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On Demand Businesses 101

The 32-Minute Promise: Unveiling Deliveroo

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The Who and the What

Who are Deliveroo? Well, feigning ignorance about them in the on-demand world would be problematic. Deliveroo happens to be one of the most efficient food delivery companies, based in London. The UK has one of the most favorable on-demand markets and this startup has just been valued at one billion – a unicorn class business, one of the few to reach this hallowed status.

Recently, the series E funding saw a fresh influx of funds, namely $275 million. Companies like Bridgepoint Capital have been significant investors, with others like General Catalyst and DST global being generous contributors in previous rounds. The company declares to have raised funds amounting to $465 million till date, a staggering amount by any measure.

Here’s a look at why they’re such a lucrative option for investors and customers alike.

In the restaurant delivery business, there are many types of models that can be engaged with by a company seeking to establish itself. Some companies own assets on ground in the form of restaurants, and have their own delivery fleets to do the logistical job. Yet other companies are take-away exclusive, and the third kind link the restaurant to the logistics fleet and then the consumer, facilitating all-round involvement.

Deliveroo is the third kind, and this works to their advantage. Certainly, logistics is a difficult business to handle. If done right, however, then restaurants that previously did not even have delivery options solicit the power of such services to get their products across.

Close up of a male hands cutting and eating delicious salad with knife and fork at restaurant. Man enjoying meal at a restaurant. Close up of a plate of salmon fillet at luxury restaurant.

Deliveroo is also niche. Most delivery outfits serve fast-moving food which is often not of the ‘gourmet’ variety. On the other hand, the ones that do specialize in these services do not provide a delivery window. Your steak comes in an hour late, and perhaps not in the best of conditions. Deliveroo solves this by making a bold claim: All deliveries under 32 minutes.

Deliveroo also specializes in tying up with high-grade, ‘premium’ restaurants who do not have another method of expanding their clientele (their focus is often on the in-house restaurant environment).

So how do they manage to get on with this audacious 32-minute promise?

Bootstrap and Learn

Company founder William Shu is an extremely enterprising man, particularly when you get to know that he was the company’s first delivery boy. While Shu admitted to Forbes Magazine that he did not have any technical know-how of logistics, being on the delivery runs certainly helped him – nearly 6 hours of toil a day in the suburbs of bustling London.

Now, Deliveroo has more than 300 employees in the London office with a delivery fleet of more than 5000 agents – this growth has taken place in less than three years of operation.

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(Deliveroo In Barcelona)

The company has recorded growth rates of 400%; it also has a presence in over 29 new cities and has signed on 9,000 new restaurant partners in a mere 8 months.

The company actually booked losses of £1.4 million in 2014, but that was also allegedly due to aggressive demand and growth – the sort which a company has to slowly accommodate for to reap the rewards. Shu insists that his company is every bit, if not more lucrative than Uber, whose own aggressive expansion has been the stuff of on-demand folklore.

The key to this growth has been Shu’s aim to provide the most high-quality delivery system to the consumer – an obsession with the logistical machine.

In essence, Deliveroo happens to be a company that aggressively focuses on fine-tuning the logistics process like none other. It’s hyper-local, ‘zonal’ mode of operations ensures a fine tuned mechanic that is augmented by technology.

Revenue and Hyper-fine Logistics

Deliveroo uses a combination of old-fashioned ingenuity with avant-garde technology to maintain its superiority in what can only be called a cut-throat market.

With competitors like JustEat and Delivery Hero having been in the business for a while, there are newer, formidable players on the block. Uber, having faced significant losses after the Didi Chuxing episode in China, has now focuses its veritable resources in all other on-demand sectors – the food delivery sector is no stranger to this. UberEATS is already competing with Deliveroo in several European regions and even Amazon (with a project called ‘Hot Wheels’) has joined the fray.

Thus, Deliveroo obviously needs to be at the top of their game.

For revenue, they charge a flat out £2.50 to the customer for delivery through their smartphone app, and also take a commission from the restaurant itself. Commissions are generally in the 10% bracket, with the average order being £30 – very profitable, if delivery is optimised.

Thus, time is again of the essence here. Deliveroo stations drivers within a 2.2km radius of the hotels they sign up, making collection and dispatch very convenient. Drivers are said to make 3 trips an hour, which stacks up exponentially in terms of commissions and charges. They possess drivers with both, bicycles and scooters for variation and added speed, if needed.

state-of-third-party-logistics

Shu has a dedicated team full of data analysts, software engineers, research managers and tech experts fine-tuning the logistics process. Since they also automate most of the process via the use of powerful routing software, in-built with algorithms to optimize routes – they also have to constantly update it according to the elements they can remove from the journey in order to minimize time.

From the time a dish gets cold, to the kind of packaging that is needed for hitch-free transport, to ambient weather conditions, routes and sub-routes, traffic movement and daily behaviour – Shu’s team crunches some serious data to arrive at the scheduling they do to maximise efficiency, making hyper-fine adjustment for a powerful logistics plan.

There are valuable lessons to be learnt here – both positive and some negative. An optimistic approach would be to understand that specializing in one aspect of businesses and perfecting it is more prudent than trying to immediately diversify, getting stretched far too thin.

Hyper-local is the way to go, certainly. Proving your mettle and failure, all can be learnt from in a smaller area of focus as compared to losing time and resources over larger areas. Ambition is necessary, albeit at the right moments. Scale up one-step at a time.

Logistics is a key sector in the on-demand economy, with ‘doorstep’ being a key branding term. Promises have to be delivered all the way home, and if that area is flawed, you might as well dig an early grave.

Lastly, on the issue of technology. You don’t need to have the best tech out there, you just need to have the appropriate one. Deliveroo’s online platform is not the most expensive there is, yet – it is effective. Adapting needn’t be expensive. The most powerful software is the one that gives a great end-to-end, easy to understand interface – with actionable results.

YORK, UK-SEPTEMBER 28, 2016.A cyclist from the increasingly popular take away delivery company Deliveroo speeding through city streets with a hot food delivery from take aways and restaurants to homes.

Negatively speaking, there has been a slew of issues regarding minimum-wage payment with the drivers (read in detail there) and legislation issues plaguing enterprises in the sharing economy of late. This was, however, foreseen – countries have not always been favorable, or existing business structures been flexible when it comes to adaptation – and let’s face it, rewriting the economic structure of the world cannot happen overnight. Thus, it is for us to constantly engage with both sides of the debate and try arriving at solutions that may achieve a balance between them.

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