Executive Summary:
Glovo is an online courier platform that delivers products ranging from food up to pharmaceuticals to customers who order using its app.
Glovo makes money from order commissions, delivery fees, subscriptions, as well as profits from its Q-Commerce service.
Founded in 2015, Glovo has quickly risen to become a major powerhouse in the online delivery space. The company counts over 3.5 million customers in the 20 countries it operates in.
What Is Glovo?
Glovo is an online food and grocery delivery service based out of Barcelona, Spain. Customers can order products from a variety of categories, including food, alcohol, pharmacy, groceries, and more.
The firm thereby partners with local businesses as well as some of the biggest brands and retailers in the world, including McDonald’s, Carrefour, or Papa John’s.
Apart from its partners, Glovo also owns and operates a kitchen that other restaurants can get access to (called Cookroom) and various fulfillment centers (named Darkroom). Moreover, customers can also use the platform to send items to someone else.
Glovo works together with independent contractors (called couriers) to fulfill those orders. To join the platform, couriers need their own vehicle (a bike, motorcycle, or car), have a mobile phone (to accept orders), and be 18 years of age. Over 57,000 couriers now work for the platform.
For its most loyal customers, Glovo offers a monthly membership program that allows them to save on delivery costs and access various other benefits.
Glovo can be used by accessing the firm’s website or downloading any of its mobile phone apps (available for Android and iOS devices).
Glovo Company History
Glovo, headquartered in Barcelona, Spain, was founded in 2015 by Oscar Pierre (CEO) and Sacha Michaud.
Michaud, who launched Glovo when he was already in his 40’s, possesses decades of experience as an entrepreneur and business leader.
After teaching himself how to code, Michaud went on to launch a software development agency in the mid-1990s. A few years later, he co-founded LatinRed, a Spanish version of Yahoo.
LatinRed was eventually sold to StarMedia in 1999, right before the bust of the tech bubble. Over the next 15 years, Michaud worked in managerial positions for telecom provider Wanadoo and sports gambling company Betfair.
Pierre, on the other hand, just graduated from university when he co-founded Glovo. After graduating with a master’s degree in Aerospace Engineering from Georgia Tech and interning at Airbus, he launched his second company.
During his university days, Pierre launched Zikkimo, a donations platform sponsoring children in need. Afterward, he went on to start LoveItLocal.es, a website aimed at promoting local artisan businesses in Spain.
Unfortunately, those ideas never really took off. What did take off though was his inspiration and imagination. During his Georgia Tech days, he experienced first-hand how courier services like Postmates were redefining convenience for everyday consumers.
So, when Pierre returned from the States, he began working on the concept that would eventually turn into Glovo. Around the same time, Michaud, who had quit his job at Betfair a few months prior, was scouting for different businesses to start.
A mutual investor friend put him in contact with Pierre who was 22 at the time and had already been close to raising his first-ever seed round for Glovo. They immediately hit it off and decided to pursue the business together.
Since both co-founders did not possess the skills to code apps, they hired a Russian agency to develop the first version of the app, which was ultimately launched in February 2015. At first, Glovo was only available in its native Barcelona.
During those days, Glovo grew primarily through word-of-mouth as well as positive mentions in the press. Nevertheless, the business itself was still in test mode. Glovo did not have any formal agreements with the restaurants and supermarkets it delivered from.
This officially changed after the team was able to raise its first significant funding round, a €2 million seed round from Antai Ventures, Cube Investments, and various business angels in December 2015. Equipped with the necessary funding, Glovo’s team went on to quickly launch in selected cities across Spain, Italy, and France.
Whenever Glovo expanded into a new city, it made sure to set up a local operations team to manage riders and signup partners. It, furthermore, made sure that the markets it expanded in were not extremely competitive. As such, it avoided the US or the UK and instead opted for launches in countries as diverse as Chile, Georgia, or Turkey. The team’s core belief is that it’s only viable to expand if Glovo can become the de-facto market leader (or at least a close second).
