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What's Grubhub's end game?
Seems like the innovator is turning into a dinosaur.
It’s hard out there for a trailblazer. There’s no doubt that Grubhub changed the restaurant delivery industry when it debuted as a marketplace for online ordering and fulfillment in the early aughts. But times have changed, and Grubhub has had a rough few years by most measures: well-funded competition won a ton of its market share; regulations and, uh, poor growth decisions playing out in public left the company playing an ongoing game of catch-up.
The company’s fortune looked up briefly after a $7.3 billion acquisition by Europe-based Just Eat Takeaway (JET), a company with global presence and a portfolio of delivery brands. But the company’s fortune hasn’t fared much better under its new parent. When JET reported some third-quarter numbers last month, some markets reported significant growth: In the UK, JET’s fastest growing segment, orders grew 51 percent year over year. In the US, Grubhub’s orders grew just 3 percent. Gross transaction value grew just 2 percent.
Meanwhile, at Uber Eats, gross bookings grew 46 percent year over year. The company’s take rate — that’s how much money it takes from orders — reached 17.4 percent. Take rate growth is an important metric for the company. Last August, Uber CEO Dara Khosrowshahi told investors the company was targeting a 15 percent take rate to increase profitability. The rate was 13 percent at the time. Uber’s delivery business reached profitability this quarter by one accounting measure, adjusted EBITDA. (That’s earnings before interest, taxes, depreciation, and amortization. It’s a measure of profitability that ignores some business costs.)
The numbers don’t look so good for Grubhub. One activist investor has already called on JET to dump Grubhub by the end of the year, a suggestion that the company’s CEO, Jitse Groen, has refused. Instead, he said, he "expects Grubhub to be involved in this consolidation when it comes and intends to do so from a position of strength.”
Also, the market continues to consolidate. During its Tuesday earnings call, DoorDash announced it would acquire Finland-based delivery company Wolt for $8.1 billion in stock. It’s DoorDash’s biggest deal yet; its 2019 acquisition of Caviar cost a reported $410 million in cash and stock.
Grubhub, Groen signaled, is not for sale. Not yet, anyway. But its acquisition’s close in June, after a full year since the acquisition announcement, obviously marked a big turning point in the company. In October, Grubhub’s founder and former CEO announced he would leave at the end of the year, sooner than many, including his new boss it seems, expected.
But even if it were for sale — where would Grubhub go? The company wouldn’t just fall off the face of the earth, of course. The logical option is that one of its biggest competitors — DoorDash or Uber — would snap it up. But such an acquisition raised antitrust concerns over a year ago when Uber’s interest in Grubhub was first reported. Since then, regulatory scrutiny of big tech has only gotten stronger; even though Grubhub is now an order of magnitude smaller than both of its largest competitors in the US, it’s still the number-three player in the country.
More likely would be a restaurant tech player like Toast, the tech-forward point-of-sale system that already offers a direct ordering option for restaurants on its platform. Or maybe it would be a larger player in the hospitality space — a hotel or resort operator, or a firm with stakes in stadiums and other venues where crowds can order food from their phones. (Remember: Grubhub recently announced partnerships with a large Las Vegas resort and FedEx Field in Washington to power food delivery to guests' lounge chairs and stadium seats, respectively.)
It’s important to note, again, there’s no indication that Grubhub is actually for sale and this is pure speculation. But by the company’s own admission, delivery consolidation will continue to happen in the US market. Could the company be a big part of it? Could it adjust its product offering to be different from its competitors instead of simply chasing their innovation? Will it double down on markets with a strong presence and try to fend off competitive creep? Or could it keep on keeping on? Grubhub isn't experiencing the same growth as its competition, but by some measures, it is still growing.
DoorDash debuts national shipping
DoorDash officially announced its nationwide shipping offering this week after quietly testing the feature for months. Select restaurants can accept orders through DoorDash to ship food nationwide — barbecue from Kansas City, cheesesteaks from Philadelphia, deli sandwiches from New York. It’s a model first addressed and made popular by Goldbelly, a startup that’s been around since 2013, just as long as DoorDash (and, somewhat ironically, this newsletter.)
