Deliveroo's Prospective IPO
Discussion
Mr Whippy said:
Sooo desperate investors subsidise cheap delivery of food, until they don’t.
In the meantime the businesses look for ways to make a profit.
Investors jump in on the promise of profit by business model X, which was clearly wrong. So stay in hoping they find a business model that will work?
I always just recall the ways my local restaurants and takeaways operated in the past.
Mostly students or temporary waitress types. Young people moonlighting doing deliveries. First job on tills on evenings etc.
There was never money in there for an intermediary. Even with economies of scale, they were always mostly busy if they were a decent business.
I can see money in this. “Deliveree“ has appeared in my local area... but they won’t have shareholders and tens of billions invested and need to make vast margins to stay in business.
If these small platforms can come about in a world where just eat and Deliveroo already do business, then the big ones would seem to be a lost cause.
Too expensive to cover investor demand for margin in the tightest margin business going... no IP, no anything, just glorified interface for a delivery business and contracts, paying the lowest salaries etc.
There just isn’t room in it for executives getting £££ in shares and investors taking multi-percentage growth and margin returns.
Trouble is that there are plenty of these types of businesses that stick themselves into the middle of an industry and burn investor cash to either force out the viable incumbents or convert an existing business model by rebranding it and undercutting with a stripped out service using investor cash and for the last 20 years enough have succeeded to critical mass or accidentally stumbled onto a different model that worked to validate the model. In the meantime the businesses look for ways to make a profit.
Investors jump in on the promise of profit by business model X, which was clearly wrong. So stay in hoping they find a business model that will work?
I always just recall the ways my local restaurants and takeaways operated in the past.
Mostly students or temporary waitress types. Young people moonlighting doing deliveries. First job on tills on evenings etc.
There was never money in there for an intermediary. Even with economies of scale, they were always mostly busy if they were a decent business.
I can see money in this. “Deliveree“ has appeared in my local area... but they won’t have shareholders and tens of billions invested and need to make vast margins to stay in business.
If these small platforms can come about in a world where just eat and Deliveroo already do business, then the big ones would seem to be a lost cause.
Too expensive to cover investor demand for margin in the tightest margin business going... no IP, no anything, just glorified interface for a delivery business and contracts, paying the lowest salaries etc.
There just isn’t room in it for executives getting £££ in shares and investors taking multi-percentage growth and margin returns.
While cash is cheap and worthless it seems likely that investors will keep hurling it at loss making businesses in the hopes that they stumble into profit eventually or get taken out by another such firm that has more investors and a bigger share premium.
I would think the biggest threat to Deliveroo type model would be if the slave labour became sentient and realised that without them it doesn't work, that building a local app is easy and they could undercut and take all the business.
The irony of current you g 'gig' workers is that they think that they are independent workers living the dream when infact they are mostly unpaid labourers making their grandparents rich.
Is that likely to happen? Probably very unlikely.
I think the other issue is on the supply side. Presumably the marginal operating profit in the last few quarters is as much driven by the ability to gouge restaurants that can't open to eat-in customers. If the difficulty of getting reservations at my local restaurants is anything to go by, people will be queuing out the doors to eat in person as soon as things open up. The economics of selling kitchen space to Deliveroo at 30% below retail don't seem quite so attractive then.
DonkeyApple said:
While cash is cheap and worthless it seems likely that investors will keep hurling it at loss making businesses in the hopes that they stumble into profit eventually or get taken out by another such firm that has more investors and a bigger share premium.
This. DonkeyApple said:
I would think the biggest threat to Deliveroo type model would be if the slave labour became sentient and realised that without them it doesn't work, that building a local app is easy and they could undercut and take all the business.
And this.In UK terms it might happen sooner than anyone expects. UK population has fallen by 1 million people during the past 12 months, largely due to migrant workers returning home. When UK re-opens from Covid there may be a lot of employers looking around and squealing, "Hey! Where's my cheap labour work-force gone?" while British yoofs moan they don't want those crappy jobs and need more money anyway. Innit.
NickCQ said:
I think the other issue is on the supply side. The economics of selling kitchen space to Deliveroo at 30% below retail don't seem quite so attractive then.
That's exactly my analysis as well. Fill a table in the restaurant at £50 a head (plus 12.5% service charge) or send out a take-away for £20 a head. Wonder which makes the most efficient use of limited kitchen space...First shock when outdoor tables re-open and go straight to full tilt.
Bigger shock when indoor dining re-opens and goes straight to full tilt with demand still high for outdoor tables.
Utter chaos through the summer when everyone who can't go abroad tries to spend their money in UK.
Big inflation in restaurant prices "to pay for 12 months of Covid closures".
