Food delivery has become one of the most sought after services in the on-demand economy. But it now appears the delivery companies are developing stomach pains from what is turning out to be cut-throat competition throughout the sector.
Grubhub was once the market share leader, but has been overtaken by DoorDash and Uber Eats. It doesn’t help matters either that delivery companies are wooing customers with deals and discounts to spur demand and grab market share.
Expect the heartburn to continue until some rationalization occurs in the market. But this could take a while and in the meantime, consumers will enjoy widespread discounted delivery prices on their online restaurant food orders.
A Wall Street Journal article, excerpted below, discusses more on the topic:
News flash: Making money suddenly matters in tech. That is bad news for any company competing in a sector filled with rivals desperate to gain scale, such as food delivery, and could leave Grubhub investors with a bitter aftertaste.
Venture capitalists have, in a matter of months, gone from trumpeting growth at all costs to evangelizing a new ethos that includes terms including “discipline,” “unit economics” and, perhaps most important, “profitability.” The dramatic change in tune has come in the midst of an icy reception from public investors to cash-burning companies like Uber, Lyft, WeWork and Peloton, which were all hotly anticipated by public investors just months ago.
Grubhub has shed 53% of its market value over the past year and 26% over the past three months alone. Those losses have come as a direct result of competitors’ growth. Earlier this month, Edison Trends released data showing Grubhub’s commanding market share lead has been cannibalized over the past 18 months by Uber Eats and the new market leader, DoorDash, which led Grubhub by 11 percentage points of market share as of September.
Overview by Raymond Pucci, Director, Merchant Servies at Mercator Advisory Group