So, why? It’s a totally different model than DoorDash’s typical flow: using local couriers to deliver food and, increasingly, groceries and other convenience goods to local customers. It’s a marketing + tech + logistics combo that’s done well for the company — it’s the largest in the US — so why bother with the distance?
Well, according to DoorDash’s own words, the company wants to be a merchant’s first stop when they want to grow their business. National shipping gives a restaurant national recognition and reach. The sort of restaurants offering this at launch are exactly who you’d think: local and regional favorites with iconic names or dishes that would play well to a national audience. DoorDash can easily insert itself into the process, managing that order flow and creating an expanded audience for a local business.
National shipping options show up in the DoorDash app, meaning DoorDash is handling some of the heavy lifting — marketing — that these otherwise local restaurants would have to handle. And it’s launched just in time for holiday gift-giving and hosting, complete with discounts on the first couple of orders for consumers.
(I also posted a hot take on Twitter on Monday, if you’re into hot takes.)
So, logically then, Goldbelly wants to be the Food Network
On Wednesday, a few days after DoorDash’s official announcement of nationwide shipping, Goldbelly made an announcement of its own: Goldbelly TV, a video platform on its website meant to become, according to the company’s CEO, “The Food Network 2.0.”
The project is produced by Art Edwards, co-creator of Cake Boss, a Food Network show that vaulted New Jersey baker Buddy Valastro into the national spotlight. What’s Valastro doing now? Well, funny you should ask, he’s created a Sweet Potato Pie Dream Cake available for nationwide delivery exclusively on DoorDash and Caviar via its just-announced nationwide shipping feature.
Goldbelly now works with over 1,000 restaurants, per coverage of the announcement, up slightly from the “nearly 900” restaurants on the platform at the time of founder and CEO Joe Ariel’s Wall Street Journal profile in July.
“You can really consume the content twice. You can consume it with your eyes and with your belly — and that has never been done before. We’re connecting those dots so that people can watch these amazing stories and also taste them. It elevates the whole experience. You can access what you’re watching,” Ariel told Hollywood Reporter in an exclusive interview.
So is it an entertainment play for the tech company that ships restaurant meals? An ad play? A marketing play? Hard to say, but a newly created but still empty Twitter account, @goldbellytv, follows two accounts, both media outlets, as of this writing: TechCrunch and Time magazine.
What else is happening?
Yelp gets the Instagram treatment. The company on Tuesday rolled out a new iOS design that lets users scroll through a vertical feed of images and other content from local restaurants. The feed includes images of popular dishes, as mentioned in Yelp reviews, and other info. The content shown is based on a few personalized factors, including proximity to any given business — an obvious play for an edge in restaurant discovery.
The new feed also bolsters one of Yelp’s ad products for restaurants: Yelp Connect, a paid feature that lets restaurants add their own highlight photos and other info to their Yelp pages. According to early testing, Yelp says that restaurants paying for Connect can expect 30 percent more consumer engagement with their posts. How’s that for an upsell?
Ordermark changed its company name to Nextbite. Ordermark, which started as software to help restaurants accept and aggregate digital orders from a variety of sources later became the less-flashy sibling to Nextbite, the company responsible for virtual brands like George Lopez Tacos. Now they’re both Nextbite, though the company’s structure won’t change, per cofounder Alex Canter.
DoorDash rolls out security tools for couriers. Dashers in six US cities now have access to a toolkit in partnership with home security company ADT: a “safety reassurance call” feature lets couriers talk to an ADT agent if they feel unsafe. If a courier taps the new “emergency assistance button,” an agent will call for emergency response while maintaining contact with the courier via text message.
NYC considers more legislation targeting the big apps. This one would require delivery companies to cover out-of-pocket costs resulting from accidents, both medical costs and property damage. Since most couriers are considered independent contractors, companies aren’t currently responsible for these costs.
Uber Eats will eventually launch robotic delivery in Los Angeles. At some undetermined point next year, the company will start using autonomous delivery robots made by Serve Robotics, the company formerly known as Postmates X and spun out from Uber after its Postmates acquisition. I have many questions about logistics here: how many robots are we talking about? Which restaurants will have access to them? Will it cost more? Are they sidewalk hogs?
And, finally: The sharing economy is now the “flywheel economy.” Thanks, Economist. ($)