Investors Refocus on Delivery Services: A Big Cog for Local E Commerce?

Interest in delivery services is heating up, as investors are looking at them to not only fulfill food orders, but boost business via convenience, impulse buys and cross-over leads.

Looking ahead, delivery services may come to mean a lot more. Some are providing their clients with marketing analytics. Others are seeking to verticalize beyond food into other SMB segments.

Strategically, they’re an alternative to Amazon Prime Now, Amazon’s own fast delivery service. They’re also a focal point for the next generation of drug stores and grocery chains, which have been closely studying their prepared food options. (They’ll be very prominent next month at the GroceryShop event in Las Vegas.)

The financial community has certainly noticed the possibilities. GrubHub’s stock has doubled since last year. Meanwhile, despite heavy operating losses for companies like DoorDash and PostMates — the latter having lost $75 Million in 2017 — massive new money infusions have positioned them for 2019 IPOs.

DoorDash raised a new round of $535 Million in March, while PostMates has just announced $300 Million in new funding. Uber is also pushing ahead with Uber Eats ahead of its own expected IPO.

According to Feb 2018 data cited by CNBC, GrubHub currently has 52 percent of the food delivery market. Uber Eats as 20 percent; DoorDash has 14 percent; and PostMates has 9 percent. InstaCart didn’t get measured in this data but has also established a large foot print.

Vertical and specialized delivery efforts are also moving ahead. Slice, for instance, is providing delivery and marketing help for independent pizzerias. Peachd, a curated lunch delivery company, is also building out its efforts. This week, we are also seeing a test of EMain, a new hyperlocal delivery and marketplace.

To PostMates, it is all about which “logistics engines” can scale. Ninety-five percent of the San Francisco-based company’s business is currently oriented around its food delivery efforts in more than 20 metro centers.

Already, it has established delivery deals with WalMart, Walgreens and Apple, and sees broader possibilities. As analyst Greg Sterling tweeted about a recent talk by a PostMates executives, the company doesn’t see itself as “a delivery service, it’s a curator of brand experiences…. beyond the store.”

It’s all appealing, strategically. Whether any of the companies can make it work depends on various factors. These include:

Scale – an increasingly important issue as they move away from subsidized delivery fees (Free to $5.99) and move deeper into the suburbs, which are less efficient for deliveries than dense urban locations.

Direct store relationships – 40 percent of PostMate’s delivered sales currently come from outside of its direct network.

Brand support – brands need to recognize new sales from the delivery services in order to lend marketing support to the services.