“Shall we get something from Deliveroo tonight?” It’s a familiar conversation on thousands of sofas as locked-down consumers seek treats, convenience and a break from monotony.

It is testament to Deliveroo that in less than 10 years it has built such a recognisable brand – a brand that blurs the lines between retailer, restaurant and service provider. 

Are you buying from Nando’s or the local pizzeria – or Aldi, or Waitrose – because that is what you knew you wanted, or because that is what youhave selected from Deliveroo’s online ‘shelf’?

Deliveroo takes on a role that, in the past, might have been undertaken by the retailer – from new customer acquisition to being the face of the brand at delivery. 

It is no disrespect to longer-established delivery specialists that their brands are not seen in the same way by consumers. While DHL or Yodel vans, and even their drivers’ faces, might be familiar and welcome sights on locked down doorsteps, nobody thinks: “I need a new shirt, I wonder what Yodel has?”

Deliveroo’s rise highlights the increasing importance of platforms and marketplaces across retail, whether that is Next’s Total Platform; tech giant Shopify; or the trailblazer, Amazon, home to a multitude of third-party sellers as well as being a retailer in its own right.

That is the background against which an IPO of Deliveroo, whose 110,000 riders now deliver on behalf of 140,000 restaurants internationally, should be seen. The company describes itself as “on a mission to transform the way customers eat”.

It is an ambition as sky-high as that of Jeff Bezos’ to turn Amazon into ”the everything store”. Deliveroo is hoping for a sky-high valuation of £5bn or more when it goes public. The listing would be one of the biggest, if not the biggest, London flotations this year.

Big decisions

Deliveroo already has the Amazon stamp of approval after it took a 16% stake in the platform last year. And Deliveroo has tempted Next chief executive Lord Wolfson, one of the retail industry’s most respected leaders, to come on board as a non-exec – his first such role.

But amid all the superlatives, potential investors will have some big calls to make. While Deliveroo coyly notes that a float comes after “having demonstrated profitability in 2020”, it almost collapsed last year, too.

That was through no fault of its own, it should be emphasised. Deliveroo’s market disappeared faster than a plate of canapés at a wedding as Covid-19 struck and widespread restaurant closures followed. 

The impact prompted the Competition and Markets Authority (CMA) to give the green light to Amazon’s investment in Deliveroo in August – a deal that had been in jeopardy prior to the pandemic. The watchdog said at the time: “In this case, Deliveroo argued that the impact of the coronavirus pandemic on its business meant that it would fail financially and exit the market without the Amazon investment. 

“If the vaccination programme continues apace and a more normal way of life resumes, will the growth of Deliveroo and others remain so rapid?”

“Given the seriousness and urgency of Deliveroo’s financial situation, the CMA concluded that Deliveroo met the criteria for a failing firm and that its exit from the market would have been worse for competition and customers than allowing the investment to go ahead.”

In fairness, the CMA monitored the situation and later concluded both that “the restaurant food delivery market had recovered much more sharply than had been expected” and Amazon’s investment would not undermine competition.

Deliveroo’s push into grocery delivery was partly in response to the difficulties restaurants were suffering and it is testament to its entrepreneurial approach that it was able to switch to a new market. 

The company already counts Morrisons and Sainsbury’s among its partners. On-demand grocery is the fastest-growing part of its business and further expansion is planned this year. 

Picking the right partner

But it is not a slam dunk for Deliveroo. It faces competition from rivals such as Uber Eats and Just Eat, which already has Greggs and McDonald’s among its customer base. 

What is to stop them from muscling into grocery? Or a new breed of players such as Weezy, which has just secured $20m to expand its 15-minute grocery delivery service in London and the UK, and whose backers include Groupon founder Chris Muhr?

If the coronavirus vaccination programme continues apace and a more normal way of life resumes, will the growth of Deliveroo and others remain so rapid? Or will people welcome the loosening of restrictions by surging back to shops and restaurants, keen to take a window seat and mix with fellow diners, rather than survey the world on screens while sitting among burger wrappers and takeaway trays on the couch?

The answers to such questions are what potential investors must bet on getting right as Deliveroo proceeds with an IPO. In the end, it will probably come down to market share accumulation – the path taken by Amazon, which sustained years of losses and investment to build up the dominant position it now enjoys.

Whoever emerges as the winner in food delivery, success will likely not come cheap, but it may herald another phase in retail’s transformation as the right partners become an ever more important element of the retail proposition.