Deliveroo PESTEL Analysis - The Strategy Story

Before we dive deep into the PESTEL analysis, let’s get the business overview of Deliveroo. Deliveroo is a popular online food delivery company that connects consumers with their favorite restaurants. The company operates primarily in the UK, Australia, Belgium, Ireland, Spain, France, Hong Kong, Singapore, United Arab Emirates, Kuwait, and the Netherlands, among other countries. However, the specifics may have changed since then.

Here’s a basic overview of Deliveroo’s business model:

Platform: Deliveroo operated a platform business model, acting as a marketplace that connects customers, restaurants, and delivery riders. Customers could order from various restaurants via Deliveroo’s website or mobile app.
Ordering and Delivery: Once a customer places an order, the restaurant prepares the food, and a Deliveroo rider picks up the order and delivers it to the customer’s location. The company used a complex algorithm to assign delivery riders to orders and calculate the most efficient delivery routes. In 2022, it delivered 299 million orders to consumers globally.
Revenue Streams: Deliveroo’s primary revenue stream was the commission it charged on each order placed through its platform. This fee varied but was typically around 20-30% of the order value. Additionally, Deliveroo charged customers a delivery fee and a small service fee in some markets. The company also earned revenue from its subscription service, Deliveroo Plus, which offered members free delivery for a monthly fee.
Stakeholders: Deliveroo’s key stakeholders were its customers, partner restaurants, delivery riders (typically self-employed), and investors.
Expansion and Diversification: Deliveroo has explored various strategies to grow and diversify its business over the years. This included launching a grocery delivery service, expanding into new geographic markets, and testing a “dark kitchen” concept under Deliveroo Editions. Dark kitchens are delivery-only kitchens that allow restaurants to expand their reach without opening a new physical location.

In 2022 Deliveroo averaged 7.4 million monthly active consumers (‘MACs’) across its 10 markets. This was up 6% on the 2021 average of 7.0 million.

How does Deliveroo make money | Business Model

Here is the PESTEL analysis of Deliveroo

A PESTEL analysis is a strategic management framework used to examine the external macro-environmental factors that can impact an organization or industry. The acronym PESTEL stands for:

Political factors: Relate to government policies, regulations, political stability, and other political forces that may impact the business environment.
Economic factors: Deal with economic conditions and trends affecting an organization’s operations, profitability, and growth.
Sociocultural factors: Relate to social and cultural aspects that may influence consumer preferences, lifestyles, demographics, and market trends.
Technological factors: Deal with developing and applying new technologies, innovations, and trends that can impact an industry or organization.
Environmental factors: Relate to ecological and environmental concerns that may affect an organization’s operations and decision-making.
Legal factors: Refer to the laws and regulations that govern businesses and industries.

In this article, we will do a PESTEL Analysis of Deliveroo.

PESTEL Analysis Framework: Explained with Examples

Political

Regulations and Licensing: Any change in government policy related to food delivery services, whether about safety standards or how they operate, will directly impact Deliveroo. For example, certain areas may have limitations or curfews that can affect delivery timings.
Employment Laws: There’s been a lot of discussion around the status of gig workers. If a country categorizes Deliveroo riders as full-time employees rather than independent contractors, this could have significant implications for the company regarding benefits, wages, and operating costs.
Taxation Policies: Changes in taxation, specifically for digital platforms or services, could impact Deliveroo’s profitability. Also, VAT or sales tax policies related to food and services could affect pricing and demand.
Trade Restrictions: Any restrictions or tariffs imposed on imported goods (for instance, the tech infrastructure used by Deliveroo) could raise costs.
Political Stability: If there’s political instability in a country, it could disrupt Deliveroo’s operations, especially if there are strikes, curfews, or other forms of disruption.
International Relations: International relations can play a part for a company that operates in multiple countries, like Deliveroo. If the home country has poor relations with another country, it might be harder to operate or expand there.
Public Health Policies: Especially relevant during the COVID-19 pandemic, public health policies dictate how businesses, especially those related to food delivery, operate. They can influence aspects such as hygiene standards, contactless delivery protocols, and frequency of health checks for workers.
Infrastructure Development: Government investments in infrastructure can indirectly benefit Deliveroo. Better roads, improved public transport, or tech infrastructure can enable smoother operations for delivery platforms.

Deliveroo SWOT Analysis

Economic

Economic Growth: The general health of an economy can influence the spending power of consumers. In a thriving economy, people might be more willing to spend on conveniences like food delivery, while during a recession, they might cut back on such expenditures.
Inflation Rates: Rising prices can impact both Deliveroo’s operational costs and the prices of meals for consumers. If inflation is high and prices of ingredients or fuel rise, it could lead to increased costs for restaurants and for Deliveroo’s delivery operations.
Exchange Rates: Since Deliveroo operates in multiple countries, fluctuations in currency exchange rates can impact its profitability. For example, if the British pound weakens against other major currencies, Deliveroo’s earnings from other countries could decrease when converted back to pounds.
Unemployment Rates: High unemployment can have a dual impact. On the one hand, it might mean more people looking for gig work (like Deliveroo delivery jobs), but on the other hand, it might result in decreased consumer spending on luxury or non-essential items, including food delivery.
Interest Rates: The cost of borrowing is influenced by interest rates. If Deliveroo or the restaurants it partners with need to finance expansion or operations, high-interest rates could make borrowing more expensive, potentially slowing down growth.
Technological Investments: Economic policies that favor technological innovation and investments can benefit platforms like Deliveroo. A strong tech sector can lead to better infrastructure for online services.
Fuel Prices: The fuel cost is a significant factor for delivery service. Changes in fuel prices can affect the company’s operational costs and the fees it might charge its customers.
Wage Levels: Economic trends that influence the level of wages can affect both the amount Deliveroo needs to pay its riders and the spending power of consumers.

Sociocultural

Eating Habits: Different cultures have varied eating habits. For instance, some regions may have specific meal times, or there might be a preference for communal dining versus individual meals. These habits can dictate the peak times for orders and the types of meals that are popular.
Dietary Preferences and Restrictions: Many cultures and religions have specific dietary rules, such as halal or kosher requirements. Recognizing and catering to these needs can be a significant advantage for Deliveroo.
Health and Wellness Trends: A growing global emphasis on health and wellness means more people are looking for healthier food options, vegetarian or vegan meals, and low-calorie or organic foods.
Local vs. Global Cuisine: Understanding the balance between local food preferences and the desire for international cuisine is key. Local dishes might be more prevalent in some places, while there’s a significant demand for international cuisines in others.
Convenience Culture: In fast-paced urban settings, there’s a growing emphasis on convenience, leading to increased demand for services like Deliveroo. In contrast, traditional meal preparation at home might still dominate in other areas.
Economic Disparities: There might be significant economic disparities within societies, with affluent sections more likely to use premium services and middle or lower-income groups looking for deals or discounts.
Generational Preferences: Younger generations, such as millennials and Gen Z, might be more tech-savvy and open to using apps like Deliveroo, whereas older generations might prefer traditional methods of ordering or dining.
Family Structures: Larger meal orders might be the norm in regions where extended family structures are common. In contrast, the order size and preferences might differ in areas with more nuclear families or single-person households.
Cultural Events and Festivals: Different cultures have unique festivals and occasions when there’s a surge in food orders. Recognizing and catering to these can provide a boost in sales.

Technological

Platform Infrastructure: The robustness, user-friendliness, and efficiency of Deliveroo’s app or web platform directly influence user experience. Regular updates, improvements, and testing are vital to ensure smooth operations and customer satisfaction.
Mobile Technology: With the proliferation of smartphones, the success of platforms like Deliveroo often hinges on the performance and compatibility of their mobile applications.
Data Analytics: Leveraging data to understand consumer behavior, preferences, and patterns can give Deliveroo a competitive edge. Analytics can help personalize offers, optimize delivery routes, and forecast demand.
Artificial Intelligence (AI) and Machine Learning: These technologies can enhance the user experience by improving recommendation engines, optimizing delivery routes, or even automating customer service through chatbots.
Digital Payment Solutions: Integrating diverse and secure digital payment methods becomes crucial as more people move away from cash. This includes credit/debit card payments, e-wallets, and other online payment systems.
Connectivity and Internet Infrastructure: Deliveroo’s service can be impacted in areas with patchy internet connectivity. On the other hand, regions with robust 4G or 5G networks can provide smoother operations and a better user experience.
Cybersecurity: Given the personal and financial data Deliveroo handles, ensuring top-notch cybersecurity measures is essential to prevent data breaches and maintain user trust.
Integration with Other Platforms: Collaborating or integrating with other platforms, such as social media for marketing or other food-tech platforms for cross-promotions, can offer added avenues for growth.
Automated Delivery Solutions: There’s ongoing research in the realm of drones or robots for delivery. While this might not be a widespread reality, keeping an eye on these technological advancements is crucial for future strategies.
Cloud Computing: Cloud technologies ensure that Deliveroo’s platform remains scalable, especially during peak times, and can efficiently handle large volumes of data and transactions.

