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Interview Synopsis

Deliveroo – GMV growth & unit economics outlook

  • Public Equity
  • TMT
  • Europe

There is “no reason” why Deliveroo's Gross Transaction Volume (GTV) shouldn’t continue to grow despite Average Order Volume (AOV) trending down, a former senior manager at the company told Third Bridge Forum recently.

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Deliveroo’s GTV continues to grow as AOV drops

Despite an “uneven” global recovery from the pandemic, the specialist was optimistic that there are still opportunities for Deliveroo to increase its market penetration in areas such as France and Italy. 

Competition is, however, “tough”, according to the specialist, with Uber Eats, Just Eat and Glovo all vying with Deliveroo for market position. Deliveroo is currently showing “very strong” growth and retention in London thanks to more “large brands” being displayed on its platform. However, it is also “struggling behind a lot of other players” in markets such as Spain. 

Deliveroo’s overall GTV is increasing despite a drop in AOV, which the specialist linked to the platform servicing more occasions that have a “lower AOV than your Saturday night takeaway”. Commissions are also going down, although there is potential for delivery fees to go up in an “innovative fashion”. 

Riders and delivery are still the biggest contributors to Deliveroo’s costs, although the specialist highlighted it as an area with a lot of room to drive savings. Shaving seconds off the “dead time” drivers spend waiting for food could add “millions of pounds”, the specialist said, but requires making “extremely hard” improvements to technology and restaurant operations.

Also adding value to the company is Deliveroo Plus, which the specialist called “one of the most positive drivers” the company has ever had. The partnership with Amazon Prime has been “pretty incredible” in attracting new customers, as well as driving greater lifetime value. Deliveroo’s other new service, Deliveroo Hop, is another potential source of growth, although the specialist said they see the initial launch as a “trail” to discover if demand is there. 

What balance Deliveroo Hop finds between a standard grocery order model and dark store model will depend on demand, although the specialist sees no reason “why they wouldn’t succeed” with either model. However, the specialist doesn’t expect the company to acquire a business to develop Hop, given it is traditionally “not a very M&A business”, having only made one acquisition since its founding.

In contrast, the specialist said Deliveroo could itself become an acquisition target, although they don’t expect the recent Doordash acquisition of Wolt to impact that decision. Commenting on the US platform’s purchase, the specialist said it is not a big deal for Deliveroo, given there is no real overlap between it and Wolt. 

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