Food-delivery platforms are on the front lines during the coronavirus crisis, with major spikes in demand as communities are confined at home, likely with more time to cook than usual. And while some restaurants have opted to shut down, others have turned to takeout as a lifeline. Yet physical contact between suppliers, couriers and customers must be more tightly managed than ever to reduce the risk of spreading COVID-19.
The gig economy has also come under renewed scrutiny due to a lack of worker protections that have left many facing a stark choice between earning a living or sheltering in place. In the best of times, operating a delivery platform is a balancing act — and these are certainly not the best of times.
We talked to Delivery Hero CEO Niklas Östberg to find out what he’s learned about managing a global logistics business in the midst of a pandemic.
The Berlin-based company operates a variety of delivery brands across more than 40 markets and 300+ cities globally, employing 22,000 people directly — with a much larger army of self-employed platform workers who hit the streets and make the actual deliveries.
Food remains a core focus — Delivery Hero says it has some 500,000+ restaurants on its platform, making it the largest global food network outside of China — though in recent years it has branched out into other areas, including groceries and pharmaceuticals. An expansion that’s proven to be timely.
This interview has been edited for length and clarity.
TechCrunch: How is the coronavirus impacting your business?
Niklas Östberg: It has an enormous amount of impact in different ways and different regions. We are heavily impacted in some areas, in some a little bit less. In some we have positive impact and in some negative.
What goes for almost everyone except for those who are under complete curfew is that the number of new customers have significantly increased.
We have a lot of new customer segments who didn’t order food before — they now urgently need food and they’ve realized the value of food delivery. And of course there are some [existing] customers who have changed their behavior — now they might not need it as much as before. But definitely one thing that is true for almost every market is that we get a lot of new users and we get a lot of new restaurants.
Another thing that is changing is that we do way more grocery delivery, pharmaceutical delivery — delivery of all other type of services. That is natural growth that’s happening there — and that’s through all markets. Then of course, it very much impacts us from all the safety measures that we need to do. To make sure that riders, community, restaurants — everyone’s fulfilling those safety measures. Also a lot of government relations that is happening — how we can help them? So it’s changed the way we work a lot. It has changed the business in many different ways. It’s very hard to summarize it.
We took a hit — as coronavirus started — so we are actually not a beneficiary in the short term at least, like most people would have believed. And now we’ve seen recovery happening and in some markets we are even above earlier levels.
Is a pattern emerging or are impacts very locally specific, market by market?
It’s very regional. It’s funny. If you take for example Nordics or Northern Europe — we’ve seen a huge increase in orders. We had a quick drop but then we’re back on levels that have never been before. Very fast growth.
While in Southern Europe — both for us and our competitors — we have seen a fairly negative view. People have been ordering less — they’ve been home more and they’ve been cooking maybe more. So we’ve seen a big increase in groceries and things, but in food there’s been less. So I guess there’s a little bit of a culture aspect that’s impacting things there.
How are you thinking about grocery deliveries now?
Two years ago we started going in that direction slowly. Last year we started pushing it a little bit more strategically. In particular, the second half of last year. It’s proven to be a good move because it makes us faster to really help in that area now.
It wasn’t a strategic area, but we didn’t expect the growth that we’ve seen now, so it helped to boost things in the short term. But it doesn’t change our long-term strategy — it’s more that maybe we’ll move a little bit faster now.
We always cater to what we think people want to have delivered. So we’re not so much thinking that we’re a food company — we saw ourselves more as a logistics company that can deliver things really fast and in a good way. Food was just the first strong vertical [of] what customers want to get delivered. But now we see, of course, a larger willingness to have other things delivered.
Were there markets where you got key learnings about the coronavirus early that helped your response elsewhere?
We were very early in adapting to it — partially because we’re very large in Korea and it very quickly panned out there. So we’re probably more aware than many other companies. But we saw it more as an insurance policy — making sure in case things get worse we stand strong and we are ready to support [partners].
We launched some basic things [in Asian markets] — like safety for riders and consumers — that was very quickly put in place. And of course the governments in Korea and in other Asian markets were very fast in implementing. So I think that helped us in many other places. What we didn’t learn from Korea but what we learned in some Middle Eastern countries is the full curfew. Because that will never happen in any Asian market — everything is shut down, you are not allowed to go out on the street. That was something that Asia never taught us.
Unfortunately, I think the rest of the world has not been as fast in making sure that tests are being made and more targeted measures. And the whole social distancing in the rest of the world was a little bit more unknown which is also why we see less [economic] impact in Asia now because they took very strategic — very small, but very targeted — measures that put them in a good position now to master this crisis. While I think Europe and U.S. and Middle East as well now have to take the big measures which hurts us much much more. And I think impacts the economy much much more. And all the rest of the small business owners — I feel horrible for them. They have no safety now.
How concerned are you about restaurants making it through this crisis and what measures can you take as a platform to help those key suppliers?
We’ve taken a lot of measures. One is that we try to get them on board as quickly as we can — so we’ve got significant scale-up teams making sure we onboard restaurants and other companies who need to drive business to get on our platform. We have waived sign-up fees, we are giving them special promotion packages that they can very cheaply apply to drive their business or kick-start their business. We have also reduced fees such that customers can get free delivery in small areas — in small, close-by areas — so that also helps the restaurants to get a boost to their business.
