Jul 01, 2021
Online grocery and restaurant delivery has seen an unprecedented spike in adoption with the onset of the novel coronavirus pandemic and startups have sprung up and have partnered with retailers to facilitate the flow of food. to consumers stuck at home. However, as the economy reopens, some are starting to wonder if all of the investment in food delivery has created a bubble that is begging to burst.
With venture capitalists throwing money at delivery startups during the pandemic, James Boley of American journalist likens the situation to a gold rush, with many speculators anticipating wealth and little earning any appreciable returns on their investment. As venture capitalists ignore the stability of given business models and startups have to spend money fast, Boley sees unicorn delivery startups from overexcited investors soon compromised by a downturn. food delivery as restaurant meals increase.
Venture capital firms were investing tens and hundreds of millions in delivery startups as late as the end of April, according to a CNBC report. London-based Taster received $ 37 million, Finnish startup Wolt raised $ 530 million and a project started by former Deliveroo staff called Dija raised $ 20 million.
As startups scramble to outdo themselves and differentiate themselves in the market by offering half-hour and even 10-minute delivery, observers wonder if new players in the industry will end up outstripping demand for services.
Consolidation appears to be affecting food delivery already, with Uber gobbling up midsize delivery players through acquisition and integrating them into its Uber Eats app offering.
Other developments, however, indicate that demand for food delivery continues to remain strong even in regions where lockdown measures to prevent the spread of the novel coronavirus have eased.
In the quick-service restaurant space, major players like McDonald’s have been slow to reopen even though restrictions were lifted on in-store dining, with some franchisees finding drive-through, curbside and delivery only means profitable to do business.
The model became so popular that municipalities began to step in to protect restaurants that might lose out from over-reliance on third-party delivery startups. San Francisco recently capped the amount delivery apps can charge restaurants per order, according to Eater.
DISCUSSION QUESTIONS: Do you think the potential growth and investment opportunities for grocery and restaurant delivery businesses have been overestimated as a result of the pandemic? How do you see the long-term demand for food delivery shaking up?
“There will be more mergers and acquisitions before the dust settles and two or three big players – Uber included – will emerge, after consolidation.”