Grubhub struggles in saturated food delivery space

Grubhub is struggling to achieve growth in a saturated market, according to The Wall Street Journal.

The Just Eat Takeaway.com-owned food delivery company competes with rivals market leader Uber Eats, DoorDash and Postmates in the US.

Uber Eats acquired Postmates back in May this year and further consolidation in the industry is expected.

Grubhub was founded in 2004 and at first its sole purpose was digitalising paper restaurant menus, before launching its delivery service 11 years later in 2015.

Analysts say that Grubhub has underperformed and should own the biggest share of the market since it was founded 17 years ago.

“Being a first mover in any sector is a powerful weapon for fending off competition,” said retail strategist DeAnn Campbell.

Despite being the first in the space, Grubhub has been unable to “parlay their early-adopter status into market dominance.”

Industry experts and former employees say that rival DoorDash, which was founded in 2013, is winning the race in food delivery with its superior tech and dominance in US suburbs.

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In January 2018, Grubhub owned a respectable 49 per cent of the delivery market, fast forward 18 months and it now controls just 16 per cent, according to Bloomberg.

Former Grubhub corporate employees who recently spoke with Insider described a leadership team that relied too heavily on promoting Grubhub as a discovery channel for restaurants through its app, or marketplace.

One of the suspected reasons for Grubhub’s failure in keeping business was the refusal from leaders to expand its grocery delivery arm or last-mile logistics, both high margin verticals its rivals DoorDash and Uber Eats have both adopted.

According to a senior analyst at Third Bridge, Joe McCormack, the pandemic caused more distrust of third-party delivery apps, forcing chains to own their “customer journey’s” and reduce the independence on third party apps.

He added: “I think the worst case ends up being restaurants wanting to utilize these platforms as getting the customer in for the very first time but then moving off the platform into their own applications.”

McCormack believes that Grubhub needs “to execute a regional strategy” by becoming a stronger leader in the markets where it already controls.

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