To say that recent capital inflows inside the food-ordering space have been growing rapidly wouldn’t do the current funding environment justice. The truth is, it may possibly also be considered a gross injustice akin to calling Mark Zuckerberg merely a website developer.
While just $46 million and $25 million were dedicated to food ordering companies in 2013 and 2012, respectively, an astounding $600 million was dedicated to 2014. Therefore far this season, we’ve had approximately $360 million invested to date, which when annualized, is released to approximately $1.2 billion1. That sort of growth is just not something you can see too frequently.
So, what’s driving investors to throw such large sums of capital into this region give fist? Well, considering exactly how much coverage companies with this sector are already getting into the media lately, the solution might not be as clear and obvious on account of all the noise on the market.
On the public’s detriment, the continuous barrage of headlines associated with funding, M&A, etc. has swayed popular opinion in a way that one’s initial inclination is always to believe that the competitive landscape is crowded, and therefore the marketplace is accordingly saturated.
Now, whilst the arena has indeed become highly competitive, the latter point on market saturation couldn’t be further through the truth. The truth is, it is the under-penetration of this market that presents a tremendous opportunity commensurate with the quantity of risk being assumed by investors today.
The first thing to note is that the buy coleus is itself a whopping $70 billion market. Moreover, of that particular $70 billion, approximately $9 billion (roughly 13 percent) is online2.
Thus, inside a world where just about everything is completed either on the pc or through mobile apps, approximately 9 out of 10 people are still while using traditional method of getting the telephone to bring in takeout and delivery orders.
Furthermore, back in February, Morgan Stanley/AlphaWise did some survey work that showed surprisingly low awareness levels among consumers of GrubHub – the most important and a lot recognized player within the space – and its particular services3.
The results demonstrated that approximately 55 percent of consumers in New York (their core market) had limited knowledge of the GrubHub (and Seamless) service, which percentage rises to 80 percent in markets outside of The Big Apple. Remember that GrubHub has been around since 2004 (pre-Facebook). This implies that the vast majority of consumers aren’t even aware that most of these services even exist.
In the event you check out large chains like Domino’s and Papa John’s today, their online penetration rates are roughly 45-50 percent2. Seeing the exponential increase in order volumes reported by competitors, small, and large, within the food ordering space, it’s clear that achieving similar penetration rates is not actually dependent on if, but of when. We can also look for comparable metrics away from U.S. for insight.
For example, the UK’s GrubHub equivalent, JustEat, includes a market penetration rate of around 25 percent. And also in South Korea, a country well-known for having a solid delivery ecosystem, Baedal Minjok, which happens to be South Korea’s GrubHub equivalent, includes a 75 percent market penetration rate2. The Usa, at the meager 13 percent, is just in the beginning stages of its own broad migration to online/mobile ordering.
What all of this points to is some serious room for growth. That being said, we should also consider how this growth stacks facing the direction through which relevant market dynamics 46dexipky trending within the U.S. With this, check out the chart below:
The direction we’re heading in is rather clear, and industry experts have a tendency to agree that online orders are required to surpass offline orders sometime in the next decade. The important thing takeaway is the fact we’re from the very early stages of the broad, secular shift to online/mobile ordering. Which is this paradigm shift in the market this is the power behind all the dollars being thrown in to the space as investors place their bets where horse ultimately turns into that proverbial sought-after unicorn.