Environmental

Sustainable Packaging: One of the most noticeable environmental impacts of food delivery services is the usage of single-use plastics and other non-biodegradable materials for packaging. There’s increasing pressure from both consumers and governments for companies to adopt eco-friendly packaging.
Carbon Footprint: Deliveroo’s fleet of bikes, scooters, and cars contributes to its carbon footprint. Using electric vehicles or promoting bicycle deliveries can help in reducing this impact.
Waste Management: The food delivery industry inherently produces a lot of waste, not just in terms of packaging but also in terms of unsold or returned food. Efficient waste management and reduction strategies can make a significant difference.
Local Sourcing: Encouraging partner restaurants to source ingredients locally can reduce the environmental impact of transporting goods over long distances. It can also boost the local economy.
Energy Consumption: The energy used in Deliveroo’s offices, data centers, and other facilities contributes to its environmental footprint. Adopting green energy sources or energy-saving practices can help mitigate this.
Consumer Awareness: Consumers becoming more environmentally conscious might prefer businesses that align with their values. Deliveroo can benefit from marketing its green initiatives and practices to appeal to this segment.
Regulatory Pressures: Governments and regulatory bodies worldwide are setting stricter environmental standards. Staying compliant and going beyond compliance can provide Deliveroo with a competitive edge.
Water Usage: While not as direct as other factors, considering water usage in partner restaurants or cleaning/maintaining delivery vehicles can also be part of Deliveroo’s environmental considerations.

Legal

Employment Laws: A significant legal consideration for Deliveroo revolves around the classification of its riders. Are they employees or independent contractors? Different countries might have varied viewpoints on this, and it affects benefits, pay, and other legal obligations.
Health and Safety Regulations: Food delivery services must adhere to stringent health and safety regulations to ensure food is safe for consumption. This might involve regulations on food storage, transportation conditions, and hygiene standards.
Data Protection and Privacy Laws: Deliveroo handles vast amounts of personal and financial data as a digital platform. Regulations such as the GDPR in Europe dictate how this data should be managed, stored, and protected.
Intellectual Property Laws: Protecting the technology, brand name, logo, and any proprietary features of the Deliveroo platform requires adherence to IP laws in different jurisdictions.
Consumer Protection Laws: These laws ensure that consumers’ rights are not violated. They might address issues like fair pricing, transparent advertising, and the right to return or refund.
Environmental Laws: As discussed in the Environmental factors, legal regulations around packaging waste, carbon emissions, and other environmental aspects can affect Deliveroo’s operations.
Taxation and Business Laws: Different countries have different rules regarding taxation, business registration, reporting, and more. Complying with these is essential to avoid legal disputes and penalties.
Competition and Antitrust Laws: As Deliveroo grows, it must be cautious about not violating competition laws, especially if it holds a significant market share in any region.
Licensing and Permits: Deliveroo might need specific licenses or permits to operate in certain areas or countries, significantly if it expands its services beyond food delivery.
Advertising and Marketing Laws: Any promotional campaigns or marketing initiatives Deliveroo undertakes must comply with the advertising standards and regulations of the concerned country.
Liability Laws: In case of any accidents or issues involving Deliveroo’s riders, the company must be aware of potential liabilities and the legal landscape governing these situations.
Trade and Tariff Laws: If Deliveroo sources any goods (like delivery bags or tech equipment) from other countries, it must be aware of any trade restrictions or tariffs.