Even if 2015 were to end tomorrow morning, many would still remember it as a year of major shakeups for the Web and app-based food delivery and dining market. As you may have heard, a flurry of activity in the food-related technology sector has occurred in just the past three weeks. Among headlines: GrubHub announced acquisitions of DiningIn and Restaurants on the Run, Yelp acquired Eat24, Zomato acquired Urbanspoon and Priceline purchased OpenTable.
In November, Delivery Hero and Foodpanda acquired services in seven different countries. In addition, high profile market strangers like Amazon and Uber are considering a potential foray into the sector by recently testing a mirage of different food takeout/delivery services.
Clearly, the market is experiencing a bit of chaos, and it may be at a point where the dust has yet to settle.
A byproduct of this change; Madison, Wi.-based EatStreet will now assume the title of largest nationwide independent food delivery service. The startup raised a $10 million Series B round in 2014.
EatStreet provides restaurants with their own websites, apps, Facebook ordering, and ordering integration into pre-existing websites. The web and app-based service is geared to serve tier-2 markets in a way that larger market focused companies like Grubhub cannot, CEO Matt Howard told DC Inno. It is also unique in that its market focus is designed to support college students and young professionals, specifically.
DC Inno spoke with Howard about his industry’s changing market landscape and what it may mean for his business:
(Chris Bing) Q: 2015 seems to be the year when the mobile food delivery biz is rapidly consolidating, why is this?
(Matt Howard) A: With Grubhub’s successful IPO, we are now seeing other companies take notice to the potential of the food ordering industry. Many large companies such as Yelp and Amazon are seeing the benefit they can bring to their users by having this as a part of their business. I believe we will see others look at the space this year and continue to consolidate the market.
Q: With bigger companies growing through acquisition and major players like Google and Amazon looking to enter the market what is a smaller operation to do?
A: Others have tried to build from the ground up in this industry and have stumbled. Most companies don’t realize the logistical challenges of the online food ordering industry when they start out. These are things we have been confronted with during our 5 years in this business and have overcome with our knowledge of the industry. We are confident in our strategy to continue growing at a rapid pace and keep building out our share of the market.Last year alone we went from 2,500 restaurants clients to 15,000 and were the fastest growing online food-ordering platform in the US. We are continuing on this rapid expansion in 2015 and expect to hit 25,000 restaurants to end the year.
I think the fact that we have been able to execute on our plan shows that there is still room in this industry. Currently, the industry pulls $70B per year and still has over 90% of orders placed over the phone. There is plenty of room for players such as EatStreet to grab a piece of the market.
Q: Could you comment on your partnership with Yelp and what it means for EatStreet?
A: Yelp remains a valuable partner to EatStreet. Many of the restaurants on EatStreet do not overlap with Eat24 because of our differentiated strategy of targeting secondary markets. For this reason, our partnership will continue to be an important one for both sides.
Q: Will the chaotic market activity we have seen over the past several weeks slow down?
A: We believe this is only the first wave of activity in the space and expect to see more consolidation to come as other companies look at entering the industry.
Q: Do you believe the rise of franchise-like companies — potentially Grubhub and/or Yelp — may discourage newer startups from entering the market?
A: There are always going to be companies that come in to a market to make it better. Although the food ordering space is getting more and more competitive by the day, I would expect to see others enter the restaurant technology space to continue to make improvements.
