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Deliveroo: When Fine Food Meets Exceptional Logistics

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Fine Food in 32 minutes? YES PLEASE!

Launched in February 2013, the idea behind Deliveroo started when founder Will Shu moved from New York to London’s financial district to work in Investment Banking. When hunger struck after a long day in the office Will had no option but to turn to Burger King because no one would deliver where he worked! He quickly realized that London lagged behind when it came to quality food delivery and -along with his co-founder Greg Orlowski- decided to do something about it.

Today Deliveroo is a leading online high-quality food delivery company, backed with $200m in funding. The company is currently working on its global expansion to Southeast Asia, Australia and New Zealand.

 

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Deliveroo: The Food Delivery Company

A web and app based food delivery service based in London, Deliveroo, delivers high quality food from your local restaurants in an average delivery time of 32 minutes. The idea behind the company was to provide higher quality dining at home than your typical –what the founders considered to be lower quality- existing delivery options. Deliveroo charges customers a flat fixed-fee of £2.5 ($3.79), and requires a minimum order of £15 ($22.76), the company also charges restaurants a commission on orders. Delivery speed is specifically quoted, depending on restaurant location it ranges from 20 to 60 minutes.

Thoughtfully selected restaurants are screened for quality, and hygiene. Customers access the website or app, enter their postcode and get a list of restaurants in their area. Options range from your local specialty ice-cream shop, to a Michelin star restaurant! The company targeted a gap in the market: quality restaurants that do not provide delivery services. Deliveroo offers a hassle-free solution by providing restaurants with orders, and taking care of the delivery services for these restaurants.

To ensure consistency in delivery speed and efficiency Deliveroo hires its own drivers who are required to apply only if equipped with a scooter or bicycle with a pizza box already installed. Drivers are all dressed in Deliveroo uniforms, and drive Deliveroo labeled scooters and bikes which are seen all over London.

 

 

Deliveroo: The Logistics Company

Owning the Supply Chain: Deliveroo chose to own its supply chain. Unlike Seamless, GrubHub and others which simply created the platform and allowed restaurants that already deliver to leverage their technology, Deliveroo decided it would manage orders and delivery to allow it to offer customers higher quality options from restaurants that do not normally deliver food.

Hiring its own drivers allows the company to strategically position drivers in certain neighborhood, and assign them to a specific delivery zone. At any given night, there are hundreds of drivers out on the road. The drivers are paid £7 per hour + £1 per drop + petrol + tips and can earn upto £3,500 ($5,309) per month.

Deliveroo’s beautifully designed and user friendly technology platform optimizes food ordering and delivery by processing web and mobile consumer orders which are sent directly to restaurants. Restaurants receive orders on a Deliveroo tablet-based order management terminal (provided by the company). The company created a highly sophisticated delivery driver smartphone software that allows optimizing delivery routes and provides customers with order tracking information.

 

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Hyper-Local: Deliveroo operates on a hyper-local model, when users enter their delivery postcode they are presented with a list of restaurants within a 2km (1.25mi) radius. This allows the company to quote a specific delivery speed, ranging from 20 to 60 minutes maximum. The hyper-local model allows for speedy and timely delivery, the ability to better predict travel distance and traffic, and a high turnover of deliveries given the smaller coverage area. The fact that London is a highly populated and commercially dense area allows for such a model to exist successfully.

 

Challenges?

Deliveroo’s relatively capital intensive model -compared to its competitors- was definitely a first barrier to scalability but was quickly resolved by heavy funding which allowed it to expand. However, entering other markets requires the company to target highly dense areas with relatively affluent consumers and high restaurant concentration in order for both its business and operating model to succeed. Restaurant owners have attributed up-to 20% revenue growth to Deliveroo orders, and consumers (myself included) find service quality and timeliness exceptional!

Deliveroo is a great example of how the founders successfully deviated from the on-demand crowd-sourced service model trend, their competitors’ pure technology based platform model to a full product and logistics service provider.

 

Sources:

Deliveroo

Startup of the Week

Deliveroo an On-Demand Food Delivery Service Raises 70 Million

Deliveroo Raises 70m for Further International Expansion

Deliveroo raises £2.75m to expand delivery of quality restaurant food

TheTechPortal: Deliveroo

 

4 thoughts on “Deliveroo: When Fine Food Meets Exceptional Logistics

  1. Love the choice of business. As a loyal deliveroo customer I think they have nailed the food-delivery market through a fantastic operations strategy – quite simply, food arrives so quickly that it is piping hot! As a customer I attributed this to the hyper-local model that they have adopted (as you point out) but had not realised that they are actually differentiated on supply chain. I do wonder how important geography is to their success – London is incredibly dense in terms of people/offices/restaurants – is there a limit to where they can operate profitably?

  2. Very interesting! This reminded me of DoorDash, which is my friend’s startup. They also consider themselves the “Uber” of food delivery, delivering from restaurants that normally don’t deliver. I can think of two potential issues that I’d love to get your thoughts on.

    1. Legal issues. DoorDash was recently sued by In N Out for delivering their food. Do you see Deliveroo running into similar legal issues? I assume not if Deliveroo negotiates a deal with each restaurant it works with.

    2. Competitive landscape. It seems that being a first-mover in London allowed it to be quite successful, which may be why it’s choosing to expand to geographies outside the United States. Do you see it gaining traction in those new countries and possibly the US in the future? The competitive landscape seems extremely fragmented.

  3. Illustrative example of unique operating model predicating successful execution of the business plan, thanks for sharing. I see your point about the challenges of their capital model, but wonder if this would actually make it easier to scale compared to competitors (ie, competitor capital demand is linear while Deliveroo’s plateaus over time). I’m also generally curious why some restaurants choose to deliver while others do not – for finer restaurants, is this a princple thing? And if so, how is Deliveroo impacting that mentality?

  4. As someone from China, I always miss the cheap (by “cheap” I mean almost free) food delivery. So it’s really interesting to learn about the operation model of food delivery business in a high-labor-cost country like UK. Owning the logistic network is definitely a big competitive advantage for Deliveroo, but it also means the model is quite capital intensive compared to their competitors. As food delivery is generally a low margin category, I’m curious about the company’s profitability level. How are they able to achieve a positive profit?

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