Customers ordering food deliveries may need to be more flexible about how long they wait as gig economy costs continue to rise, said the head of German food delivery app Delivery Hero.
“If our rider costs [go] on and the customers are not willing to pay for it. . . this is by far the single biggest risk for the food delivery segment, ”CEO Niklas Östberg told the Financial Times.
“Many people are not willing to pay another 30 cents per order,” he added, but may be willing to wait 25 minutes to get their food, while others will pay a euro to get their order delivered faster. .
But the Swedish CEO stressed that the group will implement such a policy if rising costs eat into its profit margins.
Östberg’s comments came after the Berlin – based group announced that its food delivery business would break even for the first time during the second half of the year, using its adjusted earnings-before-interest-and-tax measure.
The forecast by the 10-year-old company comes more than a year after Uber Eats, also with an adjusted benchmark, said its restaurant delivery service had become profitable on a quarterly basis.
Delivery Hero, which has operations in Asia, Europe, Latin America and the Middle East, has been under pressure from investors to reduce the amount spent on its rapid expansion. Last month, the company withdrew from Germany for the second time with reference to unsustainable costs.
Shares in the group, which are listed on Germany’s Dax index, have fallen by more than a third in recent years, despite a closing-induced rise in orders in many of its key markets.
A shortage of riders and increased competition during the pandemic have pushed down profit margins in the sector as a whole, forcing Delivery Hero to “spend hundreds of millions on fast trading” to keep up with new entrants like Gorillas and Flink, Östberg said.
Last year, the company, which spent $ 4 billion on South Korea’s Woowa among other acquisitions and also invested in Deliveroo, said it had bought a majority stake in Spanish rival Glovo, which operates in 25 countries.
Once Glovo’s operations are merged into its core food delivery business in the fourth quarter of the year, the unit will generate between zero and € 100 million, Delivery Hero said on Tuesday. This point would have been reached earlier, Östberg said, if Covid-19 had not “forced us to double” and spend more to beat opponents.
The company, which has a long-term profitability target of between 5 and 8 percent, added that spending in its fast-trading business, which offers deliveries of groceries and household goods, will be gradually reduced from the second half of the year.