[Latest 2026] The Fierce Battle for Survival in the Food Delivery Industry and Its Structural Causes of Failure: The Truth Behind Menu Withdrawals and the Next Challenger to Uber Eats’ “Dominance”

Japan’s food delivery market, which was once a battleground of fierce competition, is now undergoing a period of dramatic consolidation due to barriers posed by massive capital and platform structures.
The withdrawal of “menu,” which had touted synergies with “au Pay Market”; the plight of the long-established Demae-can, struggling through its eighth consecutive year of losses; and the overwhelmingly high turnover cycle of Uber Eats, which dominates the market—.

In this article, we provide a comprehensive overview of the current state of the food delivery industry, based on the latest data and the dynamics of the industry structure.
We offer insights into the harsh structural realities of the platform business, the strategies of individual companies, and business lessons that can be applied to the management strategies of small and medium-sized enterprises.

The Big Picture of the Food Delivery Industry: Uber Eats’ “Dominance” and the Decline of Latecomers

The single most significant factor determining success or failure in Japan’s food delivery market is the “network effect” (network externalities) unique to platform businesses.
As a result of irreversible dynamics in which all resources became concentrated in the hands of the operator that first seized market dominance, the industry has effectively shifted to a system dominated solely by Uber Eats.

[Analysis of the Positions and Current Status of Major Companies]

• Uber Eats (the industry leader and undisputed champion)
  minimizes user wait times to the absolute minimum through its overwhelming number of partner restaurants and high-density network of delivery drivers. By maintaining a
  robust, high-turnover cycle, it has established a standalone profitable business model on a global scale.
• Demae-kan (No. 2 in the industry; structurally unprofitable)
  has seen its cost of goods sold ratio deteriorate to an extreme level due to soaring labor and operational costs resulting from its shift to an in-house delivery network. There is no trace of the
  former Japanese market leader, and the deadline for structural reforms is fast approaching.
• Rocket Now (part of the Coupang Eats group and a trailblazer)
  is making a full-scale entry into the Japanese market, armed with the massive capital that helped it dominate the South Korean market. It aims to capture market share from Uber Eats through disruptive front-end product strategies such as
  “prices matching those in stores” and “high-value coupons.”
• Menu / menu (Withdrawal/Business Downsizing)
  Despite a capital injection of 10 billion yen from the KDDI Group, the company failed to reduce its customer acquisition cost (CAC) and maintain its retention rate.
  As a result, it was forced to withdraw from the market.

Background of Menu’s Withdrawal: Why It Couldn’t Succeed Even With a 10 Billion Yen Capital Injection

Launched in 2019, the service began as a rising star among domestic food delivery apps and formed a strong capital and business alliance with KDDI in 2021.
Although it received backing on the scale of 10 billion yen through synergies with the au Ponta points ecosystem, it ultimately ended in withdrawal.
Three structural barriers lay behind this outcome.

• The Quagmire of Price Competition and Defeat by the “Same Price as in-Store” Strategy: It was common knowledge that existing delivery
  services were priced 30% to 50% higher than in-store purchases, based on a structure of “product price + service fee + delivery charge.”
  However, with new players like Rocket Now introducing a disruptive pricing model of “exactly the same as in-store prices,” it was impossible for companies reliant on commission revenue to keep up given their existing cost structures.
• A Significant Deterioration
  in Customer Acquisition Cost (CAC) Users of food delivery apps are extremely price-sensitive and are characterized by “low switching costs,” meaning they easily switch to competitors once coupons expire.
  Much of the 10 billion yen in promotional spending was wasted on acquiring temporary users who did not become loyal customers.
• The “Flywheel Effect”
  Created by Uber Eats: While Uber Eats spent many years optimizing its matching algorithm and driver density, the cost for restaurants to secure drivers remained high, trapping the company in a vicious cycle where delivery delays and failed matches continued to undermine the user experience.

The Economics of Platforms: Why Does This Industry Consolidate Around a Single Dominant Player?

In the food delivery industry, it is extremely difficult for mid-tier and lower-tier operators to survive.
The reason for this boils down to the existence of a “positive feedback loop (high-cycle loop).”

