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Expanding on a #2 Psychology: Delivery Hero partners with UK's hungryhouse Written by Marguerite Imbert on 28. February 2012


This is the story of the online delivery platform that became the global market leader. And it all started in Berlin, with one little company called Lieferheld, which over the course of 18 months became Germany’s largest online delivery platform.
“Wait, wait, wait,” Lieferheld CEO (and, as of today, Delivery Hero co-CEO) Fabian Siegel interrupts, “You can’t say we’re the largest. Well, you can say we’re the largest. I have a court injunction against me that says I can’t say we’re the largest.”
(Fabian is referring to the dry, legitimate fact that is still more profitable, largely due to its six-year-headstart.)

These are the types of things we learn from Germans

“In Germany, you need to be 20 per cent more profitable than your competitor for four months in order to publicly claim the title of #1,” Fabian explains. “If I said something now, I’d get sued 10K. But it’s not that far from reality.”
So what’s reality? The Berlin-based online food delivery platform Lieferheld (which Fabian reminds me does not just deliver pizza, despite its reputation) has been building its online food ordering platform for 18 months now.
In this short time, it’s come to serve over 5,200 restaurants, so far limited to the German borders (in reportedly 700 German cities to be exact, though Siegel confirms that “probably only 200 of these reported cities actually qualify as cities.”) Now they’re partnering with the UK’s second biggest player hungryhouse.width="300"From hungryhouse’s perspective, there’s no problem making the claim. “Partnering with Delivery Hero was an easy decision,” said Tony Charles, COO, in a press release today, adding that the Berlin-based team has “proven… they can scale faster than anyone else in this industry.”

Don’t get us wrong: It’s definitely good news

In the company’s international persona and partner Delivery Hero (as of today their only persona), they’ve expanded to major markets (including Switzerland, Russia, and Mexico). Their partnership with hungryhouse marks a powerful strategic move into the British and potentially European market at large.

With 4,500 restaurants to date, hungryhouse is certainly a big player and one well-worth pairing with. But London-based JustEat is the firm leader, not only in the UK and Denmark but more critically across Europe at large.

Nonetheless there’s enthusiasm from the sidelines: “Delivery Hero is on a roll! Now in Germany and the UK,” wrote Team Europe (and Lieferheld) founder Lukazs Gadowski on his Facebook wall today.

But’s it’s not #1: Is it rude to ask ‘Why not?’

London-based JustEat is currently the #1 player in the UK (as well as in Denmark and, most critically, across Europe). “We speak regularly with JustEat,” Fabian responded when we asked if he approached them. “But there’s no need right now to work together because they can’t afford us.” Afford you?

“In the online food space, there’s room for a #2 player,” he adds quickly. “The network effects are not as global as in Amazon or Groupon, for example, so you can have a couple of players.”


Moving forward with global ambitions

So currently, JustEat has the European lead. In the US, there’s GrubHub (Chicago-based) and Seamless (NY-based, with a small office in the UK.) But it “doesn’t makes sense for them (GrubHub or Seamless) to go to Europe because the US is a big market, big enough to fuel IPO ambitions locally,” Fabian tells me. “They’d rather buy later (with an eBay-like acquisition model).”

Introducing the #2 psychology…

But Delivery Hero does not want to be acquired (or follow a similar prototype to Cascanda’s recent absorption by “The Grubhub CEO once said, ‘I do what Fabian’s doing but 15 times bigger,'” Siegel told me. “Our goal is to be bigger than Grubhub by the end of the year.”

Fabian’s hesitation to claim a superlative is not unfamiliar in this town. His bashfulness at accepting or declaring the claim of #1 accompanies a host of more egregious instances. In my four months here, a number of founders in Berlin have shocked me with the transparency with which they’re able to accept (or consider) the position and relative conditions of #2. How can they speak about it so openly?

In the US, we cover that stuff up in stockings

“In the online food space there is room for a #2 player,” said Fabian, after clearly expressing their desire to become global market leaders. How are the two goals compatible? I don’t get it. Is Oli Samwer the only one I relate to? Is it so American of me to feel a little embarrassed at the mention of anything less than the best?

Sometimes the position is reversely feared, I’ve observed, to the extent that entering the market is intensely avoided. (“If a Rocket company is in the competition,” said one investor at a nearby fund, who I will not mention by name, “I won’t even think of investing in a competing company.”) We argued for the length of a curry bowl about this. If business is not about becoming #1, what is it?

The devil you declare is the one who gets you.

If you’re willing to discuss the possibility of #2, then you might not feel so bad becoming #2, right?

My rally cry: Delivery Hero takes all

The global leader is as of yet undetermined. Why shouldn’t it be Delivery Hero? It’s got an iconic, globally flexible name (rescuing us from all the ando-undo-indos about town.) They’re doubling the size of their office 2 April, and have managed to recruit an entire SEO team of Mexicans to town. To add – Fabian and Niklas (Ostberg) are two of the smartest people in Berlin. I say, go for it. Be the European leaders.
Keep Berlin as your headquarters, and send us a pizza.

Now that’s how the story should go.

Let’s forget this #2 nonsense.

Image credit: pizza – flickr user Sebastian Mary, pepperoni pizza sweater – Supply, pizza Doritos – flickr user theimpulsivebuy