Ordering food over the phone is so old school. However does Australia really need another online-based food delivery app?
We’re currently seeing a flood of food delivery apps within the Australian market. Deliveroo, Menulog, Foodora (previously Suppertime and Delivery Hero) and uberEATS.
And did we mention pre-prepared food subscription models? There’s Youfoodz, My Fresh, Dish’d, Thrive, Gourmet Dinner Service and Dinner Ladies. And if you’re thinking about cooking but too lazy to go down to the supermarket? Well there’s HelloFresh, My Food Bag and Pepper Leaf. Oh and I haven’t even added in those apps where you can order your morning coffee, both Hey You and Skip.
And there’s a ton out there that I haven’t included above.
But the point is it kinda feels like we’re back in 2011. Remember when where we saw a flood of competitors into the daily-deals space? Remember when your email box was filled each day with offers from Livingsocial, Catchoftheday and Scoopon? And what about the original unicorn of the space which started it all, Groupon? Granted whilst still valued as high of $2 billion market capitalisation, it’s a fraction of it’s once $16.5 billion value.
There’s a term for what we’re currently seeing in the food delivery and subscription market. And it’s called “Market Saturation”.
It’s questionable whether the Australian food delivery / takeaway market is big enough to sustain this level of intense competition. And more interestingly, what is the potential affect on traditional food delivery players such as the likes of Dominos? Whilst some consumers would argue that Domino’s pizza are akin to eating a piece of cardboard, there’s no question it’s been one of the standout performers in the Australian retail space. Although coming off the back of recent highs over the past few months, the stock continues to trade at a PE ratio of over 40 times earnings – suggesting investors are expecting significant future growth.
So in an already crowded takeaway market, startup “Slice” may be interesting. An app used to solely order Pizza online and disrupt the “big players”, such as Dominos.
Ibisworld estimates the Australia food takeaway/delivery market to be worth $3.7 billion, with $1.6 billion of this solely to Pizza. It is estimated that Domino’s have just under $1 billion share, equating to roughly 60% of the total pizza market. This leaves about 40% to other players such as both Pizza Hut and Crust, as well as independent pizza shops.
This is a very similar breakdown to the US market, with an estimated 60% of the market owned by independent pizza shops. However interestingly, 90% of all online orders are placed through Big Pizza chains (Domino’s, Pizza Hut and Pappa Jones).
So what is Slice?
Developed in the US, Slice has recently raised $15 million in equity funding. The app is developed on the basis that when consumers order through food delivery platforms such as Deliveroo or uberEATS, they generally want to choose from a range of cuisines, which in-turn urges them to try new restaurants. Whereas consumers order pizza differently. That is, when people want pizza – they’re specifically looking for pizza. And likewise they’re loyal to their favourite Pizza shops.
So how does Slice differ from the competition? It specialising in one cuisine and promotes loyalty. And it additionally promotes greater customisation (consumers can build their own pizza’s), which typically isn’t offered on other delivery platforms.
Expect to hear more from them in the future, as they’ve recently hired Ryan Scott formerly of Soul Cycle, to head up marketing and operations.
Could Domino’s dream run be over?
With questions around the future profitability of Domino’s operating model as well as significant increased competition in the delivery space, this may put pressure on future earnings of Dominos. And whilst there appears to be no immediate plans of Slice to launch in Australia, if they do it could provide additional strain on Dominos current market dominance.
Reading this article make you hungry?
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