How Does Deliveroo Make Money? The Deliveroo Business Model In A Nutshell

Deliveroo is a British online food delivery company founded by Greg Orlowski and Will Shu in 2013. Shu developed the platform in response to a lack of high-quality food delivery in London.
Deliveroo makes money by collecting 25-45% of every order it facilitates. It also charges delivery fees and onboarding fees for restaurants that wish to be featured on the platform.
Deliveroo for Business is a service designed for corporate clients needing to order food in bulk. The company also charges a higher commission to businesses that utilize a network of digital kitchens to process orders.

Business Model Element	Analysis	Implications	Examples
Value Proposition	Deliveroo’s value proposition centers around convenience and choice for both customers and restaurants. For customers, Deliveroo offers a wide selection of restaurant options and delivers food directly to their doorstep, saving time and effort. The platform emphasizes quick delivery times, allowing customers to enjoy restaurant-quality meals in the comfort of their homes. For restaurants, Deliveroo provides a digital platform to expand their reach and access a broader customer base, increasing their sales. The convenience of the platform extends to flexible delivery options and real-time order tracking. Overall, Deliveroo’s value proposition is built on convenience, choice, and the ability to support local restaurants.	Provides convenience and choice for customers and restaurants. Offers a diverse range of restaurant options with home delivery. Focuses on quick delivery times for customer satisfaction. Empowers restaurants with a digital platform to expand their reach and increase sales. Flexible delivery options and real-time order tracking enhance convenience. Attracts customers seeking convenient dining options and restaurants looking to grow their business.	– Deliveroo’s value proposition aligns with the modern lifestyle of convenience and instant gratification. – The platform’s convenience benefits customers who want restaurant-quality meals at home or work. – Restaurant partners can reach a broader audience and increase sales through Deliveroo’s platform.
Customer Segments	Deliveroo serves three primary customer segments: 1. Customers: Individuals and households looking for food delivery services, especially those seeking diverse restaurant options and convenience. 2. Restaurants: Local restaurants and eateries looking to expand their customer base and increase sales through online delivery services. 3. Riders: Independent delivery riders who provide the last-mile delivery service for Deliveroo orders. Deliveroo tailors its services to meet the needs of these segments, providing customers with a user-friendly app, partnering with restaurants to integrate their menus, and offering opportunities for riders to earn income through deliveries.	Serves three main customer segments: 1. Customers: Individuals and households seeking food delivery and convenience. 2. Restaurants: Local restaurants and eateries looking to increase sales through online delivery. 3. Riders: Independent delivery riders providing last-mile delivery services. Tailors services to meet the unique needs of each segment. Provides a user-friendly app for customers, integrates restaurant menus, and offers earning opportunities for riders. Supports diverse customer and business needs.	– Catering to customers, restaurants, and riders creates a diverse ecosystem with multiple revenue streams. – Tailoring services to each segment enhances user satisfaction and business partnerships. – Opportunities for riders contribute to the gig economy and expand the delivery network.
Distribution Strategy	Deliveroo’s distribution strategy is digital and relies on its mobile app and website for customer orders and restaurant partnerships. Customers use the Deliveroo app or website to browse menus, place orders, and track deliveries in real-time. Restaurants partner with Deliveroo to list their menus on the platform and prepare orders for delivery. Deliveroo also manages a fleet of delivery riders who pick up orders from restaurants and deliver them to customers. Additionally, Deliveroo utilizes data analytics to optimize delivery routes and times, ensuring efficient order fulfillment.	Relies on a digital distribution strategy through a mobile app and website. Customers use the app/website to browse menus, place orders, and track deliveries. Restaurants partner with Deliveroo to list menus and prepare orders. Manages a fleet of delivery riders for order pickup and delivery. Utilizes data analytics for route optimization and efficient delivery. Ensures convenience and real-time order tracking for customers.	– Digital distribution simplifies access to Deliveroo’s services, eliminating the need for physical ordering or delivery channels. – Real-time order tracking enhances the customer experience and trust in the platform. – Data analytics optimize delivery operations for efficiency and speed.