[利用者の増大] ──> [加盟店の増加] ──> [注文数の増加]
      ▲                                      │
      │                                      ▼
[配送時間の短縮] <── [配達員の高密度化] <───┘

[The Advantages of a High-Turnover Cycle]

1. As
   the number of users increases, well-known restaurants and national chains are given priority for joining the platform.
2. As
   the number of participating stores increases, users' frequency of use and average order value will rise.
3. As the number of orders increases
   and order density rises, delivery drivers will be able to earn money efficiently with "zero wait time."
4. Delivery Drivers
   : A higher concentration of delivery drivers is deployed in specific areas, minimizing the distance traveled for pickups and drop-offs.
5. Improved Delivery Quality: The time
   from order placement to delivery is dramatically reduced, leading to higher customer satisfaction (NPS) and further growth in the user base.

Once this flywheel starts spinning at high speed, latecomers must continuously offer both “excessive bonus payments to delivery drivers” and “excessive discounts to users” in order to catch up, which completely destroys their unit economics (profitability per order).

Demae-kan’s Structural Struggles: Eight Consecutive Years of Losses and the Shock of a “99.5% Cost of Goods Sold Ratio”

Demae-kan, which started out as a catalog business taking orders over the phone and went on to pioneer Japan’s food delivery market, is now facing an extremely dire financial situation.

[The Challenges Facing Demae-kan, as Seen in Its Financial Data]

• A persistent loss-making structure
  : eight consecutive years of operating losses. The company also posted a net loss of approximately 7.8 billion yen in the most recent fiscal year.
• An
  abnormal cost of goods sold ratio of 99.5%: With net sales of approximately 28.2 billion yen, the cost of goods sold reached approximately 28.1 billion yen, leaving gross profit at a mere 140 million yen.
• A structure in which system development costs, general and administrative expenses, and advertising and promotional expenses weigh heavily on the company, while the gross profit margin
  from sales promotion and marketing is virtually zero.

Demae-kan, which was once a “pure information-matching platform” without its own delivery service, rapidly built a “delivery network consisting of company-operated and contracted delivery personnel” to compete with Uber Eats.
However, as the costs of paying incentives to delivery personnel and managing distribution centers ballooned, the company found itself in a situation where it could not turn a profit on a per-delivery basis.

Although the company maintains cash reserves from its capital reserve and financial backing from its parent companies (LINE and SoftBank Group), unless there is a fundamental transformation of its business model, a scenario involving withdrawal from the market or a large-scale downsizing of operations in the medium to long term will be unavoidable given the current cost ratio.

Rocket Now’s “Masayoshi Son Approach”: Can It Undermine Uber Eats with the Power of Capital?

The only contender challenging Uber Eats’ undisputed dominance is Rocket Now, which has adopted the know-how of South Korea’s Coupang.
Its strategy is the very same “SoftBank/Masayoshi Son approach” that PayPay once used to dominate the Japanese market with unlimited cashback campaigns.

[Rocket Now’s Hypergrowth Strategy]

• Complete price disruption
  : We’re eliminating the “markup” unique to delivery services, allowing customers to order at the same price as in-store.
• Large-scale user acquisition campaign: Distribute large-value coupons worth
  4,000 to 5,000 yen for first-time users, completely eliminating the initial psychological barrier.
• Aggressive Retention
  of Partner Stores and Delivery Drivers: Partner store fees are waived for a certain period, and delivery drivers are offered base pay that exceeds that of competitors to forcefully increase their utilization rates.

The goal of this strategy is to “gain an overwhelming market share in a short period of time and then shift to profitability after eliminating the competition.”
However, given Uber Eats’ global profitability and the maturity of its algorithms, the biggest turning point will be whether it can get the flywheel spinning on its own before its capital runs out.

The Future Brought About by Market Monopoly: The Adverse Effects of Lost Competition on Users and Merchants

Historically, as demonstrated by the airline industry (where JAL and ANA have driven each other to improve) and the telecommunications industry (where the three major carriers compete), the loss of healthy competition in the market has a negative impact on consumers and the ecosystem as a whole.
If Uber Eats were to achieve a complete monopoly, the following scenarios are a cause for concern:

• Since there is no
  competition regarding increases in service and shipping fees, the platform has complete freedom to set its own prices.
• Increased Commission Burden on Partner Restaurants: To maintain sales
  from delivery orders, restaurants have no choice but to accept high platform commissions ranging from 30% to 40%.
• A reduction
  in the compensation structure for delivery drivers poses the risk that the base rate per delivery will decrease as drivers lose their options.
• There are concerns that simplifying support systems and tightening compensation standards for delivery delays could lead to a decline in delivery quality and reduce the risk of customers switching to
  competitors.

3 Lessons Small and Medium-Sized Enterprises and Business Owners Should Learn from the Rise and Fall of Food Delivery Services

The dramatic structural changes taking place in the food delivