The Food Delivery Wars: Will Brands Differentiate Themselves In This Commodity-Based Market?

Digital innovation has made the world a whole lot more convenient. From car rentals to timely texts, humans are able to get what they need at the tap of a button. And getting food delivered without having to make phone calls to busy restaurants or leave the couch is one of many conveniences that continues to become more popular, with eMarketer predicting “by 2021, more than 20% of U.S. smartphone users will order food via an app.” Grubhub, Uber Eats and DoorDash are competing to offer the most efficient service to like-minded audiences and trying to differentiate themselves in a crowded market.

Amid Fierce Competition, Insiders Speculate Grubhub Is Considering A Sale Or Merger

Grubhub launched in 2004 as an alternative to junk drawers full of take-out menus. Over the course of the next 15 years, the brand merged with Seamless and acquired AllMenus and MenuPages. Grubhub now offers delivery capabilities in 3,200 U.S cities and London, commanding 26.7% of the food delivery market share.

Grubhub’s headstart in the food delivery sector made them the top dog in the business until last year, when DoorDash and Uber Eats pulled ahead. In a recent Wall Street Journal (WSJ) article about a possible Grubhub sale, the WSJ noted, “Grubhub, which went public nearly six years ago, has a market value of roughly $5 billion. That is down from its peak of more than $13 billion just over a year ago, before competition from other delivery startups heated up and eroded the company’s market-share lead and results.” WSJ indicated that sale talks are in early stages, and Grubhub responded to rumors of a sale by saying “unequivocally” there are currently no plans to sell.

Perhaps most revealing, particularly when it comes to building brand loyalty, is how agnostic users are about which food delivery service they use. From the WSJ, “Promiscuous diners have become accustomed to using more than one delivery app, which Grubhub Chief Executive Matt Maloney has called out as a challenge for his company. The percentage of Grubhub users only on that platform dropped to 24% in October from 84% in January 2017, according to Cowen & Co. surveys.”

Uber Eats Launches First Standalone Ad Campaign In London

Despite the competitive environment and recent sale of their Uber Eats business in India to Zomato, Uber Eats commands more than 25% of food delivery service market share and is a revenue-generating winner for Uber overall. After the recent release of a disappointing earnings report from Uber, Uber Eats was highlighted as a growth area for the rideshare business. Quartz reports, “[Uber] Eats revenue grew 72%, to $595 million, versus the same time last year, and order volume jumped 91%, to $3.4 billion.”

However, profitability remains elusive for Uber Eats. Investment firm Cowen recently did a deep dive of the Uber Eats unit economics or per-order costs, noting “Driving better unit economics for [Uber] Eats is a key issue among investors as it remains one of the primary growth engines for the company.” The chatter about profitability for Uber Eats led to a meeting – arranged by SoftBank which owns 16% of Uber – between Uber Eats and Grubhub to discuss a merger. SoftBank and other analysts of the food delivery sector believe an industry contraction may be necessary for Uber Eats to guarantee viability in the long term.

On the fun side of the Uber Eats business, the brand recently launched its first standalone campaign in the U.K. Called “Bring It” and featuring comedian Guz Khan, Uber Eat’s charming, fast-paced and optimistic spots debuted on TV, with a multichannel launch to follow soon.

DoorDash Pulls Ahead In The Food Delivery Wars

DoorDash, founded in San Francisco in 2013, languished behind competitors until recently, when it pulled ahead of GrubHub. With 27.6% of market share and a $12.6 billion valuation, DoorDash is the current darling of the food delivery sector. Some experts believe an IPO is on the horizon for the brand.

DoorDash is among the most prolific food delivery advertisers, with creative spots highlighting the delicious and diverse foods DoorDash delivers, as opposed to just the service itself. “We embraced the notion of celebrating diversity in how the work itself was made; mashing up animation, textures, patterns, live-action, subtle elements of surrealism, and spoken word,” said DoorDash VP of Marketing Kofi Amoo-Gottfried. “This is a new take — as most of the work in the category focuses on the idea of delivery, rather than on the food itself.”

DoorDash deployed their multichannel campaign this past fall, with out-of-home ads featuring QR codes that let users scan and order featured foods. Scanners who met certain ordering criteria were entered for a chance to win $1,000 in DoorDash credit and a year of DashPass, a subscription program offered by DoorDash that eliminates delivery fees.

Strategic Restaurant Partnerships Are A Key Part Of Food Delivery Brands Success

DoorDash partners with more than 300,000 restaurants, as does GrubHub. The strategic partnerships between food delivery services and restaurants are expected to drive user growth across the industry. According to Morgan Stanley, “Digital food delivery is projected to grow into a $467 billion business over the next five years, a 31% increase.” Despite the growth, many consumers are beginning to see food delivery as a commodity service, with the least expensive option winning their business. Food delivery brands need to differentiate themselves to capitalize on this quickly growing digital sector.

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