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How Deliveroo creates value in the fast food industry

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Stephen Cunningham

on 11 February 2016

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Transcript of How Deliveroo creates value in the fast food industry

Deliveroo Stephen Cunningham
Founded in 2013 by Will Shu and Greg Orlowski. They previously worked in finance. After working long hours everyday for many years in London, they realized the city lacked a 24 hour delivery system for good quality food.
General Overview
Characteristics of the food delivery customers
Value Proposition- Proper Food Proper Delivery
"Anyone you think of when its raining and want food".
William Shu
January 2015
The Food Delivery Industry:
How Deliveroo creates value in the food delivery industry
Deliveroo operates in 50 cities across 12 countries, launching in Dublin in April 2015
Customers want food delivered to their door. They work longer hours and have less time to prepare meals
A few of the competitors of Deliveroo in Dublin
This is a fast moving and growing industry. We see more and more places delivering food . This leads to a huge amount of competitors in the take away industry. Deliveroo competes with different food delivery countries in different regions. In Dublin, its main rival is JustEat.ie which has a 7% market share.
Who are Deliveroos Competitors?
5 Forces Analysis of the Food Delivery Industry
Industry Cometitors
Buyers
Substitutes
Suppliers
New Entrants
Threat of Substitutes
Medium to High:
Plenty of alternatives to getting a take away. Going out to a restaurant for a meal, cooking yourself at home.
Power of Suppliers
Low to Medium
: Restaurants want to have a take away service. It allows them to expand their reach of the market. Going out for a meal can be an inconvenience. If they increase prices, then customers will move away from them. However, if costs are lower, they can change from one delivery service to another, considering the large amount available.
Threats of New Entrants
Medium to High
: There have been many new entrants to the market in recent years with Deliveroo being an example. Very few barriers to entry other than a very saturated market
Power of Buyers
High
: The large amount of food delivery services in any one area means buyers power is very high. If they are not satisfied with one, they can change to the next. This is also dependent on the area as some cities have more food delivery businesses than others. Eg New York vs Cork city
Industry Competitors: Intensity of Rivalry
High:
The sheer size of the industry, lack barriers to entry and the power of buyers makes this a very competitive industry.
How does deliveroo give value to its customer?
2 Main Components
Fast- Deliveroo delivers food in an average time of 30 minutes or less. They want food delivered as quickly as possible. This is especially important in todays world where people are becoming more and more impatient
The Best Food- They also want to deliver the best type of food. This may not necessarily be the most expensive food or the healthiest food. Instead Deliveroo is looking to bring the best types of all food.
A Mix of the "Best food"
Combination of healthy and
top quality foods in their area
E.g Italian and Thai.
Averaging 32 minutes in Dublin
Funding: Deliveroo is funded through private seed investors, very recently securing 100$ million through different investors (November 2015)
In London alone they employ over 300 drivers and cyclists.
At the same time, people are now more health conscious. They are increasingly becoming aware of health and wellness, taking action to address this. According to Bord Bia PERIscope report of 2013, people are looking for quality healthy food instead of value for money
How do they do Fast?
Deliveroo adopt a Hyper local approach. They choose a location like Dublin, build a network of drivers and addresses around that area. It establishes itself in an area before expanding into other geographic areas (Generally outward). For example, Deliveroo delivers to Dublin city center but not to suburbs like Malahide and Castleknock. This allows them to maintain their promise of delivering food in under 30 minutes.
Deliveroo in Dublin- The Hyper Local Approach
Not just city center but also big towns like Dundrum and Dun Laoghaire. They expand out. "Our business is a collection of Hyper Local Markets" William Shu, 2014. Therefore those in Dundrum will get food from there allowing for quick delivery time.
Getting the Best
Deliveroo categorize their customers as premium casual. They want restaurants that provide good quality food. Price is not a big factor meaning many of the restaurants are expensive but are of top quality.
€€
All 4 stars on Yelp but can be expensive

€€
Creating Value for Restaurants
Deliveroo allows any one restaurant to increase its output by 10-15%. More customers are reached. They provide the restaurant with everything from the technology to the driver so it does not effect the restaurants fixed costs. As Deliveroo operates on commission, if no one uses the service, then it does not cost the restaurant a cent. This allows the restaurant to operate as normal, only increasing the amount of meals made. Deliveroo also displays the restaurants menus online, giving them more access and availability to potential customers.
The Ordering Process- The Back End Users
Customer places order online through app or website
Restaurant recives the order through a dedicated device (Tablet). They recieve an audio and visual alert
Food begins to be prepared & the restaurant sends for a driver by pressing a button on the tablet
The Deliveroo backend then uses an algorithm to determine which is the most appropriate driver for the job
The Designated driver also has an app that tells him exactly where to go. This eliminates human interaction and therefore eliminates mistakes
Gain Creators
Pain Relievers
Gain Creators
Pain Relievers
Restaurants
Customers
The Value Proposition
Jobs
Pains
Gains
Jobs
Pains
Gains
Access to a broad range of food
Elegant, seamless digital experience
Premium options available for takeaway
Less Waiting time for food to arrive
Customers do not have to rely on unhealthy "ready made meals" from supermarkets
Ability to reach more customers and therefore create more output
Promotes the business on an elegant digital platform
No extra fixed costs as driver is hired by Deliveroo
Very few errors created because of technology in place

Order food, satisfy hunger
Choose the suitable food for the situation e.g lunch, dinner
Quick Delivery
Broad Selection
Less reliance on unhealthy takeaways
Complex ordering process
Unsafe payment process
Late/Mix up in order
Deliver food
Increase profit/ Get more business
Establish an online prescence
Provision of driver and technology necessary for delivery
Increased output/profit
Online prescence
Increasing costs
Time spent processing orders
Errors in order processing
Late deliveries
Technology- How do we order food: Front End Users
"We want our customers to have an elegant seamless digital experience" WIlliam Shu
1.Enter Your Address
2. Choose your restaurant
3. Choose your meal
4. Enter your details and Pay!
Market Share
The food delivery industry is huge. The online food delivery market in the UK is worth 9 billion pounds. Deliveroo has a very small share in this market with roughly 1 million pounds in revenue. However, this is due to its relatively new entry to the market (JustEat entered in 2001 compared to Deliveroo in 2013).

