Delivery Hero Niklas Ostberg

Delivery Hero at scale and beyond: CEO Niklas Östberg shares his vision

April 27, 2021

Since its launch in 2011, Delivery Hero has made its mark on the platform landscape. The company operates in more than 40 international markets, which makes it the largest global platform for online food ordering outside of China. With hundreds of thousands of local restaurant partners and up to 5 million orders per day, Delivery Hero’s leadership is familiar with the demands of running a business at scale.

In conversation with Platform Leaders’ Co-chair Laure Claire Reillier, Delivery Hero Co-Founder and CEO, Niklas Östberg, gives us his candid views on the challenges and opportunities facing Delivery Hero and other global platforms.

Creating a vision

The early days of any platform are crucial and demanding, as Niklas knows well. Food delivery platforms like Delivery Hero work tirelessly to build a user base, maintain cash flow, and compete for market share. “[We] had to grow faster than we could manage, running faster than you can run. And that means that you add cost, which means you have to finance. And if you don’t get the financing, you know that it’s over,” Niklas tells us frankly. “I had many moments where I felt ‘this is never going to work’. And at the same time, you have to keep the ‘shine’ up for all your employees and everyone around you and everyone who’s supportive, that it will all be fine and good. But inside, you are tired and you’re scared and you are unsure at moments.”

Delivery Hero confronted this uncertainty head-on, relying on the cooperation and vision of its team. Niklas says, “It’s like walking a steep mountain and it’s really tough. But if you do it with good people, it’s beautiful to get up there.”

Several years on, the risks that Niklas and his team took have paid off. Today, Delivery Hero is over 40,000 people strong, all part of the efforts to grow the platform’s reach, impact, and efficiency. This allows Niklas to focus on the bigger strategic picture for the platform. “My role has become a little bit more about making sure that we stay together, setting out the vision, the strategy, and a little bit less [about] solving urgent issues in the middle of the night,” he says. 

 

Achieving scale

For platform businesses, achieving profitability and longevity is often a question of scale. “Our strategy has always been that we want to be very, very efficient, such that we can reach profitability with a very small margin,” Niklas agrees. 

A small profit margin for Delivery Hero attracts restaurants and riders to the platform, since it offers them a viable economic channel. But it creates pressure on the business to reach critical mass. “We are aiming for 11% of the food value as a margin on the order,” says Niklas. From this slim margin, Delivery Hero needs to pay its employees, fund marketing efforts, and cover additional operating costs. Niklas admits that additional growth is still needed to achieve profitability: “Even if we did 8.6 million orders the other day, and we average close to 8 million per day, it’s still not enough scale for us to get profitability on the margin we charge.”

This underscores the demands on Delivery Hero to continue its growth. “We hope […] that if we can double or keep on doubling our business to become even larger, even with a small margin, we can make the economics work,” Niklas says.

 

Balancing the ecosystem

Beyond making the economics work for the business, the value needs to be balanced across the whole ecosystem of participants. Interfering too much with the marketplace could drive restaurants away. If rider pay is too low, they won’t be attracted to the platform; too high, and the base of riders could become oversaturated, or restaurants could protest the narrowing of their profits. Niklas concedes that Delivery Hero has some responsibility for oversight in this: “We have to step in if we feel that the market economy somehow wouldn’t work.”

As the social and economic context evolves, so do the needs of Delivery Hero restaurants and riders. Niklas shares examples of how Delivery Hero responded to changing priorities amidst the COVID-19 pandemic, such as waiving sign-up and delivery fees. He also emphasised thoughtful engagement with stakeholders and related an example from Delivery Hero’s operations in Norway. “Legislation has allowed us to have the rider to choose,” Niklas says. Riders can opt to either work freelance or sign an employment contract. “In most cases, they want to be freelance because they can make more money, but there are also some people who want to be employed.” He notes that this solution could potentially work in other markets, as well.

Niklas understands the need for diplomacy: “I don’t have all the solutions, but I really hope that it can be a constructive dialogue getting to the optimal setup. The better we can make the lives of the riders, the better we will flourish.”

 

Practicing sustainability

The goal of operating sustainably drives innovation at Delivery Hero. Niklas sees the climate as an additional stakeholder in their business, and mentions that they have a variety of initiatives around environmentally-friendly packaging. But this is also about a broader definition of environmental sustainability, one that includes building long-term value within communities. 

This could involve stepping into the quick-commerce space to help small businesses to compete. “If we don’t enable stores to do both offline as well as online, I think they will also struggle,” Niklas says. He sees the growth of e-commerce and the importance of online channels to drive in-store business. “It is something that is very close to my heart,” he says, “to help there, making sure they can have both offline and online and supporting them with the tools and services. […]  It will be even lower margins, but I’m very passionate about helping that local community.”

Coming back to the question of safety and value for riders, Niklas also sees sustainability as a goal. “Even if we would get riders for a low pay […] we have to look ourselves in the mirror and feel happy and feel that we’re building something sustainable,” he says. 

 

Looking to the future

Despite the demands of running a business that receives 100 orders globally per second, Niklas is informal and engaging. It’s no small feat to manage and grow a business like Delivery Hero, but it’s clear that Niklas and his team thrive on the challenge of climbing the mountain. “As an entrepreneur, you’re never happy when you get up there,” he smiles. “You always see a bigger mountain or a bigger challenge or a bigger adventure.”

 

To go further 

This keynote with Niklas Östberg was part of the Platform Leaders event organised by Launchworks & Co on the 15th of April 2021 (full list of speakers and agenda). To watch the full event, play the video below.

TheOrganisers

The Platform Leaders initiative has been launched by Launchworks & Co to help unlock the power of communities and networks for the benefit of all. All Launchworks & Co experts live and breathe digital platforms and digital ecosystems. Some of their insights have been captured in best-selling book Platform Strategy, available in English, French and Japanese.

LW LOGO &CO
LW LOGO &CO
TheOrganisers

The Platform Leaders initiative has been launched by Launchworks & Co to help unlock the power of communities and networks for the benefit of all. All Launchworks & Co experts live and breathe digital platforms and digital ecosystems. Some of their insights have been captured in best-selling book Platform Strategy, available in English, French and Japanese.