Specialist
Former Senior Manager at Deliveroo
Agenda
- GMV and GTV (gross transaction value) growth and market share trends in the UK
- Defensibility of Deliveroo’s (LON: ROO) market share position in international markets vs Just Eat (LON: JET), Uber Eats (NYSE: UBER) and others
- Delivery unit economics trends and marketplace growth potential
- Deliveroo Hop dark store grocery roll-out and growth dynamics
- Further industry consolidation outlook
Questions
1.
I expected a relative slowdown in Deliveroo’s GTV [gross transaction value] as we came out of lockdowns, but that doesn’t seem to be the case. What’s your GTV growth outlook in the company’s core markets?
2.
What is the trajectory of GTV growth in the UK? GTV is inclusive of delivery and platform fees. Is that correct? It was reported as 54% in Q3 2021. Where might that head?
3.
The international GTV is very diverse with many different markets. Which are the most important for driving international GTV?
4.
How do you think about the KPIs in the international markets Just Eat operates in? You mentioned France, Spain, and Italy, which are very competitive markets, as are Singapore and Hong Kong.
5.
What might be the longer-term strategy in the rapidly developing European markets? You mentioned Glovo is incredibly strong in Italy and Spain. Just Eat and Uber Eats are strong in Spain and the latter is strong in France. What options does Deliveroo have in these markets? Is there scope or rationale to pull back from them and consolidate in markets where it’s number one or two?
6.
Considering the Spanish review-based legislation change, how would you value Deliveroo’s operation there in the event it’s potentially sold off to an incumbent or a newcomer to the European market with clearer expansion aspirations, such as DoorDash or Wolt?
7.
You mentioned material share still offline in the UK. How much penetration has digital or online achieved to date and how much is left to structurally come into the orbit?
8.
How do you expect market share to evolve across Just Eat, Deliveroo and Uber Eats? What Just Eat reports in the UK seems to point to the business taking a higher market share.
9.
How has Just Eat potentially impacted Deliveroo’s operations in London? I feel the scaling up of the delivery operations in London was to address Deliveroo and Uber Eats’ dominance in the market. Do you expect it to have any impact?
10.
What metric should we focus on for unit economics and the health? Is it CAC [customer acquisition cost] or cost per delivery?
11.
Do you put marketing into contribution and amortise that over the full volume of orders, or is that treated separately?
12.
Does the marketing line item include retention and acquisition?
13.
Is the rider and delivery cost the biggest contribution to cost?
14.
This is blended globally, but Deliveroo’s COGS in H1 2021 was GBP 4.43 per order, down from GBP 4.79 per order. How much of that will typically be the rider – 80% or 90%?
15.
How do you think about the cost per order? I’ve spoken to people in the context of Just Eat who think the central costs are around GBP 1-2 per order.
16.
What is the limit for what you would willingly spend on customer acquisition, considering tech?
17.
We discussed vouchers in a previous Interview [see Delivery Hero – MENA GMV Growth & Profitability Trends – 4 November 2021] on Delivery Hero. Should we consider the vouchers being offered and promoted in the market and use that as a proxy for the incremental CAC? If Deliveroo is willing to give so much away in a voucher, the incremental CAC must therefore be around that sort of number.
18.
Deliveroo discloses some good metrics around order frequency. How do you think about customer churn, because obviously a customer doesn’t just close their account and say they’ve churned? What is churn for food delivery companies?
19.
GTV per order in the UK in Q3 2021 was GBP 23.80 and you said it’s inclusive of delivery and platform fee. What do they typically account or add up to? Delivery fees are usually GBP 2-3 with a platform fee of about GBP 1. Is that right?
20.
How do you think unit economics per order will change as Deliveroo scales? It seems positive scale benefits are coming through, at least if you compare H1 2020 to H1 2021.
21.
What average deliveries per hour can riders feasibly get? It depends on the market and time of day, but it seems tough to get above two deliveries per hour on average.
22.
How low could you reasonably get the total cost per order without totally degrading the customer experience?
23.
How do you assess cohort retention for Deliveroo? Just Eat talks about cohort retention. What churn metrics should we use?
24.
What penetration has Deliveroo Plus achieved to date in terms of order volumes or GTV?
25.
How do you think about a Deliveroo Plus order vs a standard customer order? I was always sceptical of how Deliveroo Plus’s economics could work and be accretive, but clearly they are.
26.
What is the impact of the Amazon Prime-Deliveroo Plus partnership? Would you expect Amazon to take any economics? It improves the attractiveness of the Amazon Prime proposition. Is that all Amazon wants to take from the deal?
27.
Is the AOV largely the same for Deliveroo Plus customers? Is it just the frequency that’s different?
28.
How much lower are AOVs typically for a Plus customer? Is it significantly below the GBP 20 average?
29.
I believe Deliveroo is partnering with Morrisons for a few thousand SKUs for its Hop delivery service. How do you think about scaling that side of the business? What are the costs and challenges involved, given how many people are trying to do the same thing at the same time?
30.
Is there a consumer preference towards the standard grocery order model or the dark store model? Deliveroo has Sainsbury’s and Waitrose within the app and it’s rolling out Morrisons via Hop, but Gopuff, Getir, Gorillas and Weezy all have their own range of SKUs. Is there any benefit to the consumer using one vs the other?
31.
Do you think Deliveroo will replicate the model with rolling out dark stores longer term or will it rely on retailer partnerships?
32.
What share of GTV or GMV do you think is non-standard dinner events or dinner meals for Deliveroo? What share does grocery have?
33.
f the demand is there, do you expect Deliveroo to acquire an established dark-store grocery delivery player and roll it into the Deliveroo brand, or just continue to build out Hop? I think Zapp and Weezy are still unaccounted for amid many acquisitions recently.
34.
Do you consider Deliveroo a potential acquisition target for a larger food delivery player? Delivery Hero was building a stake in the business a couple of months ago, albeit a minority one. Is Deliveroo an interesting asset in play?
35.
How are Delivery Hero or the European food delivery players thinking about DoorDash’s acquisition of Wolt and what that means for their own position within Europe?
36.
How easily could DoorDash take the Wolt brand to other developed markets where Deliveroo has a reasonably significant presence? It’s unlikely it will stick to just Finland and a little bit of Germany.
37.
What is Deliveroo’s willingness or ability to scale the marketplace side to address some logistics challenges in less-dense markets? Do you expect this to become a larger part of the business or will it remain relatively minor?
38.
How do you think Just Eat would respond to the potential marketplace growth in secondary and tertiary towns and cities? We touched on it earlier, but that was part of the rationale for scaling logistics in London.
39.
Is there a proven model in the secondary and tertiary markets whereby consumers can be acquired via Nando’s or the logistics inventory, and then migrated onto the marketplace in the markets where it’s challenging to deliver profitably?
Gain access to Premium Content
Submit your details to access up to 5 Forum Transcripts or to request a complimentary one week trial.
The information, material and content contained in this transcript (“Content”) is for information purposes only and does not constitute advice of any type or a trade recommendation and should not form the basis of any investment decision.This transcript has been edited by Third Bridge for ease of reading. Third Bridge Group Limited and its affiliates (together “Third Bridge”) make no representation and accept no liability for the Contentor for any errors, omissions or inaccuracies in respect of it. The views of the specialist expressed in the Content are those of the specialist and they are not endorsed by, nor do they represent the opinion of, Third Bridge. Third Bridge reserves all copyright, intellectual and other property rights in the Content. Any modification, reformatting, copying, displaying, distributing, transmitting, publishing, licensing, creating derivative works from, transferring or selling any Content is strictly prohibited