The first bump on that expansion road came in 2017. Although its business was already fairly established, Glovo’s founding team received over 100 rejections when trying to raise money for its Series B round. Around that time, venture-backed companies like Airbnb or Uber faced various public backlashes for their growth-at-all-cost practices – all while losing hundreds of millions in an effort to gain market share.
By 2018, those ripple effects were seemingly gone. In July 2018, Glovo raised a €115 million Series C funding round on the backbone of a 61 cities presence (equal to 17 countries). It also began to experience its first growing pains of being a large-scale enterprise.
After raising a €150 million round in April 2019, the company announced that it would stop operating in Chile as well as Egypt (after a deal with its shareholder company Delivery Hero). At least the latter proved to be a little trickier than expected. A month after shutting down in Egypt, the local authorities ordered Glovo to reopen its operations due to a violation of local competition protection laws.
A few weeks before the court ruling, Glovo faced a public backlash and was subject to angry protests after one of its couriers was killed in a car accident. The protesters, who were predominantly couriers themselves, criticized the firm’s lagging safety measures.
Over the pond on the other side of the world, an Argentinian judge banned delivery platforms, including Glovo, from operating in Buenos Aires amidst safety concerns. 63-year-old Ernesto Floridia, one of the company’s couriers, was hit by a car while working for Glovo. Floridia immediately messaged Glovo’s support team, telling them that he couldn’t move, to which the service rep asked him to send a picture of the food so it could cancel the order. While the employee in question was laid off swiftly, the damage was already done.
Despite the backlash, Glovo’s stock continued to rise. In July 2019, it announced a partnership with French supermarket chain Carrefour. Towards the end of 2019, it acquired Poland’s PizzaPortal for $39 million (while opening a tech hub in Warsaw) as well as sushi company Instamaki.
Rumors soon emerged, stating that both London-based Deliveroo and Uber contemplated acquiring Glovo. Instead, Glovo decided to raise another major funding round (Series E) of €150 million in December 2019. The funding round valued Glovo at over $1 billion, making it only the second privately-held company in Spain (behind Cabify) to reach unicorn status.
Nevertheless, it seems that the funding round came with a few attached strings. Soon after raising the round, in January 2020, Glovo announced that it would exit four markets, namely Turkey, Egypt, Uruguay, and Puerto Rico.
Then, in March 2020, the company temporarily laid off 25 percent of its staff as a result of the coronavirus pandemic. Many of the markets it was operating in were major tourist destinations, which were consequently affected by the pandemic.
Nevertheless, orders soon not only picked up but reached record levels. As a result of stay-at-home orders, Glovo became operationally profitable in almost all of its markets.
Despite the upswing, Glovo decided to load off its Latin America operations. In September 2020, it sold that business, which included eight markets (Peru, Ecuador, Costa Rica, Honduras, Guatemala, Argentina, Panama, and the Dominican Republic), to Delivery Hero for €230 million (of €60 million are performance-based payments). At the same time, it launched in Moldova, Kyrgyzstan, and Uganda.
Regardless of those sales, 2020 became the firm’s most successful year. Glovo was able to more than double its revenue over that time span.
Amidst pressure from new market entrants like Berlin-based Gorillas, Glovo has shifted its expansion efforts towards Q-Commerce (short for Quick Commerce), its grocery market vertical powered by local fulfillment centers. Glovo has raised €100 million and €450 million in January and March 2021, respectively.
Yet, Glovo wouldn’t be Glovo if it didn’t continue to face problems. In May 2021, a hacker hijacked the firm’s systems and retrieved sensitive account data. A few days later, Spain introduced new legislation that forces delivery platforms to hire drivers on a full-time basis (along with providing the accompanying benefits). The law is supposed to go into effect in August 2021.
