E-grocery and restaurant delivery experienced an unprecedented spike in adoption with the start of the novel coronavirus pandemic and startups sprung up and partnered with retailers to facilitate getting food to consumers stuck at home. As the economy reopens, however, some are beginning to ask if all the investment in food delivery fulfillment has created a bubble just waiting to burst.
With venture capital investors throwing money at delivery startups during the pandemic, James Boley of The American Reporter likens the situation to a gold rush, with many speculators anticipating riches and few destined for appreciable returns on their investment. With VC investors failing to look at the stability of the given business models and startups needing to spend money quickly, Mr. Boley sees overhyped investor unicorn delivery startups soon undercut by a drop in food delivery as in-restaurant dining picks up.
Venture capital firms were investing tens and hundreds of millions into delivery startups as recently as late April, according to a CNBC report. London-based Taster received $37 million, Finnish startup Wolt raised $530 million and a project begun by ex-Deliveroo staff called Dija raised $20 million.
As startups jostle to outdo each other and differentiate themselves in the market by providing half-hour and even 10-minute delivery, observers question if new players in the space will eventually outpace demand for the services.
Consolidation already appears to be hitting food delivery, with Uber gobbling up medium-sized delivery players via acquisition and rolling them into its Uber Eats app offering.
Other developments, however, point to the demand for food delivery continuing to remain strong even in regions where lockdown measures to prevent the spread of the novel coronavirus have eased.
In the quick-serve restaurant space, major players like McDonald’s have been slow to reopen even as restrictions have been lifted on in-store dining with some franchisees finding drive-through, curbside and delivery-only to be cost effective ways to do business.
The model has grown so popular that municipalities have begun jumping in to protect restaurants that may be losing out from over-dependence on third-party delivery startups. San Francisco recently placed a ceiling on how much delivery apps can charge restaurants per order, according to Eater.
- Grocery Delivery: A Modern-Day Gold Rush? – The American Reporter
- Lockdowns are lifting, but VCs remain bullish on food delivery start-ups – CNBC
- Walgreens inks a deal with Uber Eats to expand same-day deliveries – RetailWire
- Is fast food going too slow in reopening for dine-in business? – RetailWire
- Will Permanent Fee Caps Actually Rein in Delivery Apps? – Eater