Anyone tried booking a table yet? Already I'm encountering people saying they can't get a table anywhere during April.
rockin said:
That's exactly my analysis as well. Fill a table in the restaurant at £50 a head (plus 12.5% service charge) or send out a take-away for £20 a head. Wonder which makes the most efficient use of limited kitchen space...
First shock when outdoor tables re-open and go straight to full tilt.
Bigger shock when indoor dining re-opens and goes straight to full tilt with demand still high for outdoor tables.
Utter chaos through the summer when everyone who can't go abroad tries to spend their money in UK.
Big inflation in restaurant prices "to pay for 12 months of Covid closures".
Anyone tried booking a table yet? Already I'm encountering people saying they can't get a table anywhere during April.
Isn't this partly headed off by 'dark kitchens'? I guess the reality post lockdown will be a slump in the higher end business that's probably their only profitable business as £30 meals really don't travel well and most buyers at that level also are paying for the ambience?First shock when outdoor tables re-open and go straight to full tilt.
Bigger shock when indoor dining re-opens and goes straight to full tilt with demand still high for outdoor tables.
Utter chaos through the summer when everyone who can't go abroad tries to spend their money in UK.
Big inflation in restaurant prices "to pay for 12 months of Covid closures".
Anyone tried booking a table yet? Already I'm encountering people saying they can't get a table anywhere during April.
I struggle with the business model and if either the free money and slave labour contract they could be in trouble but that doesn't mean the share price won't increase ten fold for wholly illogical reasons.
We have tried all the deliveroo type services from various restaurants and all the food has been delivered undamaged and hot.
Peoples habits have changed during lockdown but the question is if this will continue once things are opened up.
Am tempted to have a punt on this at a grand and be prepared for it to tank as it’s not much in the grand scheme of things.
Peoples habits have changed during lockdown but the question is if this will continue once things are opened up.
Am tempted to have a punt on this at a grand and be prepared for it to tank as it’s not much in the grand scheme of things.
DonkeyApple said:
Isn't this partly headed off by 'dark kitchens'?
They can use that to keep the top line growing but it fundamentally changes the investment proposition from capital light / scalable / low overhead to capital-intensive and slow to react to changing consumer tastes. I also suspect that the 'dark kitchens' are only viable in larger towns and cities where you have enough demand to maintain a variety of cuisines, and need more customisation to the local market.Question is whether the public market cares about that or whether keeping the top line moving is enough to support the valuation for as long as it takes the lockup to expire and the insiders to cash out.
NickCQ said:
Question is whether the public market cares about that or whether keeping the top line moving is enough to support the valuation for as long as it takes the lockup to expire and the insiders to cash out.
So Deliveroo essentially become a take-away restaurant business... but a uk wide brand, with decent chefs and ingredients and so on required... suddenly a bit less easy than an app and delivery giggers who look after all their own benefits packages.And yet they’ll also still be competing with their own kitchens, to be able to offer other restaurants their delivery services?
But will restaurants even bother using Deliveroo if they’re charged more so that their own dark kitchens remain competitive?
There is way too much incentive for smaller more dynamic offerings in local areas to just buy an app and run with it.
Personally I just ring local restaurant and drive out or walk to get food.
Or take away I call or walk in and order and collect.
The last thing I want is restaurant upping prices or cutting quality just to pay someone else to save me time.
I’m already saving big time on time going takeaway vs cooking, soooo.
I was offered shares in this start-up a couple of months ago - similar concept but focusing on rapid delivery of almost anything (of reasonable value) within a narrow central London area https://peyk.uk/ They're forecasting profitability in year 3.
I declined - I just don't see any meaningful USP and the barriers to entry are knee high to the proverbial grasshopper!
I declined - I just don't see any meaningful USP and the barriers to entry are knee high to the proverbial grasshopper!
rockin said:
DonkeyApple said:
While cash is cheap and worthless it seems likely that investors will keep hurling it at loss making businesses in the hopes that they stumble into profit eventually or get taken out by another such firm that has more investors and a bigger share premium.
This. DonkeyApple said:
I would think the biggest threat to Deliveroo type model would be if the slave labour became sentient and realised that without them it doesn't work, that building a local app is easy and they could undercut and take all the business.
And this.In UK terms it might happen sooner than anyone expects. UK population has fallen by 1 million people during the past 12 months, largely due to migrant workers returning home. When UK re-opens from Covid there may be a lot of employers looking around and squealing, "Hey! Where's my cheap labour work-force gone?" while British yoofs moan they don't want those crappy jobs and need more money anyway. Innit.
vulture1 said:
With any luck a bit of wage inflation for a while to make houses cheaper by comparison.
The only thing preventing house inflation is wage inflation though. If there was to be wage inflation then house prices would be released to inflate x times more. House prices are desperate to burst upwards as you can see from how the stamp savings were instantly added to the market price and swallowed up. Only lending curbs and a lack of wage inflation is holding the market back from reflecting the massive currency devaluation of the last decade.
