EatStreet Eyes Exit Amid More Online Food-Ordering Consolidation
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Yahoo could decide to follow the lead of Yelp and Amazon and get into the food-ordering industry, Howard said. But he’s confident that EatStreet will “continue to grow at a very rapid pace.”
Of course, an increasingly crowded field means that the buzz around the industry should continue, at least for a while—and potentially provide opportunities for EatStreet and others to court suitors.
Forte, for one, expects more deal making in the on-demand delivery market—not just for restaurants, but groceries and other goods. He predicts that Instacart, Delivery.com, Postmates, and Relay Foods are among the on-demand delivery companies that could be targeted for acquisition. Potential delivery startup buyers include Amazon (NASDAQ: AMZN), Groupon (NASDAQ: GRPN), OpenTable, Wal-Mart (NYSE: WLMT), and Whole Foods (NASDAQ: WFM), he said.
“I see the notion of companies wanting to expand their capability in delivery continuing,” he said.
The key will be getting the business model right. The labor costs for handling deliveries tends to eat away at a company’s profit margins, Forte said. “Historically, online delivery has not been an incredibly profitable business, so I think the challenge here is for these standalone online delivery companies to develop a profitable model independent of becoming an extension of somebody else’s strategy.”
Howard declined to say if EatStreet is profitable. The company works with many restaurants that already offer delivery, and it partners with third-party services like Mr. Delivery and Food To You to handle deliveries for restaurants that don’t. EatStreet is considering acquiring delivery companies or “building the capability ourselves,” Howard said. “We will continue to explore our options as the year progresses.”
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