Revenue Streams	Deliveroo generates revenue through several streams: 1. Commission Fees: Restaurants pay Deliveroo a percentage-based commission on each order processed through the platform. 2. Delivery Fees: Customers are charged delivery fees for each order, which contribute to revenue. 3. Subscription Services: Deliveroo offers subscription services like Deliveroo Plus, where customers pay a monthly fee for benefits like free delivery on eligible orders. 4. Marketing Services: Restaurants can pay for promotional placements and advertising on the platform to increase visibility. 5. Partnerships and Collaborations: Deliveroo may partner with restaurants or brands for special promotions and revenue-sharing arrangements.	Relies on revenue streams from: 1. Commission fees from restaurants on each order. 2. Delivery fees charged to customers. 3. Subscription services like Deliveroo Plus. 4. Marketing services for restaurants. 5. Partnerships and collaborations with restaurants and brands. Diversifies income sources through commissions, fees, subscriptions, and partnerships. Supports affordability and choice through subscription services.	– Commission fees from restaurants provide a steady source of revenue tied to sales volume. – Delivery fees contribute to revenue with each customer order. – Subscription services offer predictable recurring income while enhancing customer loyalty. – Marketing services and partnerships create additional revenue opportunities.
Marketing Strategy	Deliveroo’s marketing strategy includes digital advertising, promotions, partnerships, and referral programs. The platform runs targeted digital advertising campaigns to reach potential customers and promote special offers. Deliveroo collaborates with restaurants to create promotions and discounts, attracting price-sensitive customers. Referral programs incentivize users to refer friends and family to the platform. Additionally, Deliveroo may partner with brands or events for co-marketing initiatives. The platform’s mobile app and website serve as primary marketing channels, providing users with information on restaurants, menus, and ongoing promotions.	Utilizes digital advertising, promotions, partnerships, and referral programs for marketing. Runs targeted digital ad campaigns to reach potential customers. Collaborates with restaurants for promotions and discounts. Incentivizes user referrals through referral programs. Partners with brands and events for co-marketing initiatives. Mobile app and website serve as primary marketing channels. Provides users with information on restaurants, menus, and promotions.	– Digital advertising campaigns create awareness and attract new customers. – Collaborations with restaurants and brands enhance the variety of offerings and promotions. – Referral programs leverage existing users to drive user acquisition. – Mobile app and website serve as effective channels for promoting restaurants and menus.
Organization Structure	Deliveroo operates with specialized teams dedicated to product development, engineering, marketing, sales, partnerships, customer support, and rider operations. Product development and engineering teams focus on enhancing the platform, app, and logistics. Marketing and sales teams promote Deliveroo’s services and partnerships. Partnership teams collaborate with restaurants and brands. Customer support teams assist users with inquiries and support services. Rider operations teams manage the recruitment and engagement of delivery riders. Deliveroo’s structure reflects its commitment to providing a seamless food delivery experience.	Employs specialized teams for product development, engineering, marketing, sales, partnerships, customer support, and rider operations. Enhances the platform, app, and logistics through product development and engineering. Promotes services and partnerships through marketing and sales efforts. Collaborates with restaurants and brands through partnership teams. Assists users with inquiries and support services via customer support teams. Manages rider recruitment and engagement through rider operations teams. Ensures a seamless food delivery experience.	– Specialized teams contribute to platform improvement, user satisfaction, and operational efficiency. – Marketing and sales teams drive user acquisition and revenue generation. – Partnership teams facilitate collaborations with restaurants and brands. – Rider operations teams play a crucial role in ensuring efficient delivery operations.
Competitive Advantage	Deliveroo’s competitive advantage lies in its extensive restaurant network, quick delivery times, and convenience for both customers and restaurants. The platform’s broad selection of restaurant options and flexible delivery options provide customers with choices and convenience. Quick delivery times enhance the customer experience, making Deliveroo an attractive option for those seeking immediate food delivery. The platform’s partnerships with local restaurants give it a competitive edge by offering diverse cuisines. Additionally, Deliveroo’s rider network ensures efficient and reliable food delivery.	Derives a competitive advantage from: – Extensive restaurant network offering diverse cuisines. – Quick delivery times for immediate food satisfaction. – Convenience for customers and restaurants through flexible delivery options. – Reliable and efficient food delivery through a dedicated rider network. – Partnerships with local restaurants enhance the variety of food options. – Strong brand presence in the food delivery market.	– Extensive restaurant choices cater to various tastes and preferences. – Quick delivery times meet the demands of customers seeking fast food delivery. – Convenience benefits both customers and restaurants, encouraging adoption. – Rider network ensures the reliability and availability of food delivery services.