It's arguably the only sane thing Cameron's party did was to remove a lot of debt from the property market and impose intelligent taxation to steer away a lot of excess investment money and to force out the most leveraged speculators.
While wage inflation would be good to see it would be imperative for it to be matched by increased lending regulation and investment taxes otherwise property prices will rise far more than wage inflation's buying power.
I would also posit that a very significant impact on income earners genuinely at the level where property purchase is an option, ie putting aside the millions who would like to buy a home but simply don't have the income as a basic nature of their level of work, the true affordability inhibitor is the inability to save the deposit when there are so many other things to spend that money on instead such as Deliveroo, taxis, airplanes, media contracts and numerous other monthly subscriptions.
Low interest rates mean running the debt isn't any more expensive than before the big price rises in terms of basic affordability but the killer issue is the deposit. 2% on a £300k property or 6% on a £100k property is much of a muchness. The two big cost changes of significance being firstly debt deals now get rolled over every two years along with a chunk of extra fees that get added on to the debt but the real killer is that deposit sizes are magnitudes higher as a result of asset inflation and people at a certain level struggle to save a pot at the best of times. Not because they aren't earning enough but because above a very low level people have a habit of stopping savings and starting to spend. Most people can hold a pot of around £10k cash for a specific purpose but above that people suddenly start finding other things to spend it on. And that's before the erosion of wealth by deciding you're too rich to cook your own food or to walk anywhere.
Edited by DonkeyApple on Monday 29th March 07:52
Whilst restaurants reopening will have an impact on home delivery it may not be that big a problem. The frequency people are using deliveroo et al has increased way beyond their likelihood of eating out. It's not once or twice a week, it's every day and not just one mealtime.
With more people having a hybrid working pattern and being at home more during the week the home delivery is replacing the lunchtime sarnie from the city deli.
I imagine anyone's perspective of these businesses will be strongly influenced by where you live - in the little corner of West London where I hang out I can't see it changing massively. We've all got so used to it.
With more people having a hybrid working pattern and being at home more during the week the home delivery is replacing the lunchtime sarnie from the city deli.
I imagine anyone's perspective of these businesses will be strongly influenced by where you live - in the little corner of West London where I hang out I can't see it changing massively. We've all got so used to it.
Venisonpie said:
Whilst restaurants reopening will have an impact on home delivery it may not be that big a problem. The frequency people are using deliveroo et al has increased way beyond their likelihood of eating out. It's not once or twice a week, it's every day and not just one mealtime.
With more people having a hybrid working pattern and being at home more during the week the home delivery is replacing the lunchtime sarnie from the city deli.
I imagine anyone's perspective of these businesses will be strongly influenced by where you live - in the little corner of West London where I hang out I can't see it changing massively. We've all got so used to it.
Yup. Regional variations are likely to be big. It does make you wonder though that if you have no desk costs, no office rents, no salaries, no pension contributions etc and you can't be profitable when you have no competition just when are you going to be profitable? With more people having a hybrid working pattern and being at home more during the week the home delivery is replacing the lunchtime sarnie from the city deli.
I imagine anyone's perspective of these businesses will be strongly influenced by where you live - in the little corner of West London where I hang out I can't see it changing massively. We've all got so used to it.
DonkeyApple said:
Yup. Regional variations are likely to be big. It does make you wonder though that if you have no desk costs, no office rents, no salaries, no pension contributions etc and you can't be profitable when you have no competition just when are you going to be profitable?
Is the 64 million dollar question. I think in one of your previous posts you mentioned it's understanding if there's operational profitability with surplus being channelled into growth (or pockets) or whether it fundamentally doesn't stck up.I guess we'll find out at some point but right now I think enough people will get excited about it and it will be worth a punt short term.
Yup. I have a feeling that the market is currently wanting an IPO to fail and there is a risk that this one is seen as not being an exciting tech or modern enterprise model but a market share model that will run out of investor subsidies. But on the flip side, if they get their lower end customers to buy in, ramp it on social media and keep buying in regardless then it could go a long way north.
Against the latter happening is that it's a UK centric operator going for a UK listing. That's not much to for the global micro accounts to get excited by and the UK operating micro brokers aren't set up for IPOs yet.
It feels more like an Ocado or Royal Mail sort of listing that did nothing for years.
Personally, rather than taking a punt on stagging the issue it seems more logical to me to sit that event out and wait to see who has been contracted to keep the price up or whether it gets a load of traction. If the latter then there would still be big upside but for much less risk. It's the play I suggested for the Aston IPO and I think it's the practical one here also.
Has anyone even told Sid this is happening?
