News has broken that Deliveroo has pulled out of Germany, reducing its foothold in continental Europe, a competitive market that potentially offers huge opportunities.
The decision is set against the backdrop of the merger between Just Eat and Takeaway.com, which will create a new global market leader in the food delivery market and which aims to see off competition from the likes of Uber, Deliveroo and Amazon.
However, rather than be regarded as a negative step, the flipside to Deliveroo’s retreat is that it signals a genuine commitment to the firm’s other operations and a willingness to focus on success.
While this decision weakens Deliveroo’s foothold in continental Europe, it is also a tactical retreat that will allow the company to focus on their more profitable enterprises. One example is their Singapore operations, which saw 69 per cent growth in 2018, seeing revenues rise to $44.5 million. Another example can be found in Deliveroo Australia, which saw annual revenues soar from $41.2 million in 2017 to $71 million in 2018.
The focus on expanding in their most promising markets can be seen in its internal investments. Operating profits rose by 73 per cent in 2018, which was followed by an even larger rise in revenue; leading their gross margin to rise to 23 per cent, from less than 1 per cent at the start of 2018. Externally, Amazon headed a €515 million funding round for Deliveroo in mid-2019, providing it with the deep pockets and the backing of a logistics giant it needs to win out against its wealthier competitors.
Despite this, worries regarding Deliveroo’s place in the market persist. UberEats revenue over 2018 grew 149 per cent to $1.5 billion as it continues to gobble up market share. Moreover, the £1.4 billion in combined revenue of Just Eat and Takeaway.com would represent the earning power of a global giant.
Even Domino’s is fighting back with its adoption of e-bikes, ensuring its deliveries can get to customers smoothly and efficiently.
Nevertheless, GlobalData forecasts that the global delivery market will rise from $171bn to $213bn by 2022, representing an annual growth of 5.6%. This suggests that if Deliveroo can stick to its current growth rates, it will be able to increase its share of the ever-growing delivery market.
Ultimately, in a climate of rapid growth and change within the delivery market, Deliveroo’s exit from Germany is a tactical retreat that allows it to refocus on its more lucrative operations to stave off hungry competitors.