US Online Food Delivery Industry Shakeout

How do you think this is going to shake out between the three major players?

There’s going to be a push towards profitability, which will turn the tide a little in Grubhub’s direction because DoorDash and Uber Eats won’t be able to spend as wildly as they have in the past. I’ve seen Uber Eats pull back already. They’re already getting so much pressure. I think you’ll see DoorDash do that as well.

Then it’s going to come down to selection, speed, and price. The one big advantage DoorDash is going to have in some of these markets they’ve moved into that are smaller but taken in total — they have a good business they’ve grown out of it. The first mover advantage is real. There may not be a lot of loyalty, but if you’re with DoorDash in a small town and you already have good selection, you’ve found a few good go-to restaurants, you might go for $15 off to try Grubhub, and some do, for sure. But there’s a certain percentage that have inertia, they’re fine staying with what they’ve got. The people that are ripe to change are using DoorDash, but they’ve only got a handful of restaurants. They go for the free one-off meal with Grubhub and see they’ve got all these restaurants. I think it’s really going to come down to selection, number one.

As Grubhub and Uber Eats build out and get even with DoorDash, it’s going to go to the next thing, which is price. If Grubhub can subsidise with the delivery restaurants, they would potentially have a price advantage that could help them in the longer term. Then speed; that’s something I think the others have advantage on because they own their own delivery, whereas Grubhub don’t. It’s a two-edged sword; they get better profitability, but they don’t have as much control. People like to see where their meal is, they like to see minute-by-minute how soon it’s going to be there. Grubhub, in many cases, can’t do that. It’ll shake down to how many customers care about that feature versus price. What I’ve seen, based on actual test results and data, is people care more about price than they do about being able to track their order. After selection, it’ll be a battle with price and speed.

Let’s say you’re Maloney, it’s Q3 2019, we’ve seen a huge influx of customer acquisition from DoorDash and Uber, and they’re scaling massively. The independent restaurants are all non-contracted independents — what do you do?

A couple of things. One, they really need to be hitting on their strengths — “We’re a profitable company, growing aggressively.” At some point, even halfway through my time at Grubhub, only 15% of Americans had ever ordered a meal online. There was still a huge opportunity, and as people order a meal online, they realise there’s a lot of selection. “I can order from one of my favourite restaurants. I was sitting here debating whether I leave at half-time and go out and miss half the game, or I just sit here and hang out, they’ll deliver it to my door, and I can just eat it on the couch. That’s a slam-dunk. I’ll pay five bucks extra for that service. And if they deliver for free, why was I ever going out to the restaurant?” I think there’s still a ton of opportunity out there, it still is a gold rush. At this point, I would guess it’s still only 30% of Americans have ever ordered a meal online and had it delivered to their house.

I would be saying, “We’re going to spend, we’re going to invest and acquire as many customers as possible, and we’re going to do that with partnerships where we have strong, nationwide co-branding with popular brands like we’ve done with Yum Foods, with Taco Bell, Pizza Hut, KFC.” The relationship with Shake Shack is huge. I think that’s important, to invest in those. Number two, have strong marketing where it’s expensive but you build up as much brand awareness as you possibly can. I think they’re very much moving ahead with the loyalty programme that will hopefully be differentiated and restaurant-specific, something that restaurants and consumers love, that they don’t have to pay for.

Then going very heavy into the non-contracted restaurant push. They need to add every single attractive restaurant in the entire country, where they can offer delivery and focus on ramping that delivery as quickly as possible. That selection is key. Those would be the main areas I’d be working on over the next six months.