Deep Dive: The online food delivery industry’s problem with profitability

At the end of 2019, Meituan-Dianping recorded close to US$400 million in net profits, with more than half of the company’s revenue coming from food delivery. Seeing as the online food delivery industry is notoriously a loss-making business, this came as quite a surprise.

Meituan-Dianping delivery drivers / Photo credit: Meituan-Dianping

How did Meituan-Dianping succeed, when other players like US counterparts Uber and GrubHub are still struggling? Can other online food delivery players replicate its success? Tech in Asia reporter Putra Muskita answers these questions and more on this month’s Deep Dive.

Timecodes:

00:00 – Intro music
00:46 – Today’s topic: Can online food delivery be profitable?
01:30 – How online food delivery evolved
02:23 – The challenges that emerged in the industry
02:53 – It’s an efficiency game
04:41 – Negotiation is key
05:13 – Why does the delivery business work so well for fast-food restaurants?
06:26 – The online food delivery industry is a fragmented one
09:35 – Meituan-Dianping: The one player that managed to achieve profitability
10:17 – Why the company managed to come out on top
13:54 – It’s not just a market advantage
15:33 – What can other players learn from Meituan-Dianping’s success?
17:21 – Covid-19’s impact on the industry
20:53 – Can online food delivery be profitable? The answer isn’t so straightforward

Download the full transcript here.

Featured reporter:

• Putra Muskita, a Tech in Asia reporter based in Jakarta, Indonesia

Essential reading:

• Can online food delivery ever be profitable?

Episode Sponsor:

To better navigate the challenges of humanizing a brand and its customer engagement, Jean Thomas, chief marketing officer at Pomelo Fashion, and Kenneth Soo, Asia-Pacific team lead for customer success at Braze, will share tips and tricks that businesses can use to interact with their customers in a sensitive and efficient manner.

Register for our virtual event about how to humanize your customer engagement for the new normal and learn the best ways to retain users, keep messaging personal, and do good in troubled times.