DELIVERY APPS

Delivery Apps Are Defying a Global Consumer Slowdown With Record Revenue And Transaction Growth

Food at your door and money out the window — that’s how it feels to order in. But delivery apps are making bank while your wallet takes a hit. Since the launch of leading delivery platforms like Instacart ($CART), DoorDash ($DASH), and Uber Eats ($UBER), the longstanding question among investors has been whether these companies could serve up profits. Despite $20B+ in operating losses, they’re now changing their diets from red meat to greens.

HOT TO GO: Even with tighter budgets, Americans are still finding room to fund grocery and restaurant delivery. Last quarter, DoorDash, Uber, and Instacart reported record levels of orders and revenue, beating the slowdown in restaurant traffic and consumer confidence. Uber’s CEO said that the demand for food delivery is becoming “much more habitual,” while DoorDash described demand as “really strong.” Transaction volume grew 19% at DoorDash, 10% at Instacart, and 16% at Uber, with revenue also posting double-digit gains. Part of this growth is due to a focus on higher-margin advertising products.

• Earlier this year, Instacart cut 7% of its workforce to concentrate on more profitable areas like digital advertising and enterprise software, which now make up ~30% of its revenue and are expanding faster than its core delivery business.

• Instacart also launched AI-powered shopping carts in US Aldi stores, one of the world’s fastest-growing discount grocers.

Fewer Deliveries, More Fees

This growth comes despite new fees levied on customers to offset higher courier compensation. In California, New York City, and Seattle, new rules forced delivery platforms to pay gig workers more — but the apps have found ways to push back.

• Big players in food delivery have added new surcharges that resulted in NYC consumers paying 58% more in delivery fees after the rules took effect — while delivery volumes fell 9% in the first quarter from the previous year.

• To mitigate rising labor costs, delivery and rideshare apps are battling to keep their workers classified as independent contractors.

Forward-looking: Their recent quarterly performance shows delivery apps have come out on top. DoorDash, the largest US food delivery service, reported a less than 1% dip in orders due to new minimum pay rules. And like many other industries, delivery apps are facing a tough consumer market. Given the expensive changes, budget-conscious consumers might soon say, “Forget the fees. I’ll pick it up myself.”

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LARGECAP RECAP

🧳 Airbnb Faces Booking Blues as Travel Industry Hits a Rough Patch

The thrill of exploring is fading among Americans, chilling the air around Airbnb’s ($ABNB) bookings. Despite summer traditionally being a peak season, Airbnb only recorded an 8.7% increase in bookings in Q2, its slowest growth since the pandemic, leading to a 13% drop in its stock price yesterday.

• CEO Brian Chesky attributed the slowdown to shorter global booking times and weaker demand from US customers.

• Nonetheless, the company noted “continued growth across all regions” year-over-year, with strong performances in Latin America and Asia Pacific (CNBC).

Grounded expectations: This trend isn’t unique to Airbnb; the travel slump is hitting the entire industry. Last week, Booking Holdings ($BKNG) reported similar struggles, blaming slower European travel and a shift toward budget-friendly stays by Americans. Marriott International ($MAR) also noted operational challenges in China and revised its expectations for the US and Canada. It looks like the only checks these travel giants will be getting this year are rain checks.

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Markets & Economy

Saudi Aramco maintains dividend: Despite a slight Q2 profit dip to $29B, the global oil behemoth plans to pay $31B in dividends, highlighting resilience amid market cycles and anticipating oil demand growth in the second half of 2024. [Read]

Wall Street bets on aggressive rate cuts: Major banks expect earlier, frequent Fed rate cuts in 2024 following weak jobs data. Bank of America suggests to “sell the first rate cut” due to historical stock declines during hard-landing cuts. [Read]

Disney’s streaming profits soar: Disney ($DIS) reported its first quarterly streaming profit of $47M, one quarter ahead of schedule. With 100M+ subscribers, the company plans price hikes, showing strong pricing power. [Read]

Business & Wealth

Google discontinues Chromecast line: Ending its 10-year run, Google confirmed it will stop producing Chromecast devices and focus on its new Google TV platform and third-party devices. [Read]

Real wage growth varies by income group: The top 10% of earners saw 46.2% wage growth since 1979, while the bottom 10% saw 17%. Middle-income groups fared about the same, with 17.4% wage growth. [Read]

X sues over ad boycott: Elon Musk’s X (formerly Twitter) filed a lawsuit against media watchdog GARM and select members like CVS, Unilever, and Mars, seeking damages and aiming to stop GARM’s advertising recommendations on X. [Read]

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DIGIT OF THE DAY

9.1% of Credit Card Balances Have Slipped Into Delinquency Over the Past Year, Highest Since 2011

Delinquencies are up, and spoiler alert: it’s not because people are buying more lattes. The pandemic triggered a surge in new and existing debts, with spending spiking after stay-at-home restrictions ended. Now, with post-pandemic spending fading and essential costs climbing, many are relying on credit for daily expenses. As a result, Americans are falling behind on credit card payments at levels not seen since the aftermath of the 2008 recession.

• US credit card debt has reached a new peak at $1.14T, with 7.18% of these balances overdue by more than 90 days — the highest rate in 13 years.

• PYMNTS Intelligence found that across generations, 23% of Gen X are focusing on reducing their debt, followed by 22% of baby boomers and 20% of millennials.

Savings squeeze: Overall delinquency rates are steady at 3.2%, but this rise suggests potential troubles are brewing with consumer debt. Despite consumer spending bolstering recovery post-pandemic, Americans’ savings dropped to 3.4% of after-tax income in June, down from 4.8% a year earlier. However, while Americans have been tightening their belts, economist Mark Vitner remains optimistic, stating to MarketWatch, “There are a few cracks there… (but) from an overall basis, consumers look to be in pretty good shape.”