To say that recent capital inflows within the food-ordering space have been growing rapidly wouldn’t be doing the existing funding environment justice. The truth is, it could be considered a gross injustice akin to calling Mark Zuckerberg a mere website developer.
While just $46 million and $25 million were purchased food ordering companies in 2013 and 2012, respectively, an astounding $600 million was dedicated to 2014. So far this coming year, we’ve had approximately $360 million invested so far, which when annualized, originates out to approximately $1.2 billion1. That sort of growth is not something you see too frequently.
So, what’s driving investors to throw such large sums of income into this area hand over fist? Well, considering 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 each of the noise on the market.
To the public’s detriment, the continuous barrage of headlines related to funding, M&A, etc. has swayed popular opinion in a way that one’s initial inclination is always to think that the competitive landscape is crowded, and this the current market 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. In fact, this is the under-penetration of the market that presents a massive opportunity commensurate with the degree of risk being assumed by investors today.
The first thing to note is the fact that where can you buy forskolin is itself a whopping $70 billion market. More importantly, of this $70 billion, approximately $9 billion (roughly 13 percent) is online2.
Thus, in the world where almost anything is completed either using the pc or through mobile apps, approximately 9 from 10 individuals are still using the traditional way of collecting the cell phone to get in touch with 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 largest and most recognized player from the space – and its particular services3.
The outcome demonstrated that approximately 55 percent of consumers in New York (their core market) had limited knowledge of the GrubHub (and Seamless) service, and this percentage rises to eighty percent in markets outside of Ny. Understand that GrubHub has been available since 2004 (pre-Facebook). What this means is that the vast majority of consumers aren’t even aware that these types of services even exist.
When 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, in the food ordering space, it’s clear that achieving similar penetration rates is not actually dependent on if, but of when. We can also turn to comparable metrics beyond the U.S. for more insight.
For example, the UK’s GrubHub equivalent, JustEat, carries a market penetration rate of approximately 25 %. As well as in South Korea, a country well-considered to be a strong delivery ecosystem, Baedal Minjok, which is South Korea’s GrubHub equivalent, features a 75 percent market penetration rate2. The United states, in a meager 13 percent, is only initially stages from the own broad migration to online/mobile ordering.
What all of this points to is a few serious room for growth. That being said, we should also consider how this growth stacks facing the direction by which relevant market dynamics 46dexipky trending within the U.S. Just for 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 expected to surpass offline orders sometime inside the next decade. The important thing takeaway is the fact we’re inside the very initial phases of a broad, secular shift to online/mobile ordering. Which is this paradigm shift in the industry this is the motivator behind all of the dollars being thrown in to the space as investors place their bets on what horse ultimately becomes that proverbial sought-after unicorn.