deliveroo Business Model – How does deliveroo make money

This is a completely new world compared to two decades ago. Things are not the same as they were before. People’s expectations have changed with the growth of technology. This is because technology has made so many things easier than they were ever before. You can get anything by using your mobile phone. If you want new shoes you can order them online. Do you want new clothes? Order them online. Want to go to the movies? You can book the tickets online. People can literally avail of any service through their mobile phones. This is a great thing as you don’t want to have to leave the comfort of your home and go get them yourself. Imagine how hard it would be if you were to go out to get yourself washing or a refrigerator. But now you can just simply get it delivered to your home. 

If you can do all that then why not get food delivered to your home. Getting food delivered to your home may not be a new thing but it has definitely changed. In the past, you would have only a handful of services that would deliver food to your home like Dominos. However, it is a franchise and not a food delivery service. Delivering food was a part of its services but it is not a complete food delivery service. This is because they only delivered the things that were made by their fast food joints and not the food made by others. So in order to solve this problem there emerged a few startups which didn’t do much. Because they would only list the food items on their website but the restaurants had to deliver them. This problem was solved when food delivery services like Deliveroo emerged. 

What is Deliveroo and how it all started?

As mentioned earlier Deliveroo is a food delivery service that has its main headquarters in London. It is one of the fastest-growing food delivery services in the world. You might know some food delivery services but if you are living in the UK you would most probably be using Deliveroo. This company was founded in 2013 by two Americans William Shu and Greg Orlowski. Interestingly these two are childhood friends. This is similar to many other food delivery services that are prominent in other countries. The objective of this food delivery service is very simple they want to deliver the food from all local restaurants to people’s homes. It got popular because there were not many services like this when it started. Even though there were services like JustEat and DeliveryHero they didn’t actually deliver food. They only acted as a medium for restaurants to take orders as they would only list the items. 

But many restaurants could deliver food as they could not handle serving customers and delivering food to others at the same time. Many small food joints cannot even think of it. So they needed something more efficient that can take the burden of delivering food. That is when Deliveroo came into the picture. Deliveroo wants to deliver your breakfast, lunch, and dinner. It doesn’t matter what you want salad or a full course meal they will deliver everything. You can order any cuisine and Deliveroo will deliver it to you at your doorstep. It hired contract workers who would deliver food on time. The service was already available in eight cities, associated with nearly 1500 restaurants, and hired 500 drivers for delivering food by 2015. Right now this food delivery service is available in 11 countries in association with over 40,00 restaurants. Deliveroo is currently estimated at over $2 billion. 

Here is the business model of this successful startup. 

Business model of Deliveroo

Deliveroo has become a platform that allows you to place your order and delivers it after you confirm them. In order to do this, it has to partner up with local restaurants and drivers, that is the people who want to deliver food. By doing this the company can deliver food locally on-demand. It helps the restaurants to deliver their food and the people by delivering their favorite meals to their homes. As mentioned earlier it has to maintain partnerships with two things, that is restaurants and delivery partners to run its services. Let’s look at how they do this.  

Restaurants

The first thing they do is reach out to all the restaurants in the city they want to operate in. Not many of these restaurants will have a home delivery service. These types of restaurants easily join hands with Deliveroo as they don’t have to hire staff to do it for them. They clearly see the potential to increase their sales without putting in much effort. Even if some premium restaurants do have home delivery services they might have some restrictions like they won’t deliver if the distance is too far. So even they would want to get associated with a service provider like this. Because they can put an end to their home delivery services and partner with Deliveroo which does the exact same thing. Many premium restaurants claim that their revenue has increased at least 30% after they partnered with Deliveroo. 

But just partnering doesn’t make it work there is something interesting that Deliveroo does. Here is how Deliveroo helps to grow the revenue of the restaurants which in turn increases its revenue. 

Support

Support is something that is only provided to customers. In this case, people who are ordering food are not the only customers for Deliveroo it is also the people who make it. They understand it very well and constantly assist them in various things. It continuously provides them with analytics that could help the restaurants improve their businesses. Apart from that it manages accounts and offers 24×7 customer support.

Expansion

The Editions program of Deliveroo helps the restaurants to open new outlets in different localities. It does this by doing market research and using algorithms. If the restaurant is convinced then it helps them by offering logistical and managerial support. 

Provides Technology

Once the restaurants partner with Deliveroo it provides them with technology that automates all the process that related to taking orders, preparing, and delivering it. All the technology offered by them is simple and easy to learn which helps the restaurants to dispatch orders effectively and effortlessly. These restaurants are also provided with 4G internet so that they don’t face any difficulties in handling the orders. This WiFi is also provided to the customers dining in the restaurant. It helps the restaurants to maintain an online presence through its website. Other than that it helps them recruiting staff and provides them packaging materials for discounts. 

Promotions

Once you join hands with Deliveroo you don’t have to worry about promoting your restaurant. This is because the platform is constantly promoting your restaurant. Even the people who don’t know about your restaurant will Know about you and the things that have to offer. It will definitely help the restaurants reach a wide range of people.

Delivery partners

The success of food delivery services is dependent on their delivery partners. If the delivery partners do not do their work as they are supposed Deliveroo’s reputation will take a massive hit. A lot of credit to its success goes to deliver partners as they have been very good at what they do. The riders have to deliver any order within 30 minutes after it is handed over to them. They can do it using scooters, bikes, and even bicycles but they should not exceed the time limit. Currently, Deliveroo employs more than 30,000 riders around the world who deliver freshly prepared food. There are also some strategies that are used by Deliveroo to keep their riders happy. They have to do this as the riders are one of the most important aspects of their business. This is how they do it.

Tips

The riders spend anywhere from 6 to 8 hours of delivering food. Deliveroo allows the riders to keep all the tips that they earn during this time. It is really commendable as the tips are not given to them directly but given at the time of placing an order. Deliveroo also pays €250 for referring riders to them. 

Flexible working hours

The riders are not forced to work during a particular time of the day. They can work at any time of the day to work. All they have to do is log in using the Deliveroo rider application and start delivering food. 

Insurance and other perks

Deliveroo males sure that it’s riders are safe. So it provides their vehicles with insurance using the Zego application. This application is integrated with Deliveroo. The riders are also given high-quality safety gear and other essentials. Apart from these they also get coupons, discounts, and free international money transfers. 

How does Deliveroo make money?

Deliveroo makes its money from three sources. They are consumers, restaurants and it’s subscription plans.

Consumers

A big chunk of its money comes from customers. On average it charges a delivery fee of €2.50 per order. 

Restaurants

After the consumers, it gets its money from restaurants. It gets commissions from restaurants for delivering orders. Deliveroo charges 10% to 20% commissions on every single order. 

Subscription plan

Deliveroo also has a subscription plan called Deliveroo plus. This plan aims to provide various benefits that are not available to regular customers. These benefits include things like 24/7 customer service and free delivery on orders above €10. Not only that the customers who get the subscription plan will discounts that normal customers don’t get.

Conclusion

This is the business model of one of the most successful online food delivery services that are Deliveroo. Its business model is predominantly a brokerage business model which also included a subscription business model. This is completely different from the business model of product hunt. Deliveroo is trying to expand to core countries in the future. Its aim is to provide people a great dining experience at their homes. It looks like it has headed in the right direction. 

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