Is Deliveroo's exit in HK an alarm or opportunity to remaining players?

Deliveroo has decided to exit its Hong Kong operations through a sale of certain assets to its competitor foodpanda and the closure of other assets. Deliveroo Hong Kong’s platform will remain live until 7 April 2025.

As part of the changes, Deliveroo Hong Kong has nominated liquidators to manage closure of the Hong Kong business and the remainder of its assets in the most efficient way possible, according to a statement seen by MARKETING-INTERACTIVE.

"There are several dynamics specific to the Hong Kong market which led the Board to consider strategic options and, given the group’s commitment to disciplined capital allocation, determine that it would not serve shareholders’ best interests to continue to operate in Hong Kong," said the statement.

Eric French, Deliveroo chief operating officer, said: "We want to thank all our employees, consumers, riders and restaurant and grocery partners who have been involved in our operations in Hong Kong. We have been proud to serve so many people such amazing food over the past nine years."

Following the closing of the agreement, Deliveroo customers and riders will be redirected to the foodpanda platform. Certain restaurants and grocery shops will be onboarded into the platform, according to a statement by foodpanda.

This transaction will give customers on the foodpanda platform access to a wider range of restaurant and grocery businesses, including some only available on the Deliveroo app. Vendors joining the platform will be able to tap into a new customer base to boost their long term success.

After a decade of its operations in the local market, Delivery Hero’s decision to further invest in Hong Kong is part of its commitment to maintain a sustainable delivery ecosystem that provides the best value for its foodpanda customers, couriers and business partners.

HK market remains difficult for the brand

In 2024, Hong Kong represented 5% of group gross transaction value (GTV) and had a five percentage point negative impact on international GTV growth. The market remains adjusted EBITDA negative.

According to Deliveroo's Q4 trading update, its Q4 GTV grew 7% year-on-year (YoY) in constant currency; orders increased 3% YoY, while GTV per order was up 4% in constant currency, showing continued progress on its consumer value proposition (CVP), with encouraging signs from its enhanced Plus loyalty programme and strong growth in grocery.

Meanwhile, UK and Ireland's GTV growth improved to 9% in Q4 with order growth accelerating to 5%, as further execution on its initiatives helped drive improvements to frequency and retention despite continued uncertainty in the consumer environment.

International GTV growth increased to 5% with orders flat and GTV per order up 5%. The group saw continued strength in UAE and Italy, and a slight improvement in France, despite some ongoing market softness. However, Hong Kong continued to be impacted by the difficult competitive environment. Excluding Hong Kong, international GTV growth was 10% in constant currency, while orders grew 6% YoY.

With the emergence of new competitors such as KeeTa two years ago, Deliveroo and foodpanda have faced vigorous competition within the local market. As of March 2024, KeeTa has seized 43% of the food delivery market share in Hong Kong and has become the largest food delivery service provider by order number in the city, according to a report by alternative data provider Measurable AI.

Retail media as additional revenue stream

The exit of a major player will inevitably lead to a redistribution of market share among the remaining competitors. However, the real question is whether these players can capitalise on this opportunity rather than let it slip away, according to Chris Ngan, general manager, Hong Kong and Taiwan, The Trade Desk in a conversation with MARKETING-INTERACTIVE.

While the intensifying competition in Hong Kong’s market leads to the rise of retail media, companies are seeking additional revenue streams beyond their core business, he said. "For those still in the game, the key challenge is how to effectively monetise their traffic while continuing to drive consumer sales. One approach would be to expand strategic alliances and explore more localised initiatives. As for The Trade Desk, we remain committed to helping partners such as foodpanda unlock new opportunities and drive measurable success in this dynamic market."

Earlier last year, foodpanda announced its retail media partnership with The Trade Desk across seven Asian markets, including Hong Kong, allowing brands to reach foodpanda customers across various online platforms, including CTV/OTT, music streaming, and mobile apps, which has effectively enhanced their visibility beyond foodpanda’s advertising services.

During its beta phase in 2023, these solutions helped Unilever’s Knorr launch a new product line in Taiwan, resulting in a 229% increase in add-to-cart rates and an 81% rise in conversions, with 87% of buyers being new customers, said Ngan. "This success illustrates the effectiveness of leveraging retail data to engage a wider audience, foster engagement, and expand the market reach."

With Deliveroo’s exit from the HK market, the retail media landscape is poised for changes. Gary Cheung, managing director, Hong Kong and Taiwan, NP Digital, said the remaining platforms will likely enhance their advertising offerings to attract brands looking to fill the gap left by Deliveroo.

"Advertisers will need to re-allocate their budgets, leading to increased spending on these platforms as they compete for consumer attention.  This shift may result in more aggressive marketing strategies, special promotions, and potentially impact pricing and ROI for brands."

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