London-based food delivery company Deliveroo, like the restaurants it serves, knows how to make its offer sound appetising. It is selling slices of a business boasting “best in class economics”, “durable” market share gains and great customer loyalty. Harder to swallow is news that 2020 losses narrowed but remained substantial, according to Monday’s “intention to float” paperwork.
That Deliveroo could not turn a profit in a year when sales were up more than half is concerning. It is operating in a ferociously competitive market. Deliveroo is proud of its gross profit margin — as a percentage of gross transaction value it is up from 5.8 per cent in 2018 to 8.8 per cent in 2020 — but it is slim by the standards of other industries.
While Deliveroo serves many more restaurants than rivals in London, competitors are sniffing the air. Uber Eats is expanding rapidly and Just Eat Takeaway.com recently said it was going “all out” against its London competitors.