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Grubhub sale rumors highlight the state of the struggling food-delivery industry, Recode

Grubhub sale rumors highlight the state of the struggling food-delivery industry, Recode


The Wall Street Journalreported yesterday that food-delivery service Grubhub could be up for sale. Whether or not that sale comes to fruition, it highlights that Grubhub and its competitors are struggling to compete over who brings you food from restaurants.

Grubhub has seen its market share decline to about percent of US sales in November, down from more than half just two years earlier, according to data from credit card measurement companySecond Measure. Meanwhile, venture capital-backed startups like DoorDash have moved into the lead, with 90 percent of US sales. Uber Eats, Postmates, and a handful of smaller competitors are also duking it out in cities and towns across America.

Here’s that same chart another way, where you can more easily see Grubhub’s decline over time:

Food delivery is a low-margin business, which makes money from charging customers delivery and other service fees, and from revenue shares with restaurants. And to sign up some bigger restaurant chains,food delivery services have had to lower their commissions. Those margins are further tightened as food-delivery companies seek to beat out their competition by lowering their fees for customers and offering expensive promotions. These discounts, however, aren’t necessarily locking in customers, but rather encouraging customers to shop around. It’s a similar situation to ride-hailing, wherecustomers are not loyal.

“We believe online diners are becoming more promiscuous,” Grubhub’s CEO wrote in a

shareholder letter in October. “For years, we saw in our data that a Grubhub diner was extremely loyal to our platform. However, our newer diners are increasingly coming to us already having ordered on a competing online platform, and our existing diners are increasingly ordering from multiple platforms. ”

The food-delivery business is also notoriously expensive and difficult to scale nationally, as you can see from the varied market share city to city. Scaling includes a resource-intensive process of signing up restaurant partners as well as drivers in each city.

Drivers have also been a source of consternation for food-delivery services like DoorDash, which has beenaccused of skimming drivers’ tips. Each food delivery service has different policies, so depending on which company buys which, drivers ’earnings could be affected.Amazon shut down its US food delivery business in Juneafter struggling to gain major market share. The Journal story said Uber wants to move out of cities where it isn’t the No. 1 or No. 2 player.

The result of all this competition? Big losses.

according to the information, “Uber Eats was losing nearly $ 1 for every $ 1 it generated in net revenue, after subtracting payments it makes to drivers” in the first three quarters of 01575879, or three times worse compared to the same period in (***********************************************. Uber had been trumpeting Eats as a

potential growth engine, but that no longer seems to be the case .DoorDash is expected to lose $ (million for


. Postmates posted a $ (million operating loss in) ********************************************** ((the latest data available)),which Recode previously reported. And Grubhub, the only profitable company of the bunch, has had toreduce its earnings expectations.

DoorDashandPostmateshave both considered going public orjoining up with bigger companies. Any consolidation would be welcomed by the industry, though perhaps not by customers, who are currently enjoying the major discounts that result from the competition among these companies.

Grubhub’s shareholders seem to like the idea of ​​consolidation. Its stock is up about 30 percent after the Wall Street Journal report.************************** (********************************Read More************************

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