Today, over 3.5 million customers are using Glovo, which works together with 57,000 couriers and 74,000 restaurants and shops. Moreover, about 2,000 people are now employed by the company.
How Does Glovo Make Money?
Glovo makes money from order commissions, delivery fees, subscriptions, as well as profits from its Q-Commerce service.
Glovo’s business model is reliant on continuously raising cash (to fight local competition), courier supply (and to some extent satisfaction), and becoming the de-facto market leader in the cities it operates in.
Scale is extremely critical in this regard. The more partners and couriers it has, the faster it can fulfill orders (while satisfying the exact customer need). Also, if people move across cities, they are more likely to use existing services than trying out new ones.
With that being said, let’s take a closer look at Glovo’s various revenue streams in the section below.
Commissions
Whenever you order something on Glovo, the partner receiving that order pays a percentage commission to the company.
The commission, according to The Guardian, is about 35 percent. Meaning on a $10 order, Glovo gets to keep about $3.5.
Nevertheless, the actual fee is dependent on the agreement that Glovo makes with the partner in question. For instance, global restaurant chains like McDonald’s will likely pay a lot less because they a) have the necessary negotiating power and b) due to the low-margin nature of its business (paying 35 percent to Glovo would mean that those orders would become unprofitable).
The commission is essentially an entry ticket to be able to access the platform and its millions of customers. On top of that, Glovo will handle both the payment processing and delivery on behalf of its partners. Especially small local shops often don’t have the necessary bandwidth to afford their own delivery fleet.
Charging a commission is certainly not uncommon within the industry. Competing services like Instacart and Postmates have adopted a similar model.
Delivery Fees
Apart from the commission that is paid by the partner, Glovo also charges a delivery fee. The fee, as the name indicates, is used to cover the cost of the delivery (i.e. pay the courier).
Delivery fees are primarily dependent on the distance between the restaurant and customer as well as the market itself. The fee normally ranges between $1.50 to $5.
Subscriptions
In 2018, Glovo introduced its membership program which is called Glovo Prime. The subscription, which costs about $5 per month, provides customers with a variety of benefits.
First and foremost, delivery fees will be voided once orders hit a certain threshold (€10 in Spain, for instance). Customers will furthermore gain access to various discounts.
Subscriptions offer a variety of benefits to online delivery platforms. First and foremost, they can be a lucrative revenue stream in itself. DoorDash, for instance, generated over $600 million in subscription revenue in 2020, alone!
Second, memberships entice customers to order more since they want to get a return on their little monthly investment. This not only makes customers more loyal but these customers oftentimes spend more money.
Since those customers tend to be more lucrative, delivery services, in turn, can use them to attract new partners (such as luxury restaurants or premium grocers).
Q-Commerce
As previously mentioned, Glovo has begun expanding its business towards the delivery of its own grocery products.
As such, the company is launching and operating its own fulfillment centers. These hubs, which are small warehouses in which pickers help to select the products, contain thousands of products.
Under the model, Glovo mostly purchases the products from brands and wholesalers. It then makes money whenever that product is sold for more than it was purchased for.
There are a variety of startups and growth companies that have adopted a similar model. Some of the most prominent examples include Dija, Gopuff, Gorillas, and Weezy.
Glovo Funding, Revenue & Valuation
According to Crunchbase, Glovo has raised a total of $1.2 billion across 12 rounds of venture capital funding.
Notable investors include Delivery Hero, Luxor Capital Group, Rakuten, Entrée Capital, Idinvest Partners, GR Capital, Amrest, Drake Enterprises, and many more.
In March 2021, Glovo raised its largest-ever funding round of over $527 million. According to The Wall Street Journal, Glovo was assigned a valuation of $2.34 billion during that round.
As a private company, Glovo is not obligated to share revenue figures with the public. A report by Reuters stated that the company has doubled its revenue in 2020. Its revenue figures will be revealed as part of the filing process once Glovo decides to go public, which it inevitably will.