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Origin Story

Deliveroo is a British online food delivery company founded by Greg Orlowski and Will Shu in 2013.

After moving from New York City to London and working long hours at a desk, Shu was surprised to find that it was nearly impossible to get high-quality food delivered.

He observed that existing takeaway food was subpar at best and limited to low-end restaurants already providing a takeaway service.

Deliveroo was then launched in February 2013 by Shu and childhood friend Greg Orlowski with the motto “proper food, proper delivery“. Shu initially worked as the first Deliveroo rider, picking up food from restaurants and delivering it to customers to get a sense of how the whole process worked.

Starting with just three restaurant partners, Deliveroo secured a critical round of funding in mid-2014 to allow it to operate in the British seaside city of Brighton.

By January of the following year, the service was launched in Berlin and Paris. At this point, Deliveroo had approximately 1,500 restaurants onboarded with over 500 delivery drivers.

In 2019, the success of Deliveroo caught the attention of Amazon who subsequently invested $575 million to secure a stake in the fast-growing European food-delivery space.

The company also successfully navigated the coronavirus pandemic in 2020, adding over 15,000 couriers to cope with increased demand.

Today, Deliveroo operates in 12 countries with more than 115,000 restaurant and grocery partners.

Deliveroo’s flywheel and business model explained

deliveroo-flywheel — The Deliveroo claimed flywheel moves around a wide selection of products on the platform, which brings in consumers, thus making the platform also more appealing for riders, as they have the option to choose what food to deliver. As more riders join in, the service improves thus making it more valuable for restaurants looking to expand their customer base, by providing quick deliveries. Therefore, the positive feedback loop is triggered by a wider selection, at better value, with a wide range of partners (riders and restaurants) – Image Source: Deliveroo Financial Prospectus.

To kick off its operations Deliverro needs to build up local network effects.

Indeed, one of the limitations of a platform that operates locally is the fact that in each new location it needs to kick off its network effects, by attracting enough riders to make the service valuable for consumers and therefore the platform valuable for restaurants.

The positive side is that as the brand grows in various locations, it becomes easier to kick off operations in new ones, thus triggering local network effects more quickly.

The loop is straightforward. As more local consumers join the platform, and orders flow in, restaurants and groceries also join in more easily and in greater numbers.

This improves product selection and gives choices to consumers in terms of pricing. Thus generating also earnings opportunities for riders, who might use Deliveroo as the go-to platform to earn an additional income.

Thus, a wider network of riders, with a wider selection, better prices, makes more consumers join in, making the platform even more valuable to restaurants and grocery partners.

Deliveroo revenue generation

deliveroo-income-statement — Deliveroo Income Statement – Deliveroo Financial Prospectus.

Deliveroo has a revenue generation model typical of many food delivery companies.

This model is discussed in more detail below.

Order commissions

Deliveroo collects a commission of 25-45% for every food order it facilitates. The exact commission depends on the particular restaurant partner and the country of operation.

Delivery fees

Deliveroo customers must also pay a delivery fee which is then forwarded to the courier by the company.

