One of the fastest growing business models that we have seen in the last few years is the Food Delivery market. With new companies popping up every few months it’s clear to see that consumer demands of technological availability are making a new business model that marries the app and the use of independent contractors as a labor force. Major players today like GrubHub, Postmates, and Door Dash now have their own IPOs. In fact, Grub Hub, which is the fifth most valuable Food Delivery Service in the world, is currently estimated to be worth $2 billion.
McKinsey & Company, a Global Management Consulting firm, published a study looking at how these businesses came to rise. The first major player of an app based Food Delivery service is Grub Hub. They fall under the category of an “Aggregate App”, which pioneered the idea of “access to multiple restaurants through a single online portal”. But, the major downside to Grub Hub was that the customers ordered online, and then the individual businesses themselves handled their own delivery. The secondary category is “New Delivery”, which adds the traditional idea of the “single portal” and provides the delivery fleet through contractors who work independently through the app. The New Delivery business model’s success can be attributed to the access gained to higher-end restaurants whom do not have their own delivery infrastructure. Since the advent of this business model, almost everyone wants in on this market. For example, Amazon and Uber have launched their own plays at “New Delivery” Food Delivery services.
But with this, there is a question of sustainability; is this a fad, or is this here to stay? The article I read, assessed the positives and negatives of one of the newer players, UberEats. On the restaurant side, companies are overrun with orders from these websites. Many employees have worked overtime to fill the in-house and delivery orders. The number of trips taken by UberEats drivers grew by more than 24 times between March 2016 and March 2017. With all of this boom, there has been huge economic growth! Restaurants are hiring more employees, making more revenue when they may not have been reached by the general public before. Additionally, Uber is a company that makes no profit. As of July, UberEats was profitable in 27 of the 108 cities where it operated.
This relates to what we have been talking about in class in relation to drones, and online consumer markets. With new innovation, there are questions of regulation. Because they are reaching target markets, will this business idea have enough weight in technological innovations? What does the future hold for business like this?