Delivery-Service Companies Experience Demand Explosion

Food Delivery Business Expected to Grow to US$365B by 2030

eResearch | Delivery-service companies such as Amazon.com (NASDAQ: AMZN), DoorDash (private; www.doordash.com), and Blue Apron Holdings (NYSE: APRN) are experiencing an explosion in demand as the Covid-19 virus keeps consumers at home for the near future, forcing some delivery-service companies to initiate hiring sprees to support the influx of deliveries.

As the convenience-seeking millennial constitutes the majority of the working population, services, such as food delivery, have been growing at a rapid pace with sales reaching US$35 billion in 2018, forecasted to grow to US$365 billion by 2030, according to a UBS study.

Amazon.com

amazon-logo-squareAmazon, the largest e-commerce market in the U.S., has been hit by a massive wave of consumers due to the effects of self-isolation from the Covid-19 virus, resulting in supply shortages and longer delivery times.

Consumers who normally pick-up groceries are flocking to delivery services, such as Amazon’s AmazonFresh, and the flood of orders is causing a series of delays. In addition, due to significantly high order volumes for pantry items, Amazon was forced to stop operations for its Prime Pantry offering.

As the pandemic worsens and more jurisdictions lock down, Amazon plans to focus on prioritizing deliveries for its essential products while delaying non-essential deliveries for up to a month.

In an effort to free up congestion for priority orders and shipments, third-party vendors have been asked to stop shipments of all non-essential products. Amazon has six categories for essential products including:

  • Baby products
  • Beauty and personal care
  • Grocery
  • Health and household
  • Industrial and scientific
  • Pet supplies

To support the spike in demand, Amazon announced plans to hire 100,000 new frontline workers to support the increased demands in deliveries. In addition, Amazon is expected to spend US$350 million globally to increase employee wages by US$2 to $17/hour until the end of April.

DoorDash 

DoorDash logoDoorDash, the U.S. market leader in food delivery sales, waived delivery fees for consumers and waived sign-up costs for 100,000 new independent restaurants in light of the Covid-19 virus.

Last year, DoorDash became the largest food delivery company after acquiring Caviar, a leading luxury food delivery service, while raising US$600 million in private capital, valuing the company at US$12.6 billion.

DoorDash is investing heavily into scaling and marketing its platform, and last month, DoorDash filed an application with the SEC to list publicly on a stock exchange to increase sources of growth capital.

Blue Apron

Blue Apron logoBlue Apron, the first food delivery company to list on a public stock exchange, has increased its stock price by over 20% since last Friday to US$12.25 per share, mainly due to investors currently looking brightly on the delivery businesses.

Blue Apron was first-to-market in giving investors an opportunity to invest in a food delivery company, but it has struggled in sustaining profitability since the competitive landscape rapidly grew.

In 2017, Blue Apron’s IPO opened up at US$10, but after years of struggling, the food delivery company was forced to undergo a reverse stock split last year due to NYSE regulations which states companies must hold a minimum price of US$1.00 per share for 30 consecutive days.

As the Covid-19 virus increases demand for the already growing delivery industry, first time users and casual users of delivery services are saturating these platforms. It will be interesting to see if this spike in user demand for deliver services is sustainable or if it was just an outlier event due to the pandemic currently occurring.

//

About Jay Yi 178 Articles
Jay Yi has a HBsc from Guelph University and a MBA from McMaster. He has worked in Corporate Development in the Blockchain industry and Credit Risk at a Big Five bank in Canada.