Big Names Expanding Delivery Services Soon

In a recent report, analysts at Brean Capital looked into the rapidly-expanding world of restaurant delivery services. In light of the recent acquisitions of delivery service companies by GrubHub Inc GRUB and Yelp Inc YELP, analysts see the restaurant delivery business continuing to rapidly expand, and they believe merger and acquisition (M&A) activity will likely continue in the space.

Who Else Is Joining In?

GrubHub and Yelp are not alone in attempting to expand delivery services. Amazon.com Inc AMZN has been working to grow its AmazonFresh same-day grocery delivery service, and Starbucks Corp SBUX also plans to add a delivery service in 2015.

Analysts believe that delivery poses a potential threat to margins for these companies if it is not done correctly, as the costs of the service will likely not be fully recovered by the customer’s premium.

Shipping Cost Inflation On The Way

Analysts were impressed by United Parcel Service Inc’s UPS handling of the holiday shipment load. UPS delivered 30 million packages on its busiest days during the holiday season.

However, with UPS struggling to generate profits during the busiest part of the year due to high costs, analysts predict that an increase in shipping rates will arrive before holiday season, 2015. Increases in shipping costs will likely continue to weigh on retail margins.

More M&A To Come

Analysts believe that more delivery-related buyouts could be on the way soon. The report lists Amazon, Groupon Inc GRPN, Priceline Group Inc PCLN, Wal-Mart Stores Inc WMT and Whole Foods Market Inc WFM as companies that could potentially be looking to boost delivery services via targeted buyouts.