Deliveroo shares drop 30% on UK IPO listing
bbc.co.uk
bbc.co.uk
* Deliveroo has basically no assets
* What is the barrier to entry for other companies? Neither riders, restaurants, or customers have any reason to stay with them.
* Deliveroo heavily depends on "self employed" couriers which quite likely courts will find are workers (edited, was: "employees") which the company needs to compensate accordingly
The real winners in this scam are the founders, VCs and Amazon (Who will eventually acquire them) and some of the employees (Not riders). As expected the general public who got in late always lose even when the big investors warned them they would sell very early. Some did and some backed out altogether.
I don't know how one could fall for this ad in the UK [0] and actually become a very late 'retail investor' in Deliveroo's IPO day in which not only the share allocation isn't guaranteed, you are now locked in to waiting until the general public can trade it.
If a retail investor who bought into this pump and dump sells on the day of trading, it is at a loss. Ignore the initial hype entirely, wait for it to die down and probably buy it low.
EDIT: also, WeWork was somehow a tech company. Until it wasn't...
But that is of course a minority of customers, especially amid a pandemic. (But then again, with restaurants closed, for the ones who travel ...)
I assume they either cut kitchen staff and only have a very basic (boring) offering to cut costs or add some fantasy label to make use of their kitchen and offer delivery themselves as new revenue stream. Then the deliveroo rider could ride on the elevator instead of their bike ;)
You have to provide evidence of owning a long list of equipment as part of the application process.
It probably says something that Amazon failed at entering back in 2018 [0]. Then, they u-turned and invested in Deliveroo [1].
[0]: https://www.theverge.com/2018/11/26/18112620/amazon-restaura...
- Matching delivery people to restaurants to deliveries (and giving them a route that serves 2, 3 people)
- Their app experience is really polished (both on the buyer and delivery people side). Delivery times are usually predicted accurately and it shows when your delivery person is near you.
- Network effects (obviously)
Of course nothing of that is too hard to replicate, but it takes time
This issue has been raised in France but it turns out most couriers are "micro-entrepreneurs" and appear to be quite content with both the social benefits and the flexibility (as reported by Deliveroo and as independently assessed by the Sénat in 2020).
Anecdata, I had a couple of chats with some couriers and it seems to correlate with the Sénat finding. TBH I expected it to be otherwise.
https://fr.wikipedia.org/wiki/Deliveroo#Rémunération_et_stat...
Yikes this seems terrible for the drivers. There would be a race to the bottom surely with the most desperate drivers who perhaps just need to make a mortgage payment today undercutting everyone else.
If I look for Ubers and one is offering rides for 50p I'd take it, because the result should be the same as anyone else offering something more expensive and I have no relationship with my Uber driver.
If a gardener stats to offer gardening services for 50p an hour I wouldn't go with that, because I have a relationship with my existing gardener and I'm suspicious how quality someone can be for 50p an hour.
See the practical difference?
An individual driver may have a loan-shark threatening to break their fingers for a repayment that day.
I think individuals are going to be much more volatile and so create a worse race to the bottom.
Maybe let drivers set a price above a floor? Could be like their own surge pricing.
That's because this is always presented in a certain (negative) way in the media so that people have come to believe that all Deliveroo riders or Uber drivers are unhappy.
Of course the reality is a bit different, not least in a country like France that has high structural unemployment (and a very closed taxi industry). The 'gig economy' has no doubt allowed people to get work, and in a rather empowering way.
Already happened in NL, Deliveroo is appealing.
https://news.bloombergtax.com/daily-tax-report-international...
What makes Deliveroo any worse of a business than Grubhub, Door Dash or Just Eat or Uber Eats or...
(There do seem to be exceptions to the above for some restaurants)
Some of the current debate touches on the commission that gets charged which I guess is similar for the two, however much seems to be about treatment of the delivery drivers which would be more of a difference if Just East don't (usually/always?) employ/pay them directly.
How hard is it to change to a new app? Three minutes maybe? That’s not hard is it, come on.
If that's all it took, then no, it's not hard.
However, they all require you to login, provide email/phone details, prove who you are etc.
Also, that their Ts and Cs say that they'll share data with their partners, which you can go lookup on a massive list somewhere...
That's umpteen more companies that I know nothing about with a copy of my details.
It all adds up.
But as a business it's tough because consumers are not willing to pay much for delivery, which is a very low productivity activity (a delivery 'rider' cannot do many deliveries per hour in most cases).
2. You might have a very different definition of asset than everyone else's. Please explain.
3. The barrier to entry? Absolutely massive initial capital requirement.
4. Yes, just like every other sharing econ companies, unless you are operating exclusively out of California.
[1] https://nymag.com/intelligencer/2019/04/ubers-plan-to-lose-m... [2] http://highscalability.com/blog/2016/10/12/lessons-learned-f....
The org bloat is quite staggering for what is effectively a taxi app.
