Gobbling up the competition. The growth of online food delivery marketplaces in Europe
The battle to gobble up the food and delivery competition to gain dominance across Europe is intensifying. The digital food delivery marketplace trade is fast becoming a very lucrative industry set to grow to a whopping $200 billion by 2025. Gone are the days of the notion that takeaways are greasy, unhealthy, and the waiting time feels like an eternity only to be disappointed to receive your food cold or worse, half eaten!
With the rise of online food delivery marketplaces over the years, they have brought versatility and variety of restaurants to the comfort and convenience of homes and offices. Immigration has given rise to new cuisines being introduced into Europe. Customers are provided a great choice of meals options as well as the ability to order from the best eateries or restaurants of the town, all done in the convenience of their home or office. With applications becoming a standard utility on mobile devices and GPS systems being made available to everyone, it is no longer a hassle to deliver food to the exact location of a customer. Customers are able to track their order progress from the time of order until the arrival at their doorstep. With the rising demand of food takeaway service, it is not surprising to see more digital marketplace platforms jumping onto the bandwagon.
Investment activity in food marketplace platforms doubled to €2.3B in 2019 from the previous year, most notably in the United Kingdom, Germany, France, Spain, Finland, and the Netherlands. The value of European food tech companies reached €43B (+39%) with European public companies growing €5.9B in value. To win the food delivery wars is a fairly simple cycle — the more customers you have, the more restaurants you have listed on any given food website marketplace platform. This in turn leads to more customers.
What is the marketplace model?
There are two types of models all of which are catered to provide convenience to customers.
- Ordering-only online marketplace platform: A platform focusing on the first leg of the food delivery chain. It acts as a pure software layer that aggregates a fragmented offering of independent restaurants which manage their own fleet of delivery. They provide a platform for restaurants to go online, get more orders and facilitate an easier way to get orders. This model is sustainable and scalable.
- Ordering and delivering marketplace platform: In the second model, the food delivery service providers bring extra traffic and orders to the restaurants while also managing the deliveries for them through their fleet of independent delivery agents connected by an Uber-like mobile app.
Millennials being the key drivers form the main bulk of the industry’s customer base. Having bigger spending power, they have higher requirements such as effortless ordering, instant delivery, and one-step checkout processes.
To improve the overall customer experience, food delivery marketplace platforms are introducing new ordering channels allowing customers to place orders via all possible channels — social media, virtual assistants, or smart devices are some examples. Modern delivery options have rolled in the use of robots, driverless cars, and drones.
Many food delivery marketplaces have focused on new niches such as appealing to vegans, catering to dietary restrictions with gluten-free meals, delivery boxes that are strictly eco-friendly, farm-grown food or even healthy smoothies. There is also the concept of a virtual or cloud kitchen — it is a concept to help restaurants avoid the high operating costs of opening a new physical space and provide convenience to partnering restaurants by allowing them to use their kitchen space to prepare extra meals. This concept is beneficial for food delivery platforms as they can save costs and focus more on product development and data analysis to identify and offer the most popular cuisines in specific areas. Being in a niche can help food delivery marketplaces break through the entry barriers and differentiate themselves from the intense competition playing field.
The key catalysts are the overall level of funding for the industry and the size of marketing budgets. Technology penetration — mainly smartphone and online are still relevant to the speed of adoption so far due to the geographic expansion of food players. The food category will grow in line with the smartphone category as new smartphone users adapt their behavior to take full advantage of the technology.
Let’s look at some of the leading food delivery online marketplaces in Europe.
Started in 2013 in the UK, Deliveroo is an online marketplace and logistics platform with the aim to get food from the best restaurants in the customer’s local area and having it delivered in 30 minutes. In the past, there were already food delivery online marketplaces however, the current online takeaway food options and delivery experiences were bad or at the very least sub-par. Deliveroo transformed the way people view of “takeaway” by offering fast, transparent and reliable delivery from premium restaurants. Deliveroo combined the aggregator business model with the marketplace and logistics business model to create an all-new hyperlocal on-demand business marketplace model allowing more control of the customer experience.
Deliveroo launched by working with restaurants in need of a delivery partner, but only recently began onboarding merchants who run their own delivery operations onto its marketplace to further expand into smaller towns and cities to increase overall order volume and lower costs for the company.
While customers use the app for free, Deliveroo earns its revenue directly from the customer with a delivery fee as well as earning commission fees from their partner restaurants.
Founded in Amsterdam in 2000, Takeaway.com is an online food ordering business operating as an intermediary web portal that allows customers to order food from a vetted selection of restaurants and have meals delivered to their homes by the restaurants themselves.
They are the leading online food ordering company in Continental Europe. Its most active markets appear to be in Northern Europe processing more than 95% of orders coming in from the Netherlands, Belgium, Germany, and Austria. They are the market leader in their native Netherlands and in neighbouring Belgium. They also serve customers in Poland, Switzerland, France, UK, Luxembourg, Portugal and Vietnam.
Takeaway.com generates revenue by having customers place food orders through its delivery portal. They charge a commission to their restaurant partners on all orders which then gets automatically deducted before depositing profits into their accounts.
Just Eat operates an online marketplace for food delivery providing online takeaway ordering service that allows consumers to search for and order in real-time from its restaurant partners through a single online portal. In the Europe segment, it operates in Denmark, France, Ireland, Italy, Mexico, Norway, Spain, and Switzerland and headquartered in London, United Kingdom.
The company processed $5 billion (£4.2 billion) worth of orders with revenue expected exceeding $1.2 billion (£1 billion) in 2019, up from $960 million (£780 million) in 2018, with an underlying profit of $221 billion (£180 million).
Wolt has over 6000 restaurant partners, 12,000 courier partners and 3 million registered users. Wolt is a technology company that makes it incredibly easy to discover and get great food, delivered to your home or office. The Helsinki, Finland-based company has operations in 19 countries and 60 cities, serving food from over 7,000 restaurants with over 15,000 courier partners.
Written by Ian Ortega. He is with the Business Development team at Arcadier, a SaaS company that powers marketplace ideas and allows you to build your own marketplace in minutes. You can follow Arcadier on Twitter, Facebook, and LinkedIn for the latest insights on marketplaces and the Sharing Economy.
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