So: is delivery really a tech business? Or is it an old world business facilitated with technology?
This isn’t a facile question because a tech company, with the benefits (and more) that I’ve described above, is by its nature going to be valued with a high multiple.
But add in some of the old world considerations and ways of going about things, and the importance of the tech elements are reduced, meaning that the high margin, high growth tech element is much less significant in terms of potential growth and potential profitability. And therefore lessening the value for the business.
That’s why I want to ask this question - “Is delivery really a tech business?” - and try to find out whether they are tech businesses, or old world businesses. And, more specifically, I’d like to find out how they themselves answer this question.
My sources are statements published by DeliveryHero, Deliveroo, DoorDash, Just Eat Takeaway (JET), Grab, and Meituan. I could have selected other companies too – such as Uber and Zomato – but they tend to talk about their whole business and not specifically their restaurant delivery activities.
Since this is a question for investors, I have searched for information quoted in delivery company investor-facing notifications – annual and quarterly reports, IPO documents, and investor presentations.
And to make sure that I’m not seeking quotes that may no longer be valid, I have focussed on comments made in the last eighteen months to two years.
What do restaurant delivery companies tell investors about themselves?
What do restaurant delivery companies tell their – actual and potential – investors?
Well, they tell them that they are indeed tech companies. Their quotes are replete with words such as ‘AI’, ‘algorithms’, ‘analytics’, ‘cloud-based’, ‘data’ (including especially ‘big data’), ‘digitize’, ‘end-to-end’, ‘full stack’, ‘internet’, ‘machine learning’. They use these terms to describe their ‘apps’, ‘super apps’ and ‘websites’. And the words they use most are ‘platform’, ‘online’, and tellingly ‘technology’.
These words clearly describe companies that are firmly in the tech space.
What are the benefits of being a tech company?
These tech-based descriptions allow the companies to derive ‘data-driven insights’, to provide ‘ecommerce services’ at ‘high frequency’, based on ‘ecosystems’ that are ‘large’ and ‘global’ using ‘innovative technology’ to provide ‘network effects’, and ‘product interfaces’ that satisfy requirements for ‘on demand’ and ‘seamless services’ that are ‘optimised’ for ‘search’.
All of these characteristics are undoubtedly well provided for by technology, but old world technology is also capable of providing some of the benefits that are claimed by delivery companies that favour themselves as tech companies. I’m talking about benefits as disparate as ‘empowerment’, ‘insights’, ‘integrated payment’, ‘innovation’, ‘upskilling’, and ‘user stickiness’.
These benefits can be attributed to a ‘marketplace’, ‘logistics’ or ‘quick commerce’ business, which is ‘omni-channel’ or ‘multi-category’ with benefits of ‘marketing leverage’ that are ‘tailored to meet customer needs’. Perhaps they do this by tracking orders in ‘real time’ and certainly providing ‘a wealth of choice’.
And an important benefit is the ‘flywheel’ effect. But this is a characteristic of old world markets too – the more customers a company has, the more opportunities it has to market its products, the more customers it has, and so the flywheel turns even if you are selling baked beans from a corner store.