In light of the ongoing pandemic and its impacts across various business lines, we have been receiving a number of questions on Delivery Club (DC) food tech asset, which we are developing together with Sberbank as part of O2O JV established last December.
We decided to address these in this blog as FAQs, which you can find below. Please contact our IR team at email@example.com for clarifications or any other topics around our company.
Q. What is the business model of DC and the market that it represents?
Q. How large is DC and what have been its recent performance in terms of orders and revenues in light of COVID-19?
Q. What is the marketplace versus own delivery exposure of DC?
A. Own delivery was available in 70 cities (vs 13 a year ago), with a 53% share of orders coming from OD in Q1 vs 23% as of 4Q18
Q. What are the general terms/take rates?
A. Pre COVID-19 restaurant support initiatives, which include temporary take rate reductions, take rates stood at 20% on avg for marketplace restaurants and 35% for OD
Q. What is the geographical coverage of DC?
A. DC is present across 150 cities, which cover >45% of Russian population
Q. What is the split of business between Moscow and the regions?
A. Moscow and St Petersburg account for >50% of the overall restaurant aggregator market and therefore GMV for DC. Yet, regions are quickly catching up
Q. Have you been rolling out new cities and using which model?
Q. Which model is most profitable?
Q. Who is the average customer of DC? Have the user profile or consumption patterns changed during the COVID-19 related lockdown?
Q. Is there much difference in behavior between regular and repeat customers?
A. Average check does not differ much between new and existing customers while frequency rises looking at cohorts over time
Q. How large is the restaurant supply of DC and has it been disrupted by COVID-19?
Q. How does restaurant onboarding process work and has it been disrupted by COVID-19?
A. Process was made fully digital upon the launch of local lock-down with onboarding done within a day, versus being manual and involving offline document exchange in the past, which has taken two weeks or more previously
Q. Has DC experienced any difficulties in hiring new couriers in light of COVID-19 and related lockdowns?
A. Ahead of the lockdown announcement, DC created a courier reserve in order to meet potentially higher demand. There is no significant movement in courier pay from DC side, while their incomes have grown significantly as a function of higher demand and our rising efficiency, given that courier pay is linked to serviced orders, at RUB120 per order and RUB20 for km travelled. DC has also launched a support program for couriers motivating customers to pay tips and motivating couriers to deliver better service. As a COVID-19 measure, DC is doubling the amount of tips for couriers at own cost for April. So, DC had no courier or logistics bottlenecks despite elevated demand and peak order volume seen in April
Q. What support measures has DC taken in light of COVID-19?
A. DC has taken many steps to support restaurant partners, couriers and customers during COVID-19, including:
Q. How has DC client value proposition changed over the past 2 months? Has DC introduced any new features to address customer needs during the lockdown period?
A. Among some of the customer-focused new features:
So, DC continued to improve safety and quality standards while expanding its overall offer, including to areas like take-away, which will be convenient for users and supportive for restaurants as we exit lockdowns given the relatively low commission level
Q. Has DC increased or decreased promotional activity in light of COVID-19?
A. Given already elevated demand, DC did not increase promotional activity during COVID-19 and continued to improve efficiency of the service instead. Due to continuous improvement in logistics tech, application of algorithmic zones and further roll-out of Alan – AI based scheduling system, DC demonstrated gradual improvement of delivery time to low 30s in terms of minutes and cost reduction to record low level while improving customer satisfaction
Q. How have unit economics been impacted by COVID-19?
A. DC has been able to improve unit economics despite all the COVID-19 support measures and related costs of >RUB150mn given rising demand and slightly higher average check, faster delivery speed, further impact from ongoing AI-rollout, introduction of delivery fees and balance between OD and marketplace offers
Q. How does DC differentiate itself versus competition?
Q. What is the progress around Samokat e-grocery service?
Q. Beyond COVID-19 what is the opportunity for grocery deliveries in Russia?
A. Prospects of e-grocery in Russia are quite promising, given that food accounts for nearly half of the RUB33tn retail market of Russia is extremely underpenetrated, with e-grocery at just 0.3% of retail.
Q. Is DC integrated with other Mail.ru Group’s platforms and how does it work?
Q. Has DC done any integrations/cooperation with Sberbank?
Q. Is there any synergy between Citymobil (CM) and DC?
A. Users of CM are now able to make DC orders through CM app. This means access to longer distance deliveries as well as native integration between food and mobility verticals of O2O JV
Q. What are the strategic priorities for DC?
Overall, DC is focused on growth and creating the leading and well-diversified food delivery platform in Russia. Many initiatives require investments near-term, which is being provided by the JV between Mail.ru Group and Sberbank, but DC aims to create a profitable business within the coming years.