Against the latter happening is that it's a UK centric operator going for a UK listing. That's not much to for the global micro accounts to get excited by and the UK operating micro brokers aren't set up for IPOs yet.
It feels more like an Ocado or Royal Mail sort of listing that did nothing for years.
Personally, rather than taking a punt on stagging the issue it seems more logical to me to sit that event out and wait to see who has been contracted to keep the price up or whether it gets a load of traction. If the latter then there would still be big upside but for much less risk. It's the play I suggested for the Aston IPO and I think it's the practical one here also.
Has anyone even told Sid this is happening?
I thought about having a punt on this, but that required signing up and placing an order. They had £10 off for new customers so I ordered two cheeseburgers and fries for about £5. From order to delivery it was about 25mins. Couldn't fault the speed of the delivery and even the driver was super pleased with himself asking me if he was quick enough. I'd already pre-tipped him through the app so I guess he had some incentive.
Unfortunately , after he left I opened up my food to find out he'd given me someone elses order and I spent 10 minutes looking through the app trying to work out how to rectify the matter. No easy way to contact the driver to say "hey, this isn't my stuff". There was an option to speak to someone on Live Chat through the app but I'd have to wait for someone to become available and the phone number of the place I ordered the food from wasn't actually on the app? I had to Google them to find the number so I could call them and say I had the wrong order only to be told they were closing up so they couldn't send out the correct order. "Put a request for a refund in" was their response.
Not a great first experience. Still, my son liked the chicken burger and my burger and fries were nice enough, the onion rings were a nice surprise but absolutely nobody wanted the Mac and Cheese nor the pot of questionable disgusting dip that accompanied everything.
Unfortunately , after he left I opened up my food to find out he'd given me someone elses order and I spent 10 minutes looking through the app trying to work out how to rectify the matter. No easy way to contact the driver to say "hey, this isn't my stuff". There was an option to speak to someone on Live Chat through the app but I'd have to wait for someone to become available and the phone number of the place I ordered the food from wasn't actually on the app? I had to Google them to find the number so I could call them and say I had the wrong order only to be told they were closing up so they couldn't send out the correct order. "Put a request for a refund in" was their response.
Not a great first experience. Still, my son liked the chicken burger and my burger and fries were nice enough, the onion rings were a nice surprise but absolutely nobody wanted the Mac and Cheese nor the pot of questionable disgusting dip that accompanied everything.
Oakey said:
I thought about having a punt on this, but that required signing up and placing an order. They had £10 off for new customers so I ordered two cheeseburgers and fries for about £5. From order to delivery it was about 25mins. Couldn't fault the speed of the delivery and even the driver was super pleased with himself asking me if he was quick enough. I'd already pre-tipped him through the app so I guess he had some incentive.
Unfortunately , after he left I opened up my food to find out he'd given me someone elses order and I spent 10 minutes looking through the app trying to work out how to rectify the matter. No easy way to contact the driver to say "hey, this isn't my stuff". There was an option to speak to someone on Live Chat through the app but I'd have to wait for someone to become available and the phone number of the place I ordered the food from wasn't actually on the app? I had to Google them to find the number so I could call them and say I had the wrong order only to be told they were closing up so they couldn't send out the correct order. "Put a request for a refund in" was their response.
Not a great first experience. Still, my son liked the chicken burger and my burger and fries were nice enough, the onion rings were a nice surprise but absolutely nobody wanted the Mac and Cheese nor the pot of questionable disgusting dip that accompanied everything.
This does happen sometimes. As a single occupant of my flat mistakes usually go in my favour!Unfortunately , after he left I opened up my food to find out he'd given me someone elses order and I spent 10 minutes looking through the app trying to work out how to rectify the matter. No easy way to contact the driver to say "hey, this isn't my stuff". There was an option to speak to someone on Live Chat through the app but I'd have to wait for someone to become available and the phone number of the place I ordered the food from wasn't actually on the app? I had to Google them to find the number so I could call them and say I had the wrong order only to be told they were closing up so they couldn't send out the correct order. "Put a request for a refund in" was their response.
Not a great first experience. Still, my son liked the chicken burger and my burger and fries were nice enough, the onion rings were a nice surprise but absolutely nobody wanted the Mac and Cheese nor the pot of questionable disgusting dip that accompanied everything.
DonkeyApple said:
The only thing preventing house inflation is wage inflation though. If there was to be wage inflation then house prices would be released to inflate x times more.
All else being equal. But it probably won't be equal. If interest rates go up then it certainly won't matter how much salaries rise by, no one will be daring to go big on debt if interest rates are creeping the opposite way.Might happen, might not. Just saying
Either way rates rising would blow things like Deliveroo out of the water, and all the other speculative/hype driven stuff out there.
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