We may have reached peak food delivery, but we are nowhere close to peak food and peak delivery.
Disclaimer: I'm a Deliveroo shareholder.
At any rate, if they really released at pricing levels determined by transparent and efficient markets we wouldn't see these pops, would we?
Basically, you reap what you sow. This is, hopefully, the start of the pushback against gig economy companies that provide little to no actual value in the public marketplace.
I see many people complain about the commission they charge to restaurants, but how much restaurants save by not having to serve customers on premises?
After all, if restaurants sign up to work with Deliveroo they must have done their homework and concluded that they were still in the black.
Or a VC backed firm with zero profits was created with a sole purpose of securing enough market share that any restaurant that doesn't hand over their 30% is immediately squeezed out of the market.
I'm not saying it's illegal, but it's crappy and the stock market has apparently had its say. At least for now.
Is it the company, or the customers that won't pay enough?
Is it the company & customers, or the government that doesn't mandate a price floor so that all companies now have to pay riders more and take less commission? And if that were to happen, and all food delivery companies went under, is that a better out come for consumers and riders?
Something has to give—it's not like these companies are making money hand over fist—the customer needs to pony up for the true cost of delivery; they're the problem.
the value they provide is great to both workers and investors. immense to clients.
Example, if Airbnb had the same fire regulations as hotels or paid the same tourism tax to city councils the price difference would likely dissapear.
If Uber had to garantee vehicle maintenance, mandatory driving breaks, insurance etc. The ride price difference would likely get eaten away.
This is not about fairness it's about rule of law. You either accept that regulations and taxes exist for a reason and they therefore carry an upfront cost for anyone doing business. Or you accept that everything should be deregulated to avoid non-competitive business from bypassing those that are forking regulatory costs.
Regulate for everyone or regulate for no one but you can't have it both ways.
I feel like government needs to solve this. Maybe UBI?
The ones who leach off the vulnerable and pay less than minimum wage after realistic considerations need kicking out of society.
You would get paid per order. But, they practically didn't compensate distance (an order that would require take 10x longer to deliver would have a 2x pay). So you would have to refuse long orders. Then they would sort of shadow ban you for refusing orders, where you wouldn't get any explicit indication of that being the case, but you'd get worse orders and less frequently than others (drivers had a concensus that we were being shadow banned). After a long time of that, instead of fixing the situation, Deliveroo stopped showing the drop-off point, so you had to accept or refuse without knowing the length of the trip. Every thing they did was more infuriating than the last. What we would do then is play along, but if we'd get an outrageous order (way too long, way too cheap), we'd have to contact live support to get it cancelled, which was very cumbersome.
Anyway, I could recount stories like that for a long time. Uber Eats did some driver-oriented promotions around that time and we switched over in flocks. There was an actual Uber Eats manager we could interface with once a week in a local office. It made a big big difference. Interesting thing that he said once was that Deliveroo's Belgium branch had something like an order of magnitude more staff than Uber Eats'. Uber Eats was something like one person running the north of the country, someone running the south, someone managing both and then a handful of people in the Brussels main office. While, Deliveroo's office was something closer to 30-50 people (can't recall the precise number). And Uber Eats was doing a better job. When I think about it, it feels like Deliveroo was constantly putting out fires.
i.e. If I was an investor looking to buy, I'd be a bit worried if the dev team would all be made instant millionaires on the day I bought in, with no incentive aside from salary to carry on working. You might find you'd just bought shares in an empty office.
I love Deliveroo, I love the gig economy.
I've had a sprained ankle for six weeks. Without these companies my life would have been much harder.
Economic studies mostly seem to find that employees value the flexibility of the gig economy. (Feel free to tell me if I'm wrong - I'm just giving a broad-brush opinion.) It's unclear to me whether all the handwringing is coming from actual participants.
In the UK we have had very low unemployment rates for the past decade. That's good. I'm glad that people can get a first job in this way. It's true that they classify drivers as self-employed. Maybe that is because employees would have a large and expensive panoply of rules applied - some of which may benefit them, while others seem more to benefit the only-too-thriving HR industry.
I have zero desire to go back to the old days. I don't want the price of London cabs to go back to "unaffordable", to have to hunt for a dodgy minicab, or pay triple for a London taxi, which is a Mafiosic monopoly. I like being able to get food delivered. The pandemic would have sucked without it. Millions of consumers seem to agree.
You'd be out of a job, with no money. Not even sick pay.
You can have all of the things you mention, and the companies that employ people can still employ them fairly.
In reality though, anyone in a corporate position is paid well and some investors are likely to do very well from an IPO.
Deliveroo can pay its riders more, but makes an active decision not to.
I wouldn't have invested in Deliveroo anyway: the best possible scenario for Deliveroo was the pandemic, once it is over it can only go downhill from there, there isn't more room to grow than that. [0] https://www.facebook.com/the.olive.grove.cambridge/photos/a....
