Delivery companies are facing the challenge of keeping their heads over troubled waters. They have now resorted to spending furiously on incentives to lure customers and gain market share.
This became more evident as one of the leading food delivery business giant Grubhub’s shares tumbled down 43percent following a gloomy forecast and showing the sad future of the delivery business.
These companies are also getting to deal with growing frustration among restaurants that are now resisting paying fees for their meals delivered.
Adding more insult to the injury is the fact the lawmakers are not siding with food delivery models. They are in fact getting flag over fees and operations and from gig economy workers over compensation. Customer loyalty is proving elusive as the services’ users opt for whichever one offers the best deal.
According to GrubHub Chief Executive Matt Maloney, consolidation will become the need of the hour. Undeniably, rivals will struggle to maintain their market share—some of it drawn from his company over the past year—while also turning a profit. His prediction came true- delivery companies would need to merge to gain scale and the leverage to cut discounts.
Like GrubHub, other strong contenders are looking at other avenues to keep afloat. The biggest food-delivery company, DoorDash Inc., is private, as is Postmates Inc. Both are exploring initial public offerings and have raised a total of nearly $3 billion in private funding.
There are many QSR chains that are not opting to use the delivery models. They would prefer to keep their margins intact. Having said that, Mr. Maloney still feels that “delivery models are not a commodity you cannot do without. Those who have developed the best services to date will survive.”
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