The app-based home delivery market became an essential part of most of our lives during the COVID-19 pandemic, as we were asked to stay home and looked to digital channels to acquire our groceries, takeaways and other non-essential items. However, what's becoming clear is that this market of platform players are not all adopting the same approach to securing long-term growth.
Over the past week we saw two players in this market - Just Eat Takeaway and DoorDash - release their Q2 results, with both clearly benefiting from an upswing in demand as a result of COVID-19. However, whilst on the face of it the two companies operate a similar business model (getting people to deliver goods to your home), it's becoming clear that their strategies to achieve dominance aren't exactly the same.
On the one hand, Just Eat Takeaway is pursuing the benefits of ‘network effects' and is scaling up its focus on takeaway supply so that customers have the choice of options delivered by either Just Eat riders, or by independent restaurants themselves. It is also making gains in the grocery delivery market.
Meanwhile, DoorDash is attempting to tackle a more complex model focused on ‘local commerce' - in other words, anything you need delivered from a nearby store or restaurant. Not only this, but it is pushing its platform into these stores and restaurants that maybe don't have their own digital capabilities - offering whitehlabel tools - giving them a channel that is supplied by DoorDash.
Just Eat Takeaway already has significant market share in many of its regions, whilst DoorDash sees the local commerce market as still being in its infancy.
But before we get into the strategy difference, let's take a look at the numbers.
Just Eat Takeaway said that it had nearly 100 million active customers by the end of June, which is a 21% increase year-on-year, with 547 million orders in H1. It generated revenue of €2.6 billion, up 52% compared with the first half of 2020, but pre-tax losses were €395m due to heavy investments.
DoorDash on the other hand brought in $1.2 billion revenues for Q2, up from $675 million in the same period last year. The company said its gross order volume rose 70% year over year, but it too had a net loss, worth $102 million.
The Just Eat Takeaway approach
As noted above, Just Eat Takeaway is focusing on its ‘network effects', a term that was used a lot by CEO Jitse Groen during this week's earnings call. Groen said that the company is largely focused on using these to acquire and retain more active customers. Groen explained:
As a reminder, our investments are focused on the acquisition of new consumers and adding new restaurants to our platform to drive powerful network effects to compound the growth of our market-leading positions.
Just Eat markets are built on 3 strategic pillars: supply expansion and rollout of delivery; brand awareness and share of voice; and customer experience and value proposition, including price leadership.
These investments have fueled network effects. We have added a record number of new restaurants. Active consumers grew 22% to over 65 million, and their average monthly order frequency has strongly increased from 2.5x to 2.9x.
Groen said that Just Eat Takeaway is the number one food delivery app in Europe, Canada and Australia already, and it is a major player in the US, where it is predominantly focusing on the New York City market. In Europe, Just Eat Takeaway said its online food delivery share is roughly 70%.
Scale is the name of the game at Just Eat Takeaway and this is being reflected in its approach to delivery, partnership acquisition and pricing. Groen explained:
With regards to our investments, we are agnostic about the model that is used, whether that is marketplace or delivery - or a hybrid model. In the end, we want to provide the choice that consumers want, independent of whether restaurants are delivering themselves or if we have to provide the delivery service. We expect to further improve the profitability of delivery, driven by our increased scale, logistics optimizations and delivery fee improvements.
We have higher density because of our larger consumer base and we have the ability to offer lower delivery fees because our consumer lifetime value is superior to others due to our marketplace offering. Our global scale and brand help us to secure partnerships with key restaurant chains.
We have a clear path to profitability, where our increased scale will further increase operational efficiency. Furthermore, product and technology improvements will drive profitability. Given the widening gap in delivery fees, we have the flexibility to optimize pricing while we will continue to invest significant amounts in providing the best and most affordable service to our consumers across the world.
In H1 Just Eat's active restaurant estate has grown by almost 40% to 58,000.
The DoorDash approach
So whilst Just Eat Takeaway's approach is scale in acquisition for food businesses, with flexibility around delivery options, DoorDash is adopting an approach that aims to recognize the complexity of local commerce and to not assume that one size fits all.
Co-founder and CEO Tony Xu commented on the Q2 results and said:
In Q1, we announced that about 70% of our business was coming from orders outside of restaurants, and that has grown sequentially. It's certainly grown faster than our restaurants business. And it does touch upon the strategy of creating both in-marketplace, where we're generating incremental demand, and really building best-in-class point solutions category-by-category. Or bringing everything inside the neighborhood to consumers in minutes, not hours or days.
And then on the other side, we are also building a first-party capability on behalf of retailers and merchants, so that they can create their own digital businesses. The goal of DoorDash has always been to create the largest local commerce marketplace as well as the largest local commerce platform. And we think that this strategy is certainly playing out, not just in our core and original category of restaurants, but now also heading into other categories.
Xu said that DoorDash benefits from the ‘wide surface area' and a variety of opportunities for buyers to engage with its platform. The company's main strategy, Xu said, is to offer a best-in-class solution for buyers, across multiple categories. But there is a learning curve to tackling this complexity. Xu said:
We're still in that learning process. I think there is a long way to go. I think the industry has a long way to go.
I mean even within our core category, I want to remind folks that of restaurants, we are single-digit percentages of the restaurant industry. And when you add in some of these other categories, we're at a much, much smaller fraction. And so I think there's a long way to go before we can start truly inventing technologies that will continue to change consumer preferences.
The one thing that we do know is that consumers always lean towards the direction of greater and greater convenience and so that you should expect from future products to come.
For DoorDash, this focus on convenience sits at the centre of everything - and Xu said that much of this requires "invention". In other words, this isn't going to be a wholesale approach for DoorDash, it is going to look at the needs if local marketplaces and businesses and adapt. Xu added:
And if you think about fundamentally what we're trying to do regardless of the model in which we operate, we're trying to take the physical world or physical businesses and all of the activities that they're doing and being able to give those merchant partners a digital way or frankly, a new way to build their own digital businesses.
So every activity has to be re-imagined and there isn't one point solution, I would say, that's going to ultimately work for every single merchant nor is there one that's going to ultimately be consistent enough to actually solve all of the unique challenges within each respective category. We both aspire to build the best-in-class category-specific solution as well as the best-in-class experience across categories. And so we will continuously work with our merchant partners to invent these technologies that will continuously help change consumer preferences.
A tale of two delivery platforms at a stage of growth that has been amplified by the COVID-19 pandemic. But it's clear that this isn't a market that will play out with one clear winner, nor multiple winners taking the same approach. The common theme? Convenience, speed and choice. So even if Just Eat Takeaway and DoorDash tackle two different ends of the market, it's good to see that both have these user needs at the center of their strategies.