£156.8K per employee
1,075 employees
£168 Million Revenue
£2.76K per employee
250 employees
£1 Million Revenue
Pricing Strategy
Delivery fee - A "Roo Fee" of €2. 50 is charged directly to the customer.
Commission - A commission rate (Undisclosed) is charged to each restaurant that signs on with Deliveroo.
There is no priority fee to be at the top of the website.

Revenue Model
Deliveroo have made roughly £1 million in revenue.
Costs include the technology installed into each restaurant, back end workers who operate the technology and drivers who deliver food.
Other costs include the development of the modern website and app
Profit Equation
Evaluation
Whilst Deliveroo may not be competing financially with its competitors, it is maintaining the promise of delivering the best food as quickly as possible. They are expanding at a much faster rate than its older competitors. Just Eat operates in 15 countries compared to Deliveroo in 12, despite being 11 years older. This has been aided by the recent funding of private investors such as DST global. If the company continues to grow at such a rate, they will be the number one food dellivery service in 5 to 10 years.
Finally....
How do they plan to grow
William Shu has outlined 3 ways to expand Deliveroo
The average delivery time is 8 minutes, meaning a driver could do up to 7 deliveries in an hour
Geographic Expansion- Expand Deliveroo to as many countries and cities as possible, establish a foothold and expand in the city. "Going to new cities in countries we are already in" William Shu 2016
Marketing- Deliveroo have not focused on marketing but more logisitcs. They want to get their name out there through their online platform.
Hiring the best people possible- The company want to expand on the team they have by acquiring human capital who can assist in the expansion of Deliveroo. This includes top level management with innovtive ideas right down to the drivers. The more drivers Deliveroo has, the more food can be delivered, the more opportunity to expand into different regions of cities and countries.
How do Deliveroo create value
Technology
Deliveroo uses algorithms to determine which drivers are most suitable to each job. As well as this, they install technology into each restaurant and have back end technology which process orders. Deliveroo give the customer an elegant digital experience with a very simple and easy to use website
The Brand
Whilst Deliveroo is a young company, it is establishing itself as a reliable brand, being known for their quick delivery service feasible by the technology they use. They are also well known for their premium meals with particular emphasis on healthy meals
The People
Deliveroo make a point of hiring "only the best people". This starts at the top level where management make big decisions right down to the drivers who deliver your food
Scalability
The company is only small in comparision to its competitors and they look to expand goegraphically, spread the word through their marketing campaigns. This is being funded by their investrs Accel and DST Global
The Tows Matrix
Strengths
1. Good technology in place that allows for quick delivery
2. Large amount of restaurants using Deliveroo
3. Elegant digital interface
Weaknesses
1. 2.50 delivery charge
2. Minimum of 15 euro purchase
3. Not as big as their competitors

Opportunities
1. Capabilities to expand geographically
2. Expand into more restaurants
3. Expand outwards within cities
Threats
1. Plenty of experienced and established competition

SO Strategies
1. With its financial capital, it has the ability to expand into different countries which lack quality food delivery systems

ST Strategies
1. Deliveroo should continue to put emphasis on delivering quickly and providing premium meals for its customers. This is a niche in the food delivery industry and will help them expand into a bigger competitor.
WO Strategies
1. Scalability will allow Deliveroo to reduce costs and therefore consider a reduction in their roo charge or in their minimum purchase.
WT Strategies
1. By taking their competition on at their own game, Deliveroo may be able to increase its capabilities and then reduce their prices.
Bibliography
http://finance.yahoo.com/video/deliveroo-competes-food-delivery-business-023240133.html;_ylt=AwrC1C5APLJWIBYAhGGTmYlQ;_ylu=X3oDMTEzN2RpdDhrBGNvbG8DYmYxBHBvcwM0BHZ0aWQDVklEUFJEXzEEc2VjA3Nj

http://www.wired.co.uk/news/archive/2015-04/03/startup-of-the-week-deliveroo

http://www.irishtimes.com/business/technology/deliveroo-gets-official-dublin-launch-1.2182331

https://deliveroo.ie/faq#story

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11766032/Deliveroo-raises-70m-six-months-after-previous-round.html

http://www.bordbia.ie/industry/manufacturers/insight/publications/bbreports/PERIscope6/PERIscope2013FinalReports/Periscope%207%202013%20Ireland%20and%20GB%20Final%20Report.pdf

http://monocle.com/radio/shows/the-entrepreneurs/154/

http://techcrunch.com/2015/01/29/deliveroo-hoo/

https://www.owler.com/iaApp/139325/just-eat-competitors

http://techcrunch.com/2015/05/07/a-secular-shift-to-online-food-ordering/

http://venturebeat.com/2015/04/22/deliveroos-premium-meal-delivery-service-moves-beyond-britain-starting-with-paris-berlin-and-dublin/
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