How Deliveroo Works
Posted on: | Posted by: Rahul

How Deliveroo Works: Business Model and Revenue Model

Do you like to get out of your comfort zone? Would you like to get something with minimal effort? If your answer to these questions is a “No” and a “Yes” respectively then, the online food delivery services are a godsend for you. The doorstep delivery services started some time back have brought about a drastic change in the food market. So what has enabled this change and could we look into a case study of one such service provider to understand this market better? 

Let us begin by understanding that today any business can grow into a giant by leveraging the right technology. The food delivery service industry is one such example. Nowadays food delivery apps can help deliver meals instantly, track customers’ eating habits, and their preferred times of having food. Not only are these apps making lives easier for their customers, but also taking the food industry to the next level. One such business based on a food delivery app technology that has been very successful is Deliveroo.

Let us get to know in detail how Deliveroo works starting with the size of the market that it caters to.

MARKET SIZE

The global online food delivery industry has reached USD 84.6 billion in 2018.

In France, revenue in the Online Food Delivery segment amounts to US$1,837m in 2020 which is expected to show an annual growth rate (CAGR 2020-2024) of 9.0%, resulting in a market volume of US$2,597m by 2024.

If compared worldwide, China generates maximum revenue share in the online food delivery market. (US$45,909m in 2020).

In the UK, revenue in the Online Food Delivery market amounts to US$5429m in 2020 which is anticipated to show an annual growth rate (CAGR 2020-2024) of 6.5%, resulting in a market volume of US$6,976m by 2024.

Revenue in the Online Food Delivery industry in Spain amounts to US$996m in 2020 which is conventional to show an annual development rate (CAGR 2020-2024) of 9.0%, resulting in a market volume of US$1,409m by 2024.

ABOUT DELIVEROO

Deliveroo is an online delivery food application that provides food at home and workplace from various restaurants and food courts. The idea of Deliveroo came with an immediate need to bring change in the food delivery market, a market in which people were deprived of both good quality food and variety in food options. In 2004, when William Shu, a hedge fund employee shifted from New York to London. He found most of the restaurants only providing takeaways due to which customers had to compromise with the quality of services provided by the restaurants. This gave an idea to William Shu to partner with his friend Greg Orlowski to launch their start-up, and so another name in the list of food delivery businesses was added.

The name Deliveroo is inspired by the name of the animal, kangaroo, which is protective of its community. The reason to do so was to position the company as a safe place for a dining environment.Within one year Shu’s Deliveroo raised £2.75 million and by January 2015, Deliveroo was able to grab partnerships with 750 restaurants and had served over 50,000 people.

BUSINESS MODEL: How deliveroo works?

Deliveroo’s business model is a highly efficient one, it targets the most valuable customer segments that are interdependent and required for a business to work, these are:

1) Customer: People who work or desire food to come to their doorsteps. People who desire a variety of items to choose from different restaurants.

2) Restaurants: Food serving entities that want to get their food delivered to the customer and also want to expand their customer base.

VALUE PROPOSITION

Deliveroo offers five major value propositions: accessibility, convenience, price, risk reduction, and brand reputation.

Deliveroo provides accessibility by partnering with restaurants that do not provide online food delivery services on their own. This helps the restaurants reach maximum customers in the city and customers, in turn, get facilitated with a variety of food options with multiple restaurants to choose from.

Deliveroo promises to deliver the food within 32 minutes, which gives service value to customers. Along with that, Deliveroo takes care of the restaurants by providing them good drivers and delivery services.The company charges a reasonable price of £2.50 for each delivery it makes to the customers. Also if the customers recommend the application services to their friends, then they get special offers on food delivery services.

Deliveroo makes sure that the food has good packaging that can maintain the food temperature for a longer period. Moreover, if the customer is not available at the destined delivery location, the delivery man waits for him for 10 minutes.

Deliveroo has maintained its brand status by providing good quality services to its customers throughout these years. These quality services have earned the company many loyal customers and contributed to the success of Deliveroo.

CHANNELS

Deliveroo food market’s main channel to reach its customers is its website whereas the restaurants are approached through the business development team. For instance, the company promotes its name through social media pages.

KEY PARTNERS

The company has collaborated with Grab, Southeast Asia’s top ride-hailing company. Consumers who complete five or more trips per week with Grab are eligible for free Deliveroo credit worth as much as $40 per week.

The company recently agreed a deal to be the official partner of the Norwich City Football Club as its “Official Takeaway Delivery Service Supplier“.

KEY RESOURCES

Deliveroo’s main resource is its software platform, which serves its restaurants and consumers. It also depends on technical support and skilled engineers who maintain the platform, delivery drivers, and customer service employees.These engineers directly contribute to the efficiency of Deliveroo’s business model.

REVENUE MODEL: How does it earn revenue?

Deliveroo charges a small amount of fee from customers depending upon area. On a basic level, it charges £2.50 from customers. Deliveroo also earns from restaurants through commission. Since it promotes the restaurant’s name and makes the deliveries, Deliveroo gets a commission from the restaurant on each delivery. Sometimes the restaurants demand the application to advertise and market their name on their Deliveroo app or website. This also costs restaurants and they pay a fee to Deliveroo to get more visibility.

OTHER PLAYERS IN THE MARKET

· Uber Eats is considered one of the biggest competitors of Deliveroo. UberEats was founded in 2014, and is headquartered in San Francisco, California. UberEats is known to be one of the assets for the online food delivery industry and had a huge impact on the Deliveroo food market. Uber Eats generates $1.9B more revenue than Deliveroo.

· Delivery Hero is also estimated as one of Deliveroo’s biggest rivals. Delivery Hero was founded in Berlin in 2011. Compared to Deliveroo, Delivery Hero generates $1.1B more revenue.

· Just Eat is the top competitor of Deliveroo. Just Eat is a public company that was founded in London, England in 2001.

CONCLUSION

The competition is getting tougher by the day in the online food delivery industry. As the demands of the customer increases, more and more companies will enter the space to provide customers with the aim of providing better online food delivery services. Some of them might emulate the Deliveroo business model and others might come up with one of their own, whatever may the scenario,the food delivery market is poised to take off within the next few years. The business space still doesn’t have enough players to meet the demand and if one wants to enter, then this is the best time to start.

If you are inspired by such success stories and aspire for your app to provide similar services to the customers, then AppsRhino can help you. We will guide you through your journey to build and design your app according to your convenience and expectations.