Sugar is the antidote to salt and bitter taste. Food delivery companies are similarly looking for ways to reconcile their own need to grow their clientele with investors’ pursuit of higher profits. The secret ingredient could be selling their food delivery technology as an additional service to retail groups. Companies like DoorDash, Uber Technologies and Just Eat Takeaway, which owns Grubhub, are adapting at breakneck speed to the post-pandemic reality: Fewer new customers are now ordering, while investors are increasingly hungry for more profits. Getting the group companies back to the rapid growth of the last two years of the pandemic is a big challenge. In the second quarter of this year, revenue growth for DoorDash, which is valued at $28 billion and is led by Tony Sue, was 30% year-over-year, compared with 83% in the same period. of 2021. Gross margin shrank to 43% from 53% a year ago.
Controlling your marketing or recruiting spend is a step towards profitability. Inventing new revenue streams, for example by allowing serviced restaurants to advertise on delivery companies’ platforms, is another. Uber CEO Dara Khosrovshahi hopes to grow the food delivery arm’s advertising revenue sevenfold by 2024 to reach $1 billion.
One option for DoorDash-type businesses is the ability to deliver very quickly as a service. For a monthly subscription, supermarket chains or other retail groups could use the price and driver tracking expertise. Those who provide technology, now, could have discounts. More than 100 conglomerates, including Apple and Walmart, already have such relationships with Uber, while DoorDash builds warehouses and provides drivers on behalf of Loblaw, Canada’s largest grocery chain.
Since the technology already exists, such a bypass would yield higher profit margins. Subscription-based tech giants from Salesforce to SAP have roughly 70% gross margins, compared with 40% for Amazon-backed food delivery businesses like Deliveroo. And that translates into a higher rating from the investing public, as on average software companies have shares trading at nearly seven times 2024 earnings.