"Additional fees" seem to correspond to "Marketer offer discount", which I don't know exactly what it is and whether the restaurant had a choice.
valuable company that provides extraordinary services. immense value for customers.
Perhaps, but that has so far been entirely sponsored by early investors. Deliveroo has never made a profit and it remains to be seen if it ever will. In a competitive marketplace where your competitors are well funded, it is very difficult to raise prices. That makes it kind of the opposite of a valuable company. The services it provides are also not extraordinary at all, home delivery has been a thing for decades.
Deliveroo seems to be more for the higher end of things. Not sure why or how it turned out that way.
A greater than 50% crash in 40 trading sessions, for DoorDash.
From that alone, I'd guess Deliveroo is by far the bigger player in this market, but Uber Eats possibly has a wider international market?
Lol I've been waiting forever for any food delivery or ride sharing company whatsoever to start operating in my Cheshire town!
1. Deliveroo ought to be mad profitable, because (other than customer acquisition costs) they've offloaded all variable costs to drivers and restaurants. Taking one more order means the restaurant needs more ingredients and the driver needs more fuel. But Deliveroo just need one more row in a database. How can they possibly lose money?
2. The company has a moat, in the form of drivers/restaurants/brand recognition/customers/app installs. They could raise their prices and become profitable immediately if they wanted to, they're just investing all the money in growing the business.
3. Even if they're inherently unprofitable now, if they can buy enough market share eventually economies of scale, like drivers making more deliveries per route, will make them profitable.
4. If investors continue to subsidise their growth, one day so much order volume will go through them that they can shake down restaurants for an even larger cut of each order.
5. Even if the company never becomes profitable in its current form, the future is robot kitchens/drone deliveries/driverless cars, and their moat will let them dominate that market.
6. Even if the company never becomes profitable in its current form, in the future nobody will cook or even have a kitchen. Their moat will let them dominate that market.
Of course, it's possible none of the stories above are true:
1. If they have a moat, how is it Just Eat, Deliveroo, Uber Eats, DoorDash and half a dozen smaller competitors are all in the same market?
2. If they'll be profitable through economies of scale, why hasn't the last 12 months done that? Delivery has been absolutely dominating the prepared food landscape. In-person dining is closed. Lots of people are looking for work - while people who've been lucky enough to work from home have saved loads of cash they would have been spending in the hospitality industry. If this unprecedented advantage hasn't been enough for them to make a profit, will anything be?
3. Is it really likely that a company smart enough to develop self-driving cars or workable delivery drones will be unable to launch a competing app? Even though they'll be able to offer much lower prices? Oh, some delivery companies might claim they're developing drones themselves, but everyone knows 99% of drone delivery PR have no tech behind them, and a manual pilot hiding behind the camera.
Personally, I won't be rushing out to invest.
You seem to be assuming it will be good to buy sometime...
In the case of solar panels, we *all" owe a debt of gratitude to China for commoditising a market that we all needed. It's industrial policy, yes. But even more because the product is strategic in other ways too.
In the case of Deliveroo and the like, it's another example of capital markets still haven't figured out how to price the capital / tech-growth new calculus that started with Amazon.
Deliveroo may turn out to be a harbinger, or markets may revert to dumb credibility in eventual tech-growth.
- The pandemic has meant more traditional chain restaurants embracing delivery (me personally in UK that has been Nandos, Wagamama being available to me via Deliveroo).
- There space for more premium restaurants to reach individuals at home, from what I have seen they prefer to own the whole chain (own website, driver network). Interesting if this expands and they decide to partner with provider. I would think Deliveroo would win here over JustEat (just my view).
- The whole driver situation is in a state of flux. There is a good paper here* that describes what's going on in gig worker fuelled platform companies as 'pre-automation'. Essentially they are keeping employees at arms length and 'taskifying' all activities with a long term view of automating away the human component with technology (Drones, Autonomous Cars...). This is where the margins start to look more attractive for companies like Deliveroo but the capital investment upfront along with political / legal issues means this will be painful.
* Pre-Automation:Insourcing and Automating the Gig Economy https://sociologica.unibo.it/article/view/11657/12290
In UK at least, they're seen as the 'premium' food delivery option (mainly restaurants, rather than takeaways) - and that's good. What's not so good, is that brand aside, I'm not sure what makes them unique. Speaking to their riders (and Uber drivers) their workforce isn't particularly loyal and have a few different phones for the few different gig-companies they work for. Somebody comes along and offers them more money (say a company that doesn't have to provide a return to investors) and their riders will vanish from the streets overnight - and everybody will seamlessly switch.
Deliveroo will be the Yahoo of food delivery.
Indeed.
So premium that I now always check other services (particularly Just-eat) to see if the restaurant is on them, as the price differential has been as much as 25%. Over £10 on orders in the £40-50 range!