For the last several years, Americans have increasingly fallen in love with services that deliver restaurant meals to their homes. This month, as the outbreak of the dangerous and highly contagious coronavirus is prompting citizens to shelter in their homes, meal delivery sales are expected to reach new heights.
However, our data reveals that, through the end of February, meal delivery services experienced business as usual. And the big news before COVID-19 reached the United States was that market leader DoorDash has taken steps toward an IPO.
DoorDash and its subsidiaries earned 39 percent of U.S. consumers’ meal delivery sales in February, while Grubhub and its subsidiaries, which include Seamless and Eat24, took in 30 percent. (Purchases made through LevelUp, which Grubhub acquired in late 2018, are not included in our analysis. Neither are college student meal plan purchases made through Grubhub subsidiary Tapingo.)
Our data indicates Uber Eats earned 20 percent of U.S. meal delivery consumer spending in February. It’s worth noting that publicly reported earnings show Uber Eats has an edge over Grubhub in U.S. sales. There are several reasons why our sales metrics may differ from the filings. First, some Uber Eats transactions are indistinguishable from Uber Rides transactions in Second Measure’s data, and this issue was especially pronounced from May 2019 to mid-August 2019. Additionally, Second Measure’s data does not include Uber Eats’ purchases made using Uber Cash or purchases made by corporate customers, an area where Uber Eats is reportedly making inroads. Our analysis includes aggregated debit and credit card purchases from a panel of millions of anonymized U.S. consumers.
The fourth major U.S. meal delivery company, Postmates, confidentially filed for an IPO last winter and raised $225 million last fall. But CEO Bastian Lehmann recently declined to say when the company would move forward with its IPO, citing “choppy” market conditions. Postmates earned 10 percent of the U.S. meal delivery market in February.
One of the industry’s smaller services, Waitr, earned 2 percent of national sales. In January, the company announced plans to lay off all drivers in favor of using contractors. The change comes weeks after Waitr installed a new CEO as it tries to boost share prices and remain listed on Nasdaq.
Even before coronavirus, meal delivery sales grew
Although coronavirus-related sales spikes weren’t yet detected in February, sales across the industry did increase 28 percent year-over-year. And DoorDash’s growth continues to stand out. The company saw an unparalleled 85 percent year-over-year jump in February.
In February, 27 percent of American consumers had ever ordered from one of the services in our analysis, up from 22 percent a year ago. And quarantined diners could drive that percentage even higher in March.
Grubhub and DoorDash control different parts of the country
The top two food delivery services may be close in U.S. market share, but their strongholds are in different regions. Grubhub is the most popular service in many Northeastern metro areas, including New York and Boston. DoorDash rakes in more than half the sales in the two biggest Texas metro areas, Dallas-Fort Worth and Houston, and it’s approaching two-thirds of the market share in its Bay-Area home turf. The two companies are neck and neck in Philadelphia.
Subscription meals have appeal
As meal delivery services look for new ways to grow in cities big and small, one emerging answer is subscriptions. In February, Grubhub announced its answer to Postmates Unlimited (launched in 2016) and DoorDash DashPass (launched in 2018). Notably, in December, DoorDash partnered with Chase to give free DashPass memberships to millions of credit card holders. (These free memberships are not included in Second Measure’s data.) Uber is also testing various subscription plans for food, rides, bikes, and scooters.
In February, 15 percent of Postmates customers were subscribers, a proportion that’s held relatively steady for the past year. DashPass attracted 14 percent of DoorDash’s customers, not including the promotional memberships they offered Chase users.
Companies vie for restaurant partners
Another very popular growth strategy for meal delivery companies has been forming partnerships with the nation’s top chain restaurants. (Though many services have also recently been in the news for listing restaurants that do not want partnerships.) In January, DoorDash officially teamed up with Little Caesars Pizza, a brand that has never previously offered delivery. DoorDash has other deals with Wendy’s, Chick-fil-A, and McDonald’s, the biggest fast food chain in the country, which also offers delivery with Uber Eats.
Starbucks has a contract with Uber Eats, Popeyes with Postmates, and Taco Bell and KFC with Grubhub. Yet, As Uber Eats and Grubhub public filings show, partnerships don’t always lead to revenue. Often, partners pay the delivery services lower fees, decreasing their take rates or even causing them to lose money. But the partners often have huge customer pools, many thousand locations and impressive advertising reach, all of which have delivery services betting that joining forces will pay off in the long term.
The partnerships are paying off for many of the restaurants. The Cheesecake Factory and Chipotle have publicly credited DoorDash with boosting their revenue. In February, Second Measure data shows 10 percent of The Cheesecake Factory’s sales came through DoorDash (before subtracting DoorDash’s cut or the delivery tip). The delivery service accounted for 6 percent of February sales at Buffalo Wild Wings, and 7 percent at Chipotle.
Fewer customers are loyal to a single service
Despite overall industry growth, the battle for customers is getting more intense because fewer of today’s diners are loyal to just one service. (Grubhub’s CEO has cited “promiscuous customers” as hindrance to his company’s growth.) In the fourth quarter of 2017, 78 percent of Grubhub’s customers didn’t use other meal delivery services. Two years later, it’s fallen to 59 percent, as competing services woo customers with different restaurant offerings and promotional prices.
Postmates has the lowest percentage of exclusive customers (43 percent). DoorDash, Grubhub and Waitr all saw about 59 percent of customers use them exclusively in the fourth quarter, and for Uber Eats, it was 54 percent. Nearly all the services in our analysis have a lower percentage of exclusive customers than they did two years ago.
Not surprisingly, the biggest meal delivery services are also the most likely to share customers. More than a quarter of each company’s diners also ordered food from top competitor DoorDash in the fourth quarter of 2019.
As more restaurants form exclusive delivery partnerships, more diners are going to have to hop between apps to cover all their favorite takeout spots. The least loyal customers, it seems, will also be the most well fed.
Check back monthly for the latest updates in the meal delivery wars, or request a product demo to see the data for yourself.