Delivery fees are based on the distance between the restaurant and the customer and also the estimated travel time.

Onboarding fees

Deliveroo also charges an onboarding fee for new restaurants wishing to be included on the platform.

Ostensibly, this fee covers the cost of photographing the menu and also the equipment that connects with online ordering software. A typical onboarding fee is in the vicinity of $300.

Deliveroo Plus

Deliveroo Plus is a subscription membership plan for members giving them access to free delivery, 24/7 customer service, and exclusive restaurant offers.

Prices vary according to country. In Australia, for example, the cost of Deliveroo Plus is:

$14.99/month for the Gold plan, which offers free delivery on all restaurants, takeaway, and grocery deliveries.
$6.99/month for the Silver plan, which offers the same free delivery provided the order amount is at least $40.

Deliveroo for Business

Deliveroo for Business is a service provided to corporate customers who wish to order food in bulk for their employees.

The fee structure for this service is unclear, but the company likely earns a commission from its existing restaurant partners. Given the bulk nature of these food orders, the commission is likely to be significant.

Deliveroo Editions

Deliveroo Editions is a network of kitchens where several restaurants and food brands work together in a single space to streamline the food delivery process.

These kitchens are built and fitted out by Deliveroo and leased free of charge to the restaurants and brands.

However, the company takes a higher commission for every order placed through the app. This commission may be as high as 50% in some cases.

Key Highlights

Origin Story: Deliveroo, a British online food delivery company, was founded in 2013 by Greg Orlowski and Will Shu. The idea arose when Shu, after moving to London from New York City, noticed a lack of high-quality food delivery options.
Revenue Generation: Deliveroo generates revenue through several channels:
- Order Commissions: It collects a commission ranging from 25% to 45% on every food order, varying based on the restaurant partner and location.
- Delivery Fees: Customers pay delivery fees based on distance and estimated travel time, which are then paid to the couriers.
- Onboarding Fees: New restaurants pay an onboarding fee (approximately $300) to cover menu photography and online ordering software integration.
- Deliveroo Plus: A subscription plan offering free delivery, 24/7 customer service, and exclusive restaurant offers for a monthly fee. Prices vary by country.
- Deliveroo for Business: Offers bulk food ordering services for corporate clients, likely earning a significant commission from restaurant partners.
- Deliveroo Editions: Provides shared kitchens for multiple restaurants to streamline delivery. Deliveroo takes a higher commission (up to 50%) for orders from these kitchens.
Network Effects and Business Model: Deliveroo’s success is built on a positive feedback loop where a wide product selection attracts consumers, leading to more riders and restaurants joining. This creates value for each participant, reinforcing the platform’s appeal.
Expansion and Investment: After its founding, Deliveroo expanded rapidly, gaining investments including a significant one from Amazon in 2019. It has navigated challenges, such as the COVID-19 pandemic, by adding more couriers to meet demand.
Global Presence: Deliveroo operates in 12 countries, with a vast network of over 115,000 restaurant and grocery partners.
Innovation: Deliveroo introduced concepts like “Deliveroo for Business” and “Deliveroo Editions,” showcasing its innovative approach to catering to various customer needs.
Local Network Effects: A challenge for Deliveroo, operating locally, is building up network effects in each new location. As it gains traction and brand recognition, it becomes easier to establish operations in new areas.
Commission Structure: The commission-based revenue model is typical for food delivery companies, with Deliveroo charging varying rates based on the order and restaurant.
Subscription Model: Deliveroo Plus offers subscription plans that provide members with benefits like free delivery and exclusive offers, contributing to recurring revenue.
Corporate Solutions: “Deliveroo for Business” caters to corporate clients’ bulk food orders, likely earning significant commissions due to the volume of these orders.
Shared Kitchens: The “Deliveroo Editions” concept involves shared kitchens that allow multiple restaurants to operate in one space, with Deliveroo earning higher commissions on orders from these kitchens.