Deliveroo is stepping up its focus on providing value for money to its consumers in order to drive growth and move towards positive cash flow.
This focus includes more targeted promotional activity, and increasing the prominence of offers and discounts in the app. The food delivery business is also focusing on value across its TV, digital and print media campaigns, according to CEO Will Shu.
These initiatives were set up after Deliveroo established a team to look at how to deliver value for money in the current economic environment.
“This is clearly more important than ever, as there’s no question that inflation has hurt the demand side and also NPS scores across the industry,” Shu said during a call with investors yesterday (10 August). “Things simply cost a lot more than they did two years ago.”
Deliveroo’s value perceptions have significantly fallen versus two years ago, according to YouGov’s BrandIndex platform.
In the last month (ended 8 August), Deliveroo’s value score was at an average of -8.4. In the same period in 2021, it was significantly higher – albeit still negative – at -3.4, while last year it stood at -4.6.
There’s no question that inflation has hurt the demand side and also NPS scores across the industry.
Will Shu, Deliveroo
Alongside a focus on value for money, Shu also said the company is working on improving the customer experience, specifically after an order has been placed. Ensuring the order arrives quickly and is correct are key to whether customers will order again with Deliveroo, he noted.
“I actually think this is one of the top reasons the industry isn’t bigger,” Shu said.
“You don’t ever think about an Amazon package going wrong… in food delivery it’s even more emotional. Maybe you’ve had a long day at work. Maybe you’re having a treat. Maybe it’s your Friday, regular takeaway, whatever the reason is, you want a flawless experience.”
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Getting this right will help improve frequency and retention he said, adding it is “a key aspect of industry growth and delivers growth”.
Deliveroo saw its losses narrow for the first half of its fiscal year. In the first half of 2023 it made losses of £82.9m, versus £153.8m in the same period last year. This represents a 46% reduction in losses made year over year.
The company did record a 6% drop in its number of orders in the first half of the year versus 2022, though. But this was offset by a 10% increase in the average transaction value per order.
Deliveroo’s gross profit rose by 23% year over year to £365.1m.
In its path towards generating positive cash flow and driving profitability, the delivery firm has also been focused on improving the efficiency of its marketing spend. In the first half of 2023, it reduced marketing spend by 27%. The company said this was due to “more measured, targeted marketing investments given the weaker consumer environment”. It does expect to step up marketing spend in the second half of its fiscal year.
Shu also highlighted the “really good progress” Deliveroo has made in its own advertising business. This allows brands to advertise within the Deliveroo app. Restaurants or grocers can pay to appear in higher visibility spots on the site, and other brands can have ads within the app, for example, on the rider tracking page.
In the period the advertising business achieved a revenue run-rate of £55m, Deliveroo reported. It said it is seeing strong progress on the number of restaurants participating in the business but that the FMCG side of the advertising business is still “nascent”.
While progress on the advertising business is “exciting” for the company, Shu said that the customer experience on the app remains its priority and that it is conscious of balancing any ads on the platform with that.