Food delivery services around the world are pulling out of regions and cutting staff.
These moves come as global inflation and increased competition make the already challenging economics of the aggregator model even more difficult despite ongoing demand for convenient meal options.
The latest occurrence in this segment includes word from Just Eat Takeaway.com subsidiary Menulog, which is reportedly laying off staff in Australia, The Sydney Morning Herald reported Thursday (Nov. 24), as part of a global restructuring.
“To ensure we are operating as efficiently as possible, we have taken the difficult decision to reduce the number of those management and support roles,” a company spokesperson told the outlet.
The spokesperson asserted in the article that the company will be able to “continue to maintain a strong position” in the region, but other recent food delivery news in the area would suggest that the competitive environment in Australia is becoming more challenging.
Additionally, in a statement sent to PYMNTS, the company said, “We have made some necessary changes that impact colleagues of the global customer service team. This decision is not taken lightly, and we will make every effort to retain employees where possible.”
The news follows a similar action earlier in the month, in which United Kingdom-based aggregator Deliveroo closed up shop in Australia, Reuters reported. The company cited both economic factors and the competitive environment as factors in this decision.
“Deliveroo, like all other companies, is now doing business in challenging economic conditions, which requires us to take difficult decisions,” the company said in an email to customers, according to The Guardian. “We always aim to deliver the best possible service for our consumers wherever we operate, and if we cannot do that we will be prepared to review our position.”
The email went on to state, per a screenshot shared by a reporter from the news outlet, that the company has found that it cannot “achieve a sustainable position of leadership” in the region. This assertion indicates that the competitive environment in Australia is such that, for all the ongoing demand for food delivery, even category giants cannot grow their audiences enough to counterbalance the cost of the service.
Indeed, Australians have a wide range of food delivery options to choose from, including Uber Eats, DoorDash and others. In addition to giving consumers a range of choices, this presence of a multitude of aggregators also gives drivers many options, requiring delivery services to invest more in hiring and retention, further raising their costs.
Yet, consumers continue to seek out digital dining options.
Research from PYMNTS’ study “Super Apps for the Super Connected,” created in collaboration with PayPal and derived from a survey of more than 9,900 consumers across the U.S., the U.K., Australia and Germany, found that 70% of millennials in these four countries order restaurant meals online. Plus, the considerable majority of Generation Z, Generation X and bridge millennial consumers do the same, as do about half of all baby boomers and seniors.
Still, it is not only in Australia that food delivery services are struggling to make the economics work. According to a recent statement sent to PYMNTS, eCommerce giant Amazon is shuttering its food delivery trial, Amazon Food, in India after Dec. 29.
“We don’t take these decisions lightly. We are discontinuing these programs in a phased manner to take care of current customers and partners,” a company spokesperson said.
These moves come as, around the world, prices are on the rise. PYMNTS research reveals that consumers become more conservative in their restaurant spending when menu prices increase. Research from PYMNTS’ August study, “Consumer Inflation Sentiment: Inflation Slowly Ebbs, but Consumer Outlook Remains Gloomy,” which drew from a survey of more than 2,100 consumers, revealed that 86% have made adjustments to their dining spending.