Economic profitability of last-mile food delivery services: Lessons from Barcelona

Abstract

During the last years, the number of digital platforms offering allegedly environmental sustainable last-mile logistics services has been increasing fast all over the world. Their size and geographical spread are growing leaps and bounds. Some studies suggest that they are still operating at losses and relying on venture capital to carry on growing. In this paper we employ real-life data gathered from the largest food delivery platforms (Just Eat, Glovo, and Deliveroo) operating in the city of Barcelona (Spain) to analyse the profitability of these business models. We develop a Monte Carlo simulation model with several scenarios to estimate how many orders are needed to reach economic profitability. Using this simulation model, a second model based on multiple linear regression is built to investigate the relationship between ‘the minimum number of orders required to reach profitability’ and several independent variables, such as the share of the total purchase order or the delivery time-distance. The potential use of this tool for managers is discussed, and several lines of future research on the economical profitability of food delivery operations are highlighted.