The Overcrowded Food Delivery Sector

fooddelivery

In the past two years, there has been numerous food delivery startups. They range from on-demand restaurant delivery services (i.e. Doordash, Fluc, and Postmates) to prepared grocery subscription based orders (i.e. Blue Apron). With food delivery currently being one of the hottest VC sectors, who will win and dominate the market?

Of the numerous food related companies, Blue Apron seems to be promising. Given how competitive the food start up scene is, their growth and revenue figures are impressive. They did not release revenue figures but revealed that they deliver 3M meals every month. They grew from delivering 1M meals monthly to 3M in seven months. Assuming the same growth rate, their revenue will reach $334M for second half of 2015. Blue Apron has the potential to expand as Americans are trying to eat healthier. The switching costs for prepared grocery subscription based service is higher because there are more added value factors such as type of recipes, difficulty of recipes, and the way ingredients are packed. This is in contrast with services like Doordash and Fluc where switching costs are low. If they are to succeed, then they need a way to differentiate themselves. However, all of these services face the same challenge of being able to scale logistically. It will be interesting to see how they will be able to efficiently scale with growth.

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