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GrubHub's record-breaking performance continues (GRUB)
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Grubhub Inc. continues to outperform previous quarters as it increases revenue and onboards more users.
The company reported record revenue for the third quarter of this year, its financials reinforcing both Grubhub and Seamless as top players in the industry.
Grubhub Inc. revenue continues to break records: During Q3 2016, Grubhub Inc. revenue totaled a record $124 million, representing 44% year-over-year (YoY) growth. In Q2 2016, revenue grew 37% YoY.
The company continues to onboard new users: 7.69 million people ordered food through either Grubhub or Seamless during Q3 2016, marking a 19% YoY increase.
Users are placing more orders than ever: Grubhub and Seamless processed over 267,500 daily orders combined, on average, in the quarter, representing 26% YoY growth.
Grubhub is strengthening its position in the on-demand meal delivery market as it converts more sales into revenue. Grubhub's sustainability as a business partly depends on its ability to convert a portion of its food sales into revenue, also known as the "take rate."
This metric has climbed steadily over the years, demonstrating the long-term viability of the online meal delivery industry. The company's revenue as a share of gross food sales reached a record 16.8% in Q3 2016, according to BI Intelligence calculations. The rising take rate indicates that Grubhub is effectively monetizing its services and capitalizing on its popularity with partnered restaurants to command higher fees, while also onboarding more merchants to its service.
However, the newest arrival to the on-demand delivery market may pose a serious threat to Grubhub Inc.'s future success. Amazon launched its own meal delivery service, called Amazon Restaurants, last November, and the company has been rapidly expanding the service across the US. It's now available in 28 US cities exclusively to members of Amazon's Prime subscription program.
This may seem like a miniscule base — Grubhub and Seamless are offered in over 1,000 US cities — but Amazon's business model and brand recognition gives it the potential to convert users. Unlike veteran delivery services, Amazon has promised not to charge a delivery fee, which will probably give it a real edge with consumers. As Amazon Restaurants arrives in new cities, it could pose a threat not only to Grubhub Inc., but to all of the players in the on-demand meal delivery space.
Quick-service restaurants (QSRs) — also known as fast-casual restaurants — such as Starbucks have been turning to mobile order-ahead apps to extract higher sales, intensify customer loyalty, and heighten foot traffic.
Mobile order-ahead refers to a consumer-facing mobile payment platform that allows customers to order food remotely, pay for the items on their phone, and pick up their order at a specific restaurant location.
Leading QSRs in the U.S. are beginning to adopt these platforms at an accelerated pace and are benefiting from them. Taco Bell sees 30% higher average order values on mobile compared to in-store, and Starbucks' Mobile Order & Pay already represents 10% of total transactions at high-volume stores, directly contributing to increased company sales.
Mobile order-ahead is still in its early days, but will be a $38 billion industry by 2020, accounting for 10.7% of total QSR industry sales. This will be driven by full adoption among the top QSRs in the US, the growth of mobile commerce, QSR adoption through aggregators like Grubhub, loyalty programs, higher average order values, and new buy buttons.
Evan Bakker, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed Mobile Order-Ahead Report that profiles the companies that have proved the mobile order-ahead concept and analyzes the trends contributing to this new industry's growth.
Here are some key takeaways from the report:
Mobile order-ahead apps — platforms that enable consumers to remotely purchase menu items for in-store restaurant pickup — are on the rise among quick-service restaurants (QSRs). We expect sales on these platforms to reach $38 billion by 2020, representing a five-year compound annual growth rate (CAGR) of 57%.
Mobile order-ahead will ultimately have an additive effect on the QSR industry. Mobile ordering platforms have been proven to intensify customer loyalty, increase purchase frequency, and lift average ticket sizes through order customization and easier checkout options. This means that mobile ordering is not a simple substitution for in-store purchasing, but a channel that can enhance the lifetime value of QSR customers. This makes mobile order-ahead a critical channel contributing to the growth of the QSR industry.
Alternative commerce solutions will help propel mobile ordering. Aggregators like Grubhub will onboard smaller fast-casual restaurants into the mobile ecosystem by offering them an existing app to integrate into, lowering the upfront costs of creating a mobile channel of their own. And in-store self-service kiosks will help popularize remote ordering and accustom users to less traditional forms of payment that don't require a cash register.
In full, the report:
Forecasts the growth of the mobile order-ahead industry in the US from 2015 to 2020, including its share of total QSR sales.
Profiles brands that are leading the migration to mobile ordering.
Examines the alternative commerce solutions that could help popularize mobile order-ahead.
Explains the risks and drawbacks to launching a mobile commerce platform.
Assesses the ways both large and small brands can create a mobile order-ahead platform.
Determines which types of fast-casual chains are in the best position to benefit from mobile order-ahead.
To get your copy of this invaluable guide, choose one of these options:
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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of mobile order-ahead.
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