Growth and profitability
Our strategy
Pillars
- Selection: From the beginning, Deliveroo has been built on offering great selection across all restaurants and cuisine types. Expanding choice - including across grocery and now non-food retail - continues to be a key driver increasing spend and retention with existing customers and of adding new customers.
- Price/value: Ensuring value for money on our platform is key to building consumer trust and supporting frequency and retention. We promote fair prices using direct levers such as targeted promotions for consumers and indirect levers such as our value programme, which rewards merchants who limit markups and deliver great service.
- Consumer experience: A great experience combines in-app search and discovery, the delivery service and care/recovery in case of any issues. We have opportunities to improve across all three aspects, and doing so improves consumer trust and is a key element of unlocking further growth.
- Loyalty: Our Plus programme is a tiered subscription plan now live in eight markets, offering members free delivery and additional benefits. Plus customers spend three times more than non-members and have stronger retention, making this programme one of our most valuable strategic growth assets.
Progress in 2023
- Selection: We expanded merchant supply with an additional c.5,000 restaurants, c.2,000 grocery stores and a growing number of retailers globally, including adding brands such as Domino’s in the UAE, Subway in Hong Kong and Five Guys in Singapore. We also dramatically increased the selection that consumers see by expanding delivery areas to give them greater choice.
- Price/value: We improved value for money and addressed food price mark-ups on our platform. During 2023, we shifted marketing spend to increase our targeted promotions. We also introduced our value programme and commercial architecture for partners in the UK - with promising results showing up in our value for money Net Promotor Score (‘NPS’).
- Consumer experience: We prioritised fixing defects so we could deliver more and more perfect orders. One area of focus was orders classified as OMDNR - when a consumer pays for their order but does not receive it - which we reduced by around 65%.
- Loyalty: We continued to add benefits to Plus, such as an on-time promise providing £5 compensation if an order arrives more than 15 minutes late. We also launched a programme targeted at students in the UK, as well as adding partnerships with Revolut in the UKI, France and Italy, with Gojek In Singapore, and with Hong Kong Telecom in Hong Kong.
Priorities in 2024
- Price/value: Promote price integrity by rolling out our commercial architecture and value programme, taking it beyond the initial launch with UK restaurants and across our main markets and verticals.
- Consumer experience: Continue to strive for perfect deliveries by reducing order inaccuracy (missing items), cancellations and rejections.
- Loyalty: Strengthen our tiered Plus programme by enhancing our offerings and introducing new ways to inspire consumer loyalty, including providing additional discounts and perks, and exploring further partnerships.
Pillars
- Restaurant: We operate in large addressable markets with significant growth potential across the entire restaurant delivery business. We use data science to capture opportunities on a hyperlocal level at scale, and we align commercial incentives to improve the consumer experience and drive growth.
- Grocery: We were one of the first platforms to launch on-demand grocery, where penetration is low and there is a clear demand for the speed and convenience we offer. We are driving growth by expanding our selection (additional partners and more SKUs), improving the experience through new consumer and partner technology, and expanding into larger basket missions.
- Retail: Consumer behaviour shows a clear appetite for on-demand Retail through our platform. We are well positioned to capitalise on the opportunity, leveraging our grocery playbook and evolving our existing technology and data capabilities to build a large business with attractive unit economics.
- Advertising: We provide an attractive platform for advertisers to connect with our large premium consumer base. Our technology powers our advertising solutions, allowing us to deliver strong returns for our advertisers while protecting the consumer experience by serving them with only the most relevant content.
Progress in 2023
- Restaurant: Over the last two years we have used our machine learning models to assign a score that predicts the performance of each restaurant on the platform, helping us to curate a quality portfolio in the UK. This has seen the number of ‘high quality’ restaurants grow at double the pace of overall selection, with GTV from these restaurants 2.5 times higher than lower scoring restaurants. We have also rolled this out in all our international markets, allowing us to improve restaurant supply and gain leverage from technology investments.
- Grocery: We increased grocery to 13% of GTV in H2 2023 (vs 11% in H2 2022), helped by the introduction of our new ‘top-up’ feature. We step-changed our technology offering, for consumers (e.g. multi-level aisle shopping, substitution preferences in-app) and merchants (new picking app, in-stock API and improved substitutions flow).
- Retail: We launched our ‘Shopping’ proposition, initially in the UKI and UAE. Categories already launched include pharmacy, flowers, toys and DIY, reflecting the lowhanging fruit where emergency needs are most obvious – but with lots of scope for further expansion.
- Advertising: We further scaled our business across sponsored positioning and search results product for restaurants and grocers, with ad revenue reaching 1.0% of GTV in Q4 2023. We continue to take a consumer-first approach, to strike the right balance between helping merchants drive incremental demand, while always prioritising the consumer experience.
Priorities in 2024
- Grocery: Serve more customer missions by expanding into medium-sized baskets through range expansion and enhanced technology.
- Retail: Begin to scale retail globally by partnering with leading brands and local favourites to grow selection and coverage, including launching in additional markets beyond the UK and UAE. Boost consumer awareness including through key seasonal retail moments with marketing campaigns, promotions and in-app merchandising.
- Advertising: Continued to scale by adding new formats, increasing advertiser adoption across segments and driving return on ad-spend (‘ROAS’) to improve retention and pricing.
Pillars
- Optimised delivery: Delivery costs are the largest expense item in our Profit and Loss. We have a proven record in driving efficiency in the delivery network, enabling us to reinvest in our key growth drivers and improve profitability, while also allowing riders to maximise their earnings potential.
- Marketing efficiency: Our marketing activities are focused on both new consumer acquisition and increasing retention, frequency and spend of existing consumers. We continually experiment to improve the efficiency and effectiveness of our spend, helping us to reduce our marketing cost as a % of GTV.
- Operating leverage: We support our market-facing commercial and operational activities with a global tech platform and central support functions. We have multiple opportunities to drive efficiency and operating leverage as we scale.
- Investment discipline: Our industry is still early in its maturity and there remains ample room for growth. We are disciplined in allocating capital to the most promising opportunities where we can build strong market positions offering compelling returns. Our capital position provides the financial resources to maintain and strengthen market positions and pursue growth opportunities while providing appropriate headroom.
Progress in 2023
- Optimised delivery: We drove efficiencies in our delivery network by reducing the overall time riders spend on an order, for example by incentivising merchants to make sure orders are ready on time. We also continued to develop our order stacking capabilities by launching multi pick-up stacking - when we know the consumer experience will not be harmed and it makes sense for the network.
- Marketing efficiency: We reduced marketing spend by 14% year-on-year through performance marketing optimisation by improving our targeting and introducing optimisation signals linked to individual customer value. We’ve also enhanced our machine learning models in customer relationship management that better predict how consumers will respond to promotions, which drove both cost savings and incremental GTV.
- Operating leverage: We completed a redundancy programme removing 9% of employed positions across the business, driving benefits not only through lower headcount costs but also increased efficiency and speed of decision-making. We also reduced costs relating to contractors and customer care agents.
- Investment discipline: Following market exits in late 2022, we continued to focus investments across the highest impact areas in the business.
Priorities in 2024
- Optimised delivery: Develop order stacking capabilities, including pick-ups from multiple merchants, to improve efficiency and offer riders more stacked orders so they can earn more money quicker.
- Marketing efficiency: Increase marketing efficiency by targeting and personalising promotions and increasing co-funding by partners.
- Operating leverage: Drive further efficiencies through improved tooling and automation, optimising third-party spend and leveraging our location strategy.
