Germany: Amazon backed Deliveroo pulls the plug

German consumers looking to order a meal and a fresh beer delivered to their homes will only have a limited choice from this week on. Amazon backed home delivery service Deliveroo will stop its service in Germany after only 4 years amid fierce competition, leaving behind a near-monopoly situation.

When entering the market in 2015, British company Deliveroo tried to replicate its international success story in Germany. But different from other markets, Germany had already a duopoly of two major food delivery services. On one side there was Delivery Hero, a German startup from 2011 with its own brand and two acquired brands (acquired in 2014) and (acquired in 2015).  On the other side there was, a Dutch food ordering and home delivery service that took over German market leader in 2014. Both companies were fighting heavily for the lead in Germany leaving Deliveroo only with a disappointing market share of 2 percent in 2017.

Deliveroo also experienced heavy headwinds in Germany from unions that tried to fight he company’s business model which relies on self-employed delivery riders while competitors employ own riders or use the proprietary delivery service of partner restaurants.The Food, Beverages and Catering Union (Gewerkschaft Nahrung-Genuss-Gaststätten) accused Deliveroo of exploiting its 1,100 riders that are paid only slightly above minimum wages and named the system a bogus self-employment.

Realizing that the business environment in Germany was much harder than in other markets, Deliveroo withdrew its service last year from less promising cities in Germany like Stuttgart, Leipzig or Dresden giving hope that the remaining business in major German cities like Berlin, Hamburg, Munich, Cologne and Frankfurt could be saved.

At the end of last year Delivery Hero, the smaller one of the two big players, also had to acknowledge that it would never be able to win the race in its home market without wasting a lot of money which could be invested much better in other markets. Despite operating quite successfully on an international basis, Delivery Hero sold in December its German operations to rival in a deal worth EUR 930 million (or about USD 1.1 billion).

In May 2019, online business giant Amazon led a USD 575m funding round for Deliveroo, which raised hopes that this could be a first step for a complete takeover of the UK-based company and could support the ailing German business. However, faced with a 98 percent market share monopoly, Deliveroo had most likely already decided to pull the plug in Germany.

"At Deliveroo we're on a mission to create the very best food delivery service in the world," the company said in a statement. "And at the heart of this is offering a service that works brilliantly for our customers, riders and restaurants. Where we cannot do this to the level that we expect and you deserve, we won't operate. Therefore, Deliveroo's focus will now be on growing our operations in other markets around the world."

Share this article: