Deliveroo’s customers are becoming less loyal due to rising prices, but the company’s expansion of its grocery options has driven customer frequency, according to its CEO, Will Shu. Deliveroo added about 2,000 grocery sites over the last quarter, bringing its total to 18,000. Shu noted that smaller, more frequent grocery purchases have become habitual for people since the company introduced grocery offerings before COVID. Many consumers are seeking out grocery options now as food prices rise, given that meals prepared at home are less expensive than restaurant dining. Grocers are turning to online delivery to retain their customers.
On a call with analysts discussing Deliveroo’s Q4 financial results, Shu said the company had already seen the worst of inflation’s impact on customer habits. Deliveroo’s base of monthly active consumers was down slightly (1%) relative to 2021, with both acquisition and retention impacted. “It’s definitely the less affluent customers that are, for obvious reasons, less engaged with the platform than they were previously,” Shu said. He added that the company expects the trend of smaller, more frequent grocery purchases to continue going forward.
Part of Deliveroo’s push for grocery comes from its Deliveroo Hop ultrafast delivery business, promising fulfillment within minutes from dark stores. However, Shu noted that the economics of the model are tricky, with dark stores working best in densely populated areas where the aggregator already has high penetration, making profitability possible at these sites. He added that the company had achieved four-wall profitability at locations in London and Paris.
Sean Connolly, CEO of consumer-packaged goods (CPG) company Conagra Brands, noted the trend of consumers eating more at home on a call with analysts earlier this month. “There was a trade-down into at-home eating during COVID, and that has not fully reverted to away-from-home, because the prices of away-from-home have gone up so high that it’s a better value to continue to eat in-home, as people are trying to stretch their household balance sheet,” Connolly said. Yet demand for instant convenience remains, and many grocers are noting the need to get online and open up delivery options.