Mega Profit Illustrates Market Power Of Just Eat Aggregator
Covid-19 has been great for online food delivery marketplaces Just Eat and Deliveroo. Research conducted by Amarach over the summer found that six out of ten consumers now order restaurant or takeaway food online at least once a month.
Just Eat was doing very well anyway before the pandemic, while Deliveroo has some catching up to do. Just Eat Ireland’s accounts filing shows turnover growth of 13% to €31m in 2019 and operating profit of €11m. Deliveroo Ireland’s latest accounts relate to 2018, when turnover advanced 80% to €9m. Excluding a transfer from the UK parent, the operating loss was €2m.
Just Eat’s operating profit margin of 35% points to its market power. Takeaway food vendors can sell directly online if they want to, but the punters are reaching for the Just Eat app to source what they want. So if you’re not on the platform you’re losing out, despite the aggregator commissions.
Those commissions are sizeable. If the aggregator is organising the delivery, the commission on the value of the order can be c.30% or more. When Just Eat first entered the Irish market in 2008 its base commission was 8%, and this has since increased to 14%.
Flipdish founders Conor McCarthy (left) and James McCarthy
The Amarach research, which was commissioned by digital foodordering solution Flipdish, also found that three out of four people who use Just Eat and Deliveroo are unaware of what restaurants are charged. Flipdish’s hope is that if more consumers were aware of these charges they would be more inclined to order their food directly from their restaurants of choice.
According to CEO Conor McCarthy: “The majority of people are unaware that marketplaces can charge restaurants up to 30% commission per order. We would hope to see a shift in people ordering directly from their local restaurants to make sure they receive the maximum amount of their revenue.”
The Flipdish technology enables restaurants to facilitate online orders, and it’s not free either. As with the aggregators, there’s a sign-up fee (€395) and a bespoke mobile app is priced at €805. The Dublin firm is as coy as Just Eat about its commission structure, stating that it is ‘volume based’.
Flipdish has financial firepower for the long haul too. Its March 2019 balance sheet shows €5.7m balance sheet cash, and in July the company found a powerful new ally in Dunnes Stores. The retailer turned to Flipdish for the tech back-end which it is using for limited grocery delivery from its flagship store in Cornelscourt.
The dilemma for restaurants fed up with Just Eat commissions is that it’s hard to buck the power of marketing. Just Eat’s new owner Takeaway.com spends one-third of its revenue on advertising and marketing, and neighbourhood restaurants and takeaways can never compete with that level of marketing spend.