Deliveroo has no appetite for China’s ‘competitive’ food delivery market

PUBLISHED : Monday, 12 February, 2018, 9:04pm
UPDATED : Monday, 12 February, 2018, 10:42pm

Online food delivery giant Deliveroo is reluctant to enter China because it sees it as a highly competitive market, according to its founder and CEO.

“China is a very well served market already, with a lot of competition there,” said Will Shu, a former investment banker who founded the company in 2013, when asked if Deliveroo had any plans to take its business to the mainland.

The UK-based start-up’s apparent lack of ambition in the Chinese mainland stands in contrast to a host of other foreign technology companies who have tried and failed to get a foothold. They often face huge disadvantages against domestic competitors thriving in an environment geared to their success.

Uber sold its China operations to its main rival Didi Chuxing in 2016, having carved out a meagre 8 per share of the ride-hailing market, compared with Didi’s 85 per cent.

Google, EBay, Amazon and Facebook have all attempted to tap the mainland’s enormous potential, with disappointing results.

The food delivery market in China is currently carved up largely between just two dominant providers, Meituan-Dianping and According to consultancy firm iiMedia, the former accounts for 55.3 per cent of market share and the latter 41.3 per cent.

Tencent-backed Meituan-Dianping says that the country now has about 300 million people who use online delivery services.

The market grew in value to about 204 billion yuan last year, up 23 per cent from 2016. iiMedia Research expects it to reach 243 billion yuan this year.

It is a very different story for Deliveroo in Hong Kong, where it claims to lead the sector with a 60 per cent share. The UK-based start-up, which expanded into the city in November 2015, now has about 3,000 restaurant partners across the city.

“Hong Kong is one of our fastest-growing markets,” said Shu. “Over the past year, we have doubled our supply of restaurants. We now partners with close to 3,000 individual restaurants which have contributed to our orders volume tripling in the past year.”

In Hong Kong, Deliveroo has been venturing into the New Territories. It expanded into Yuen Long in the first week of February and is now the food delivery company that services the largest area of the city.

Deliveroo raised US$385 million in private funding last September and is not seeking any more currently, according to Shu.

Asked whether the company was considering an initial public offering, as has been widely reported, he replied: “It’s something we’re not focused on right now. There’ve been some media reports but I don’t know where they’ve come from.”

According to accounts filed at Companies House in the UK, revenues of Deliveroo were up by more than 600 per cent to £128.6m in 2016, but its losses also skyrocketed from £30.1 million to £129.1 million.