Analysis

Deliveroo – making the move from platform to operator

Last May, Deliveroo Editions announced that it would start bringing its own brands of food to market – and now we see Deliveroo stepping this up. In London, for example, Deliveroo Editions has six of its own brands offering food available from Crouch End in north London. The brands represent a range of pizza restaurants and fried chicken outlets: Cluckleberry Finn, Peach’s Fried Chicken, Wing It, Lower East Side, Nonna’s Square Pizzas and Knead Neopolitan. These six are just a few of the 400 or so virtual restaurants already available on the Deliveroo platform in the UK.

The large aggregator platforms are increasingly diversifying and trying to find new ways to bring in revenue, other than their current business model. Uber Eats, for example, recently announced that it would be cutting its fees and also allow restaurants in 100 towns and cities to use their own delivery drivers on meal orders placed using the app in a marketplace service to rival Deliveroo and Just Eat, alongside its core delivery service business. In March Uber Eats also announced that it too, will be launching dark kitchens, starting in Paris.

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Deliveroo’s endeavour to increasingly offer food from its own virtual brands was clearly signalled and expected by the industry. Deliveroo first announced and launched its dark kitchens project in 2017 and in May 2018 it announced that it was intending to launch a £5m “innovation fund” to invest in developing its own restaurant brands, together with chefs. Even at this point, operators were already speculating that this could potentially be a sign of a larger evolution of Deliveroo’s services, with the ultimate ambition of becoming a restaurant brand in its own right, rather than a marketplace or platform.

Speaking at the Casual Dining Show at the beginning of 2018, Mark Smith, MD of Vietnamese noodle soup restaurant Pho, said it was common sense for Deliveroo to launch its own delivery-only restaurant brand, taking advantage of all of the data that is has at its fingertips. He said: “If I was Deliveroo, I’d be looking at becoming an operator… so they [could] start to become a competitor of ours as well. They control the customer data. They know all the Vietnamese noodle customers who’ve ever ordered Deliveroo through us. Combine that with a dark kitchen and the data, that’s really powerful for them to start thinking about being an operator.”

This should be a concern for restaurants, particularly for those with a presence on Deliveroo’s platform at the moment. Moreover, it will have a wider impact on the whole of the restaurant and takeaway industry. Deliveroo is learning from the hard-earned lessons that the operators on its platform have learned and it is able to take this information and use it to offer food to a pre-existing, receptive market, though its existing infrastructure.

Nowadays, data of all sorts is critical to food businesses. This can range from what ingredients work well and the ideal price point, to identifying the right customer segments. Creating and building on this knowledge and insight takes time for young companies. It is one of the major barriers to success. Deliveroo is able to learn from both the data and errors of others and is therefore able to provide a targeted food offering, for delivery, while taking no risks itself.

Restaurant operators should keep a close eye on this development and evaluate whether they want to be one of the businesses that Deliveroo learns from in order to make itself into an operator in its own right. If not, they should look to take back control from the aggregator platforms. There are a growing number of white-label alternatives to the big aggregators, from payments and mobile, or web ordering technology providers, to delivery logistic management businesses. The Do-it-Yourself approach is an increasingly viable alternative to Deliveroo and, critically, it keeps the most important part in the hands of the operators – their customer and business data.


By Nick Hucker, CEO of pre-ordering technology provider, Preoday

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