January 17, 2022

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Delivery Hero becomes a lender

There’s an old joke, and we’re paraphrasing, that “in the end, all internet businesses become advertising businesses”. Well, maybe now we should add “and lending businesses”.

Check this Tuesday piece from Bloomberg:

Delivery Hero SE is looking to expand newer business offerings including selling advertising and allowing consumers to delay payments on purchases, both of which could help the company grow sales as it moves closer to profitability.

The company has rolled out a buy-now-pay-later service in the Middle East and north Africa as part of a test, chief financial officer Emmanuel Thomassin said in an interview Tuesday. Delivery Hero also wants to better leverage its platform to grow ad sales, he said.

The piece added:

Delivery Hero is also looking at broadening its financial-technology offerings such as providing financing to vendors in collaboration with banks.

That’s €22bn Germany-based global food delivery company Delivery Hero, who are aiming to break even (finally!) in the second half of the year, proposing to grow their core business through, in effect, a mix of eyeball catching and financial engineering. If your customer can’t afford larger meals, finance them. If your suppliers can’t get the credit to expand their kitchens, do that too.

In a way, it’s not that different to what Amazon did over the past decade. You can now get an Amazon Credit Card, and, as a supplier, Amazon will cover your warehousing costs in return for a cut of revenue. It also, surprise surprise, now allows targeted advertising on its retail platform that generated around $8bn of revenue last quarter.

But while Amazon offers a vast array of products — enticing for advertisers — with benefits like cashback via its credit card — enticing for consumers looking to smooth out their spending — it’s hard to see how needle moving this might be for a tech-enabled meals on wheels business. The only other people might advertise on Delivery Hero’s platform are other restaurants who, even in rich metropolitan areas like San Francisco, are largely still struggling to make money from gig economy services. Then, is a consumer really going to take credit out to buy another pilau rice? Well, perhaps.

And, as for restaurants where using Delivery Hero is earning profits, why not fund extra kitchen space out of those earnings instead of taking on onerous partner credit instead?

Lots of questions. But as the gig economy as a whole has yet to establish its credentials as a sustainable one, perhaps it’s a sign that, if these businesses are to survive and prosper, they need to start finding another means of making money beyond the notoriously difficult world of last mile delivery.

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