The heads of Just Eat Takeaway.com and Delivery Hero have warned of stiff competition, making it difficult for anyone to make a profit. Their rivals at Uber and Deliveroo, however, are considering potential alliances with the new delivery apps.
The new apps, which include GoPuff, Getir, Gorillas, Weezy, and Dija, among others, use their war chests to offer hefty discounts, a tactic used by more established food apps as they fought for shares of market. The new apps also complicate efforts by Delivery Hero, Deliveroo, Uber and others to branch out into grocery deliveries, a potentially bigger opportunity than restaurant food delivery.
Getir, an Istanbul-based app that raised $ 300 million at a valuation of $ 2.6 billion in March, is already in talks with investors to raise more funds at more than double its current value, according to reports. people close to the discussions. Getir did not confirm or deny the news, but said he was “in constant dialogue with potential investors” to fuel his expansion.
Meanwhile, DoorDash, the US-based food delivery group, and Amazon have also considered making an investment or acquisition in the sector in Europe, according to people familiar with the situation. Both companies declined to comment. Any deal would bring DoorDash to Europe for the first time.
Venture capitalists have been particularly interested in apps that promise to deliver groceries in as little as 10 minutes, through a network of “dark stores” in urban centers of London, Berlin and beyond.
“He received a ton of VC dollars in an incredible amount of time,” said Will Shu, Managing Director of Deliveroo, adding that the growth in applications was “quite staggering”.
Niklas Östberg, Managing Director of Delivery Hero, has warned that too much of this capital is being diverted to coupons and other promotions. This makes it harder for Delivery Hero, which invests heavily in Dark Stores or “Dmarts” of its own, to make a profit, he said.
“As long as there are hundreds of millions [of dollars] put in this space, I think the economy will be very difficult, ”said Östberg. “There will be a lot of money lost along the way. Consumers will be happy, but someone will have to pay for the party. “
Delivery Hero has already opened more than 600 “Dmarts” across the Middle East and Asia, as well as delivering 80,000 convenience stores and traditional supermarkets. The service now delivers 400,000 grocery orders per day and accounts for approximately 10 percent of Delivery Hero’s revenue.
But Jitse Groen, managing director of Just Eat Takeaway, said he was struggling to see how the business model of multiple apps entering just a few cities “will be viable.”
Their performance was “probably inflated because of the pandemic,” he said on a recent call with reporters. “It’s just something that we’re not prepared to invest a lot of capital in.”
Uber’s food delivery chief Pierre-Dimitri Gore-Coty said he was “keeping a close eye on what’s going on in the dark side of the grocery store,” after seeing a sevenfold increase in size of Uber’s grocery business in Europe and the Middle East. and Africa in the past 12 months.
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Gore-Coty compared the fundraising frenzy around 10-minute grocery apps to the earlier spending frenzy around rental e-bikes and electric scooters such as Bird, Lime, Voi, and Tier. “It sounds a lot like the micro mobility madness we had a year or two ago when there was funding everywhere and there were new players literally every week,” he said. “That’s not to say it’s a bad idea,” he added, but it was still “too early” to assess. “Mergers and acquisitions will always be an option,” he said.
In the United States this week, Uber entered into a massive partnership with GoPuff, the Philadelphia-based convenience store delivery service, which will be available through Uber Eats in dozens of cities.
Deliveroo is testing a similar distribution deal with Dija, a black store start-up founded by two former executives of the London-based food delivery service.
Additional reporting by Dave Lee in San Francisco