Last week, FT Lex analyzed food delivery group Just Eat Takeaway (JET)’s deal with Amazon, which gives the e-commerce giant a 2% stake in JET’s US subsidiary Grubhub. (“Just Eat Takeaway: The Amazon Deal Is Less Appetizing Than It Looks,” Lex, July 7) While the article correctly concluded that the deal was not a worthwhile investment, it lacked completely a key element in the analysis of the FT: the thousands of restaurants. and takeout that make up JET’s customer base in the United States and around the world.
As Lex pointed out, JET’s order growth in the US hasn’t translated into profits, and the reason is simple: JET’s customer concerns are being ignored. As a result, restaurants choose to research alternatives and ask consumers to order direct.
Many restaurants and takeaways are already struggling to make a profit when customers make purchases through platforms like Just Eat, which can take up to 30% of the commission. Earlier this year, Peter Backman, a restaurant market consultant, estimated that JET/Grubhub took $11.4 billion in gross transaction value (GTV) from US businesses at the height of the lockdown (between the second quarter of 2020 and third quarter of 2021).
And, as markets across Europe saw in June, there is also the risk that the commission rate will increase further. JET increased fares by 1 percentage point, which equates to an increase of more than 7% for many businesses when they are already struggling with skyrocketing costs.
Additionally, an Amazon investment could raise longer-term concerns for small businesses if JET decides to deploy the same restaurant data capture strategy that Jeff Bezos used for his e-commerce site. In this scenario, every time a customer orders through a marketplace, local data is used to determine the location, menus, and even delivery routes of Amazon-owned takeout brands. The “amazonization” of the restaurant industry would be crippling, leaving only the large restaurant chains able to compete with the giant.
Until the food delivery giants return profits, power and value to restaurants and takeaways, they will continue to struggle.
Managing Director, Flipdish