Seamless — The Final Frontier?

What it is

Seamless, the online food ordering service, founded in 1999, allows users to order food for delivery and takeout from restaurants through their web site or suite of mobile apps. Presently, it serves 25,000 restaurants in the US and London. This results in about 234,000 orders from those restaurants a day. Seamless/Grubhub ($GRUB) went public in April 2014.

Market size

Americans only spend about $9 billion a year on online food ordering, a tiny fraction of the total $70 billion food takeout and delivery market. Can the slowing of growth for Seamless signal an emergence of a change in consumption?

http://www.businessinsider.com/grubhub-seamless-handles-a-quarter-million-food-orders-a-day-on-average-2015-5

2012 to 2015E Capital Inflows to Food Ordering Space — http://techcrunch.com/2015/05/07/a-secular-shift-to-online-food-ordering/

With the improvements in GPS, omnipresence of phones, and recent Seamless IPO, investments in the space are heating up. While just $46 million and $25 million were invested in food ordering companies in 2013 and 2012, respectively, a staggering $600 million was invested in 2014. And in mid-2015, we’ve had approximately $360 million invested to date, which when annualized, comes out to approximately $1.2 billion. That type of growth is not something you see too often.

Evolution of food ordering

When restaurants wanted to advertise themselves, one way was to flyer people’s mailboxes with their menus.

Sample Restaurant Menu

That was fine, but there were some aspects missing. People would have to save the flyers in a binder, and go to said binder when they were hungry.

Then came the restaurant websites that posted the menus so you wouldn’t have to save them.

Sample Restaurant Website

That was great, however now restaurant owners would have to worry about 1) website upkeep, 2) SEO, and 3) overall discoverability — all not their core competencies.

So just like Google, a search engine for food emerged — Seamless. You wouldn’t have to remember the name of the restaurant around you, you would just need to go to Seamless, order your food, and it would be delivered. You didn’t even need to call the restaurant — all done online.

Since Google was the last evolution in discoverability, wouldn’t the same go for Seamless?

Quadrant I

To understand the answer to that question, we need to understand what Seamless is. It is a food ordering platform which:

1. has a storefront, and
2. has it’s own delivery people.

Quadrant II

However, there are a few companies that slightly alter that model, and take a decent portion of the $70B food takeout market. UberEATS and Postmates service the part of the market which has it’s own storefront, but not it’s own delivery people. UberEATS is an “expansion of a lunchtime-only service Uber began offering in a dozen cities last year, will use its network of more than a million drivers to transport goods, in addition to people.”

Postmates is the “leading on-demand logistics provider. With more than 20,000 active Postmates, the company operates the largest on-demand delivery fleet in 40 major US metropolitan markets. Postmates overall mission to power local, on-demand logistics focused on fast deliveries from any type of merchant at scale.”

By unbundling the logistical side of Seamless, they carved out their own offering for an underserved market.

Quadrant III

What would be the direct opposite of UberEATS and Postmates? A “restaurant” with no storefront, but it’s own delivery people? The answer is Maple. Maple both prepares and delivers the food itself.

“At a high level, we’re trying to purpose-build a company that has a singular vision to make delivery exceptional at every touchpoint,” [founder] Caleb Merkl said. “To do that we really had to own the entire process — everything from sourcing ingredients to last-mile delivery.”

Quadrant IV

To fill out the last quadrant, a food preparer without delivery people and no storefront, is simply a caterer. Below find the visual representation of how all these companies coexist.

Food: Delivery people / Storefront

We can slice the pie a little bit differently as well. In the above examples our assumption was that all the food was prepared on delivery. What if that is not always the case?

Quadrant I

Seamless is a service that a:

1. Chef prepares, and
2. a customer receives fully cooked.

Quadrant II

What would be an example of a service where a chef prepares, but you receive the ingredients still in the raw?

Kitchensurfing is an on-demand service for people who love food. It is re-defining the dining experience by directly connecting chefs to diners, and in the process, creating a more intimate and rewarding experience for everyone around the table.

Quadrant III

How about a service that the customer receives the ingredients raw and they themselves prepare the food based on recipe cards?

Blue Apron (and it’s direct competitor Plated) is a grocery delivery service company that delivers a recipe and the required ingredients right to their customer’s doorstep.

Below find the visual representation of how all these companies coexist.

Food: Prep condition / Maker

As trends change, so do the companies that fulfill those needs. Building a 100 year company does not mean following the original business plan, but evolving it to meet the needs to the marketplace. Identifying short and long trends is key here, because “changing the course of a moving ship” takes significant investments that transcend time and money.

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