The online food ordering and delivery market is an exciting one to watch.
The last few years have seen a number of shakeups — market leader GrubHub in 2013 merged with competitor Seamless and in 2015 bought delivery companies DiningIn and Restaurants on the Run; Madison-based EatStreet partnered with restaurant review site Yelp, which later bought delivery company and GrubHub competitor Eat24.
Now, tech giants Uber and Amazon are homing in on the action. Each company has begun rolling out an online and mobile food ordering and delivery service. UberEATS launched in 10 U.S. cities in January, and Amazon expanded its Prime Now-based restaurant delivery service to 20 U.S. cities in late 2015.
“This is definitely a market that’s in a lot of flux right now,” says Jon Eckhardt, a professor in the UW-Madison School of Business and a co-founder of gener8tor startup accelerator.
But the entrance of these big players — each with nearly unlimited capital and a history of aggressive expansion into new markets — “doesn’t mean anything negative” for other companies involved in the same industry, Eckhardt says. There is still an “incredibly large” number of restaurants that lack a web presence or online ordering platform, which means that companies like EatStreet are well-positioned to continue providing that service.
“There is a variety of different choices and opportunities along the value chain of how food gets from a restaurant to a customer’s door,” he adds. “It’s a gigantic market in its depth and its breadth.”
EatStreet last week announced a partnership with UberRUSH, Uber’s fledgling courier service. Uber will help the company deliver food orders in Chicago, but the partnership could soon expand to more of the 250 cities where EatStreet operates. (Editor’s note: EatStreet recently began accepting payment via Red Card, which is owned by the same company as Isthmus.)
EatStreet CEO Matt Howard says the partnership with UberRUSH is a “great opportunity” to combine EatStreet’s network of restaurants and diners with Uber’s logistical capabilities to improve delivery. EatStreet also partners with Mr. Delivery for third-party deliveries and relies on restaurants to do their own delivery.
“This is now a third way for us to work with restaurants,” Howard says.
Howard doesn’t see UberEATS, which also operates in Chicago, as a competitor just yet. UberEATS is focusing on big-city “tier one” markets; EatStreet’s focus has long been on college towns and smaller “tier two” cities, although EatStreet does have a presence in several big cities.
College graduates who used EatStreet while they were students often relocate to cities like New York or Los Angeles, Howard says, so having a presence in larger cities allows customers to continue using the service.
Howard says his objective is to “grow a great company” until EatStreet gets big enough to go public or receives an attractive purchase offer.
“We’re always talking about, ‘Is it the right time?’” he says.
GrocerKey is another Madison-based food tech company that does online ordering and delivery for grocery stores. CEO Jeremy Neren says he’s “definitely been watching” Amazon, which he considers a longtime GrocerKey competitor.
Amazon Prime offers free, two-day shipping on many items that consumers might typically buy at a grocery store. The company last year rolled out Prime Now one- and two-hour delivery in various cities and has since added Amazon Restaurant food delivery service.
“This is not a surprise to us,” Neren says. “We expect that in the next couple of years Amazon is going to offer fulfillment same-day in every major or mid-level market.”
Even so, Neren isn’t too worried about tech giants edging in on GrocerKey’s turf. In fact, he thinks the competition could even increase the need for his product. GrocerKey’s online ordering and delivery platform is linked to local, brick-and-mortar grocery stores — establishments that will always be necessary, even in the age of Amazon. And as these stores seek to modernize, he hopes they’ll turn to services like GrocerKey.
“[Competition from Amazon] could potentially increase the need for what we offer,” Neren says. “That’s what we really believe, and that’s what we’re betting on.”