- REUTERS/Charles Platiau
- Popular food delivery startup Deliveroo grew hugely in 2016, with revenue up 611% to £129 million. But losses were up too – a 300% increase to £129 million. Most of this has been driven by Deliveroo’s rapid expansion in the UK and abroad. The firm’s gross margin percentage is just 0.7%, an improvement on last year but still tiny.
Deliveroo’s expansion in 2016 helped drive the company’s revenue for the year up 611% to £129 million, from £18 million the prior year.
Losses for the food delivery startup were up 300% year on year to £129 million, from £30.1 million in 2015.
Most of the growth came from Deliveroo’s international markets, with revenue from countries outside the UK “increasing substantially.” In 2016, the London-headquartered startup had expanded to 84 cities in 12 countries. It now operates in 120 markets across 12 countries, and has 120,000 restaurant partners.
The company is still sitting on considerable amounts of investor cash, having raised $275 million (£210 million) in a Series E funding round in August last year. Deliveroo said its net assets stood at £169 million as a result.
Rapid growth means London-headquartered Deliveroo is considered a major startup success story. It was founded in 2012 to allow people to order food for delivery from their favourite high street restaurants, not just those which do takeaway. The company charges £2.50 for delivery – more if your order is under £10 – and takes a commission fee from the restaurant.
But there are some risks. According to Deliveroo’s filings, its gross margin percentage stands at just 0.7%. That figure shows the proportion of each pound of revenue the firm keeps as gross profit, before it pays cost of goods. The higher the margin, the more efficient the company. Deliveroo’s low figure suggests it has more work to do to cut costs – but 0.7% is an improvement on 2015, when the firm reported a negative gross profit margin.
A higher gross profit margin may depend on whether Deliveroo is forced to pay its drivers more. There is an ongoing battle over how companies like Deliveroo and Uber pay their workers – who work flexibly but are not guaranteed the minimum wage. Deliveroo itself acknowledged the risk of greater regulation in its filings.
Another risk to the business is that more rivals are popping up in the food delivery space. UberEats is a significant rival in the UK, while Amazon has also launched a food delivery service.