In the face of formidable market challenges, Deliveroo has exhibited impressive performance in the first half of 2023, demonstrating not only profitability and cash flow progress but also a commitment to innovation and consumer-centric enhancements.
Deliveroo’s H1 2023 interim results were published this month, and it’s clear that the company is exhibiting growth in a challenging market.
It boasts a 3% growth in Gross Transaction Value (GTV) and a 5% surge in revenue, which the company prides itself on because of volatility and economic pressures in the industry.
The tumultuous landscape, characterized by high food price inflation and the lingering effects of COVID-related restrictions in Asian markets, has taken a toll on consumer spending power and demand for food delivery.
Navigating intricate macroeconomics
Will Shu, Founder and CEO of Deliveroo is satisfied with the interim results: “I am very pleased with our progress so far this year. We have delivered a strong financial performance despite challenging macroeconomic conditions.”
It’s clear ups and downs marked this growth. GTV growth improved as the year progressed, with Q1 witnessing a 1% decline and Q2 bouncing back with a commendable 3% growth.
According to the company, this positive trajectory is attributed to multiple factors, including easing COVID restrictions, especially in Hong Kong and Singapore, and robust performance in the United Kingdom and Ireland (UKI) segment.
“This has been achieved alongside continued improvements to our proposition for consumers, riders, and merchants. In particular, for consumers, we have continued to innovate, for example now offering a more personalized in-app experience and enabling consumers to top up their restaurant orders with grocery items,” Shu said.
The plan: Scaling advertising
Deliveroo’s future includes a plan to scale its advertising business. It’s managed to reach an annualized revenue run-rate of £55 million in Q2 2023, accounting for 0.8% of GTV. The revenue predominantly stems from sponsored positioning and search results for restaurants and grocers in the app.
What this means for consumers is when they open the Deliveroo app they will see a list of sponsored restaurants first. While this will raise revenue for Deliveroo, it also means the cost for a restaurant being listed on Deliveroo will increase. In the short term, this will be great for Investors in seeing increased revenue, however, It will be interesting to see the long-term impacts on their business.
Businesses have been complaining about the costs of food delivery platforms for some time now. Will restaurants see this as a reason to shift to managing online orders away from the platform and save significant amounts of costs? The platform is home to over 50,000 merchants that are advertising on the platform. And the advertising revenue can be attributed, at least partly, to collaborations with renowned brands like PepsiCo, Quorn, ITVX, and Sky Glass.
Despite facing short-term macroeconomic headwinds, Deliveroo remains steadfast in its belief that the industry’s growth potential is far from exhausted.