Search

Food Delivery Got Really, Really Messy in 2019. That’s a Good Thing

by Jennifer Marston

https://thespoon.tech/food-delivery-got-really-really-messy-in-2019-thats-a-good-thing/


Roughly this time last year, talk around the future of restaurant food delivery screamed promise and progress. Funding and acquisitions abounded. Valuations skyrocketed, and by mid-year, third-party food delivery apps were projected to have 44 million U.S. users by 2020. 


That number hasn’t changed, but a heck of a lot else did, and somewhere along the line, the rose-tinted glasses through which the industry viewed food delivery came off and reality set in. In case you hadn’t heard, reality is a messy business. At the close of 2019, food delivery is even messier, mired in regulatory battles, bad press, and questions around profitability that grow louder each week.


None of this means third-party food delivery is dying. All of it plays a crucial role in moving the discussion forward about food delivery — what it is now and what it should become going into 2020.


Before we go forward, here’s a quick look back:


Third-party Delivery Opponents Got Stronger and Fought Harder

Largely speaking, there weren’t many detractors — at least not vocal ones — of third-party delivery services like DoorDash, Grubhub, etc. at the start of 2019. While some chains, notably Jimmy John’s, opted out of third-party delivery, we saw more deals struck in the first half the year than questions raised. 


DoorDash serves as a good example of the sentiment around third-party delivery in the first half the year. DoorDash became the first delivery company to offer service in all 50 U.S. states. It also struck lucrative deals with high-profile restaurant chains left and right. And there was its valuation, which kept ballooning with each new funding round, eventually eclipsing $12 billion. 


The other major services also had their fair share of lucrative deals and high valuations. Uber Eats nabbed a “preferred” delivery partnership with Starbucks. Postmates raised millions ahead of its IPO (more on that in a minute). Grubhub, too, made a slew of deals with high-profile restaurant chains, including Taco Bell and Dunkin’.


Then things started to get tense. In June, an oversight hearing held in NYC called into question the high fees Grubhub and other companies charge restaurants for use of their services.


From there followed one controversy after another: antitrust investigations, ethically questionable tipping policies, plummeting stock. More recently, California passed Assembly Bill 5, which reclassifies gig workers as employees and undercuts the entire model on which third-party delivery is built. DoorDash and Uber, among others, have vowed to fight back in 2020.


We can certainly expect that battle to take place. But if events in 2019 taught us anything, it’s that no matter the front it chooses to fight, third-party delivery companies will find more than one opponent lying in wait. 





IPO Fever Cooled Down


Of the big four third-party food delivery companies, Uber, Postmates, and DoorDash were all said to be moving towards IPOs in 2019. (Grubhub IPO’d back in 2014.) However, Uber was the only one of them to actually follow through and go public — then subsequently racked up billions in financial losses. The company’s most recent earnings call saw some improvement: roughly $1 billion in losses in Q3 versus $5.2 billion in Q2. But it’s still $1 billion in losses.


Postmates, meanwhile, confidentially filed for an IPO in February but was at last check in talks to find a potential buyer after laying off staff and shuttering its Mexico City operations. DoorDash may be pursuing an IPO for 2020. Or it may be pursuing a direct listing, largely to avoid some of the scrutiny that comes with debuting on the public market. After all, profitability remains very much a question mark for third-party delivery companies, and IPOs in general fizzled this year, leaving even more questions about them for next year.


Hybrid Delivery Heated Up


Earlier this year, I wrote that “there are now more ways for restaurants to do delivery than the two extremes of pay for your own fleet or sign up with a third-party service.”

That middle ground gained, eh, ground in 2019 thanks to the rise of hybrid delivery strategies, where delivery orders originate through the restaurant’s own app and third-party services are used only for last-mile fulfillment. Some chains, notably Panera, are using an inverse version of this strategy, sending orders through third-party apps but handling the last mile themselves. 


There are even variations on those variations, but they all hint at the same thing for the future: the delivery stack — tech, operations, the all-important customer data — won’t rest in the hands of one but many for some time yet.


Progress, as George Orwell once wrote, is “slow and invariably disappointing.” The market for third-party delivery may be mired in confusion and controversy (of its own making in some cases), but, as I said before, that doesn’t spell the end for the model. In fact, third-party delivery is still expected to account for 70 percent of delivery orders in 2022.


In the near future, though, expect this area of the food industry to get messier, raise more questions, and incite more regulatory battles as it progresses towards normalization.


7 views

Recent Posts

See All
JOIN FOOD HUB

2039A NW 1st Place Miami, FL 33127 | info@food-hub.co | Tel: 786-599-6484

  • Black Instagram Icon
  • Facebook
  • LinkedIn