Launched in 2013, Deliveroo is the brainchild of ex-New York banker Will Shu, who found, upon moving to London, a city that “lacked a thriving, quality, 24-hour food delivery ecosystem”.
The premise, for those still unfamiliar with it, is simple. Customers use a smartphone or web-based app to order food from one of hundreds of local participating restaurants – including the likes of Busaba Eathai, Carluccio’s, Gourmet Burger Kitchen, and MEATliquor – which processes the order, then a nearby courier – sometimes on a moped, but most commonly a bicycle – is summoned by another smartphone app to deliver the order to the customer, all within an average time of 32 minutes.
Deliveroo is foodservice’s answer to the sharing economy – it functions with the same ease and convenience for the consumer as Uber or Airbnb. Deliveroo is not on its own in the delivery sector. Hot on its heels is that goliath of the sharing economy, Uber, which has entered the marketplace, launching UberEats in London in June this year.
At the top end of the market, Supper uses specially-adapted scooters to deliver within a limited radius from a small selection of high-end London restaurants, including Daniel Boulud’s Bar Boulud and the award winning L’Anima.
With Just Eat and Hungry House dominating the lower, fast food end of the market, Deliveroo has cornered casual dining, bagging its biggest brand yet, Pizza Express, in June. And, though it started in the UK capital, Deliveroo has swiftly expanded, with those blue and black boxes now visible in 62 cities across the UK, Europe and Asia Pacific.
“Every city has its own unique characteristics, no two markets are alike,” a spokesperson for the brand says. “For instance, in Hong Kong we use runners instead of riders as this will often be quicker when you take into account the high floor numbers our customers are ordering from.”
According to research insight company CGA Peach, in the UK alone, just under seven million consumers have had food delivered at least once a week in the past six months. Although that is representative of the whole food delivery market, 1.7 million have used Deliveroo, a 61% increase from April 2015 to April 2016.
“From a consumer perspective, the expansion is mainly about convenience,” says Jamie Campbell at CGA Peach. “The consensus from focus groups is that people are almost begrudgingly spending more money because the option is there and they’re tempted.”
Just Eat, which caters to the more traditional, fast food end of the UK market still maintains its hold. It is the most used third-party delivery service, with 38% of those consumers who have had food delivered using it.
The next challenge
Deliveroo is still restricted to those consumers who live within 30 minutes of their restaurant of choice – typically based in city centres or urban areas. Deliveroo’s biggest USP, the ability to deliver food from higher quality restaurants than a traditional takeaway, is perhaps the most significant obstacle to further expansion.
“I live outside a Deliveroo zone,” says Campbell. “I tend to get slightly dodgy local takeaways. If I could get one of my preferred restaurants to deliver to my house I definitely would do, but it’s not an option.” This, says Campbell, is Deliveroo’s latest area of expansion. In late April, it announced RooBox, an “off-site delivery kitchen initiative that brings well-loved restaurants to areas with low restaurant supply”.
The initiative, Deliveroo says, frees restaurants of the “significant risk” and “substantial cost” associated with restaurant expansion. It allows brands to test locations through a delivery-only offering while simultaneously growing their customer base, revenue and brand in a new area.
“Other delivery companies might have expanded their delivery zones to achieve this increased supply, allowing their food to travel for longer. Instead, we’ve taken a no compromise approach to quality, and brought the kitchens closer,” Shu says.
Quality is, says Campbell, one of the principal concerns of operators. If customers have a bad experience with a third-party delivery service, will they come back? Will increased sales balance out the risks associated? It is, of course, too early to tell, he says. But, so far, the signs seem to be positive.
Deliveroo can boost the sales of restaurants that don’t already offer takeaway by 30% or more. Its peak times tend to coincide with restaurants’ down times – Sunday evenings, for example, when restaurants are traditionally quiet – and, crucially, of the seven million who get food delivered once a week, 80% still eat out once a week, 36% higher than the eating out levels of the UK as a whole.
A meteoric rise
Deliveroo takes £2.50 on each order, and although it has kept its actual sales figures close to its chest, it has raised more than $200m from investors worldwide. Its rise has been meteoric, as Shu told London newspaper the Evening Standard, in the space of two years, it has gone from a two person operation – with Shu doing most of the deliveries – to over 500 staff in 40 countries with 10,000 couriers.
There is a “huge amount of supply” from various apps and platforms, says Campbell, and demand does not seem to be declining. “It’s a pertinent issue,” he says. “Everyone’s asking us about it. It’s going to be really interesting as the market diversifies.”
What is clear, is that the sharing economy has arrived in the restaurant sector. Like hotels and transport before it, what could shape up to be one of the biggest disruptions to the way consumers access and use the service has come not from within the sector itself, but from Silicone Valley – or, in London’s case – the Silicone Roundabout.