We have also done faster payments — making sure they get liquidity. So we try to both finance and help them on liquidity and drive business. What’s most important for them is to drive business. That’s probably what we’re also the best at. To make sure that they can keep on running their business and get some revenue.
I wish we could save everyone. We try to contribute as much as we can but there will be a lot of restaurants and small businesses who’ll be very hard-hit. And I think in some countries they’re managing it better than in others.
This has probably also surprised the whole worldwide authorities and the community — how to deal with this? What kind of shutdowns do you do? And what’s the impact if you do these shutdowns? Both on helping not spreading the coronavirus further, but also the impact to business. That is also a learning process where we have a dialogue and helping process that we have to do with authorities.
How are you managing additional complexity around risks to riders and to customers?
There has been an enormous amount of implementation processes — everything from cashless delivery, no-contact delivery but also processes and communication to our riders. In some markets they should wear face masks, gloves and where appropriate making sure that they get hand sanitizers. How they’re carrying the bags, how they pick it up from the restaurants. How to leave it at the customers. So we try to do all initiatives possible. I think with the initiatives that have been taken we really avoid as much contact as [possible] for the riders to not put them in risk.
I’m a strong believer that we reduce the number of contacts compared to a private person going to a restaurant or a grocery store — maybe two or three people travelling there, meeting a lot of other people — we try to avoid those gatherings. I think here we have a much safer solution to solve the problem by thinking about the riders and how they do this.
Luckily this is also not a virus that spreads through food. It’s more that contact — we try to avoid as far as possible.
Riders making deliveries on your platform aren’t covered by worker protections like sick pay, which means there’s additional risk during a pandemic. What can you do there?
We’d like to be helpful to the whole community. Since it’s not employees it’s of course very hard for us to cover this — like we do with other partners. But we are helping setting up different initiatives and different funds to help the rider community. We’ll communicate a little bit more about that separately [in the future] but we are providing support to society — to make sure that [those communities] are covered when these things happen. Same with other vulnerable groups. It could be restaurants — that was one. But in particular the rider community. Try to help them because we benefit from that community. We benefit from the restaurant community and we want both to stay strong after this crisis.
Have you seen more people wanting to be riders during this crisis or fewer?
We haven’t seen that there has been less. But anecdotally there’s probably more — there are more people out of work and who maybe also don’t want to sit home all day long but actually try to get out. We have not seen at least less in this market that I’m aware of — but have seen a willingness to help. And I hope that it’s a contribution that we are taking certain actions to be helpful and to be safe.
How do you believe your business will be changed by the coronavirus over the longer term?
The main focus now is making sure that we do the right thing and I believe that if you do the right thing good things will happen to you — right now I really focus on that. I hope that we can master this crisis and be a positive contribution to it. I do think that we’re gaining a lot of support, a lot of new customers, a lot of new restaurants — a lot of people realize the value that we can provide.
It feels horrible for me to say now but I think that we believe that we will come out of this very strong. But that is a little bit secondary — this is a terrible crisis and we should all do what we can to help. But I believe a lot of people have realized the value that we can play and the value that we can build. Also I think our team has started getting stronger from the learnings, the initiatives, the pushing to deliver other items faster — will probably help us make our company stronger.
Do you believe we’ll see more consolidation in the delivery space in general as a result of this disruption?
The market environment and the ability to raise significant funds could potentially drive consolidation. Not coronavirus per se, but the potential change in the market environment.
Anyone who’s building a good, consumer-focused business, who’s focused on growth through a good customer offering, will always be able to find capital and they will never burn too much money. I think the problem we have had is that we had an economy that was very hot — and people [were] willing to put money behind anything in many cases. And the comparative threat that SoftBank was using was capital. They wanted to outspend Delivery Hero, they wanted to outspend Just Eat, they wanted to outspend each competitor. Not for having a better product or service but just by the sheer amount of money they could invest.
I think that is likely proving to not be the case. It’s again proving that the best product and best service win. That’s why I also believe that those players who have a good service and good offering — they will also get funding and they will also be able to survive, even in a tough environment.
A lot of the best companies like Amazon and many of them have been born through tough times. It makes you cost-efficient and you achieve a lot with little monies. So I think the right players would survive but the players who use capital as a source of comparative measure — instead of customer experience — they will potentially struggle.
Where are the key pressure points for Delivery Hero right now? What’s keeping you up at night?
The first priority and also what keeps me up at night is making sure that we evolve our product very fast. I think we’ve done the safety side — we’ve come a long way there. We’re probably in a very strong position but now we have to focus on the restaurant community and the business community. How can we make sure that they survive?
How to make sure that they don’t lose their customers during the lockdown? And also how can we ensure that we kick-start them once things are going back to normality? How can we get them all kick-started to avoid that this is a dragged-out, long process? So it’s making sure that we can satisfy those partners who have been joining us in the last month.
We have a significant amount of capital and we see a good return on our investments and regardless of the market environment so we continue to hire and we continue to expand in the same fashion as we did before — of course with certain adjustments — tactical adjustments to certain curfews or maybe push a little bit more on our grocery verticals and delivery X business models. But we rather see this as an opportunity to further enhance our product offering and our customer base.
It’s great for users — a lot of innovation is going to happen.
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