Both Google and Uber have recently launched online meal delivery schemes in India, taking on an uphill battle in a market that several startups have failed to crack, Quartz India reports.
Google launched its Areo restaurant delivery and home services platform in April, and Uber followed up by launching competitor UberEATS in India last week.
However, the two large tech companies are entering an online meal delivery space littered with troubled startups that have failed to gain much traction outside of India’s largest cities.
Google and Uber have deep pockets, allowing them to undercut their competition on delivery fees. For instance, UberEATS only charges $.23 per delivery, with no order minimum, less than half of what some startups charge.
However, the tech moguls still face steep overall barriers in India’s fledgling online meal delivery space. Much of India’s population still doesn’t have access to the internet. That lack of internet penetration has also limited Google’s and Uber’s brand recognition in India compared with other markets like North America and Europe. Lastly, individual restaurants in India typically have their own neighborhood delivery services, and have very established networks of couriers and customers. For the tech behemoths to build successful meal delivery businesses in India, they will need to rely on massive expansion of internet access and find ways to differentiate their app or delivery experience from the plethora of other delivery services out there.
Pizza chains have long dominated meal delivery, but digital platforms are now enabling the entire restaurant industry to plug into online delivery. In the dominant on-demand meal delivery model, platforms like Grubhub serve as a middleman that connect people to food using the scalability of the internet.
Although some industry leaders are processing hundreds of millions, even billions, in annual food sales volume already, they're a drop in the bucket in terms of the total addressable market (TAM) for food delivery, which is valued at $210 billion, according to Morgan Stanley Research estimates.
Companies are adopting diverse business models in the market to deliver these meals; some, like Postmates, are focused on the logistics of delivering food, while end-to-end providers like Sprig cook, facilitate ordering, and deliver the food themselves. Ultimately, order-focused platforms like Grubhub/Seamless and Eat24 appear to hold the strongest positions in the market. The former controlled an estimated 59% of total order volume in 2015, while Eat24 held an estimated 7% share. Moreover, Grubhub/Seamless could pose a threat to the logistics companies DoorDash and Postmates if it pushes further into proprietary delivery services, especially in markets its competitors haven't expanded to yet.
Despite varying advantages and disadvantages, all stakeholders will have to navigate some challenges in the market, including cooling deal volume, consumer resistance to delivery fees, potential industry consolidation, and downward pressure on take rates, which measure the revenue a company actually earns out of the volume they process.
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In full, the report:
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