The next task of home delivery is software as a service

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Un repartidor de DoorDash, en Nueva York durante la pandemia.
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Leasing their technology to retailers could give them the profitability they seek, although it is not certain

Sugar is a quick fix to balance the salty and bitter. Food delivery companies are also looking for ways to reconcile their need for more customers with profit for their investors. The secret ingredient could be selling its delivery technology as a service to retailers.

DoorDash, Uber Technologies and Grubhub owner Just Eat Takeaway are quickly adjusting to post-pandemic reality: Fewer new customers are ordering food delivery, just as investors are most hungry for profit. Matching the rapid expansion of the past two years was always going to be a tall order. In the April-June quarter, revenue growth for DoorDash, led by Tony Xu at $28 billion, was 30% year-on-year, up from 83% in the same period a year ago. Its gross profit margin dropped to 43% from 53% a year ago.

Reducing spending on marketing or recruiting is a step toward profitability. Finding new revenue streams, for example by letting restaurants advertise on platforms, is another. Uber boss Dara Khosrowshahi hopes to increase advertising revenue sevenfold in his delivery division by 2024, to $1 billion.

But capturing more customers is crucial to lower costs per order and improve efficiency. One option is for companies like DoorDash to offer express delivery features as a service. For a monthly subscription, supermarkets or other retailers can use the insights to track prices and drivers. Technology providers can also take a portion of the order. More than 100 retailers, including Apple and Walmart, already have such an agreement with Uber; DoorDash is building warehouses and providing drivers for Loblaw, Canada’s largest supermarket chain.

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Since the technology already exists, the diversion should produce juicier margins. Software subscription giants from Salesforce to SAP have gross profit margins of 70%, compared to 40% for delivery companies like Amazon-backed Deliveroo. That translates into a higher valuation by investors: On average, software firms are trading at almost 7 times 2024 revenue. If Uber, for example, could generate 5% of its projected 2024 revenue through technology outsourcing, its top line would grow by more than $700 million, according to analyst estimates compiled by Refinitiv. At a software multiple, that equates to about $5 billion in today’s money, almost a tenth of Uber’s current value.

Ocado, which is listed on the London Stock Exchange, offers a note of caution. It has been outsourcing its robotic warehouse technology for years, but has yet to realize any operational benefits. For the secret sauce to deliver the desired result, retailers will have to have more luck with the mode of delivery.