Deliveroo is a part of the online food delivery segment in the UK, with the service operating in international market too. The company helps the customers in gaining access to food and grocery items from the local restaurants and stores. The business environment for the food delivery industry is determined by the different factors that are examined in the following PESTLE analysis of Deliveroo.
Political Factors
The stability of government and favorable policies devised by the government plays a crucial role in creating an environment that is conducive to business growth and continued revenues. Political instability makes it difficult to maintain business operations in an effective manner. The political environment in the UK has been stable over the years, helping in business development.
Deliveroo has been able to take benefit of the stable political climate in the country and expanded its operations within the UK, as well as venturing into other regions. However, the recent Ukraine and Russia conflict has halted the growth of the business in international market, along with the issues in the European market due to the geo-political tension (Norris, 2022).
The policies of the government related to taxation on the organization and the VAT are also influencing factors when it comes to the political factors. The employees at the company, including the riders have to follow the tax rules in the UK. The level of VAT applied on the food and grocery delivery also effects total cost, subsequently effecting behavior of consumers.
Economic Factors
The rising inflation in the UK has created shift in consumer buying behavior as there has been a decline in the online delivery orders. Increased cost of living and inflation makes it difficult for the customers to manage the expenses and the tendency of using food and grocery delivery option is directly affected by these economic pressures, thus effecting business of Deliveroo.
A positive development is the decrease in fuel price, however, the inflationary pressure in the form of high food prices remains an area of concern for Deliveroo as it effects the profitability of the business. Due to inflation, food prices have also been effected and the management at the company had to ensure that the earnings of the riders remain reasonable despite the higher cost.
Another area where the effect of inflation on the company is evident is the budge allocated to the marketing segment. Initially, in 2022, the management had decided to increase the investment in the domain of marketing activities. However, considering the negative economic environment, the management decided to forgo the plan of making the investment (Jefferson, 2022).
Social Factors
The population dynamics determine the market growth for the online food delivery. Population growth rate suggests the increasing number of customers. Deliveroo is targeting the individuals who are working or studying and are looking for quick food delivery. The grocery delivery targets customers who have busy routine and rely on online delivery service to save time.
The buying habits of consumers of the online food delivery industry are shaped by a variety of factors. One of the major examples is COVID-19 that had brought significant changes in mode of purchase. Pandemic has boosted the growth of online food delivery as a greater number of customers started preferring home delivery for the food instead of dining out (Shead, 2020).
The taste and preference of the customers shapes the selection of restaurants that are a part of the Deliveroo app. For example, the launch of vegan tile supports the customers who prefer the vegan food options. Moreover, the app has included the option of selecting restaurants based on their healthy diet lifestyle by allowing the users to enter their specific dietary preferences.
Technological Factors
Since online food delivery is dependent on the use of strong technology infrastructure, companies such as Deliveroo have to maintain up to date technology to manage operations. For example, Hop technology support the vendors in fulfilling the orders placed by the customers, which are subsequently delivered by the riders working for the business (Deliveroo, 2022).
The company also benefits from the use of predictive algorithm and use technology to handle the processes from the placement of order to the delivery to the customer. The whole logistics operations is supported by the relevant technology, which helps in tracking the orders, as well as selection of the restaurants according to the proximity of the customers.
Legal Factors
Deliveroo is required to follow the legal framework of the regions where the service is being provided and dealings with trade associations and vendors are within these guidelines. The status of riders as self-employed is not aligned with the rulings of French government, creating complications for the company in terms of their agreement with the riders (Deliveroo, 2022).
The management is making efforts to retain the self-employment status which is similar to the UK market. Another area where legal factors affect the company decisions is providing the delivery personnel with accident related insurance. The wage offered to these riders also needs to be in accordance to the legal guidelines to avoid any legal issues.
Environmental Factors
The environment factors for Deliveroo include the focus on sustainability, reduction of emissions and participation in other activities that reduce harmful impact on the environment. The management has decided to include electric vehicles as a part of its delivery fleet with the aim to reduce the emissions and follow clean air endeavors.
Net zero emission and waste management also hold important part of the sustainability practuces at Deliveroo. Within the organization, the emission reduction goal for 2035 indicates the focus on net zero. The company is also working in the domain of reducing food wastage, seeking support from Waste and Resources Action Programme (WRAP).
Conclusion
Deliveroo has been operating in UK and international market, dealing with a variety of positive and negative forces in the external environment. Despite the issues such as geo-political conflict and inflation, the overall dynamics of the industry are favorable, which indicate business growth in the coming years.
References
- Deliveroo (2022). Annual Report. Retrieved from https://dpd-12774-s3.s3.eu-west-2.amazonaws.com/assets/8916/7999/4882/deliveroo_plc_Annual_Report_2022.pdf
- Jefferson, M. (2022). Deliveroo pulls back on marketing spend as inflation softens demand. Marketing Week. Retrieved from https://www.marketingweek.com/deliveroo-pulls-back-marketing-spend-inflation/
- Norris, P. (2022). Deliveroo reveals huge losses as it warns of ‘headwinds’ from inflation and Ukraine conflict. Wales Online. Retrieved from https://www.walesonline.co.uk/news/uk-news/deliveroo-reveals-huge-losses-warns-23413924
- Shead, S. (2020). Covid has accelerated the adoption of online food delivery by 2 to 3 years, Deliveroo CEO says. CNBC. Retrieved from https://www.cnbc.com/2020/12/03/deliveroo-ceo-says-covid-has-accelerated-adoption-of-takeaway-apps.html