Kitchen Fund, a venture capital firm that invests in food startups. Instead, some consumers are walking away from delivery apps, restaurants are struggling to make delivery sustainable, and there’s potentially a bigger problem even a captive consumer base hasn’t solved. The big four consumer-facing delivery apps-Grubhub, Uber Eats, Postmates, and DoorDash-offer a convenient solution for both parties, accelerating the move to the tech-centric, gig-economy-powered Delivery World of tomorrow. Restaurants in states with lockdown orders now depend completely on delivery and takeout, while public health authorities are telling consumers to stay indoors. At first, the COVID-19 pandemic seemed like a perfect fit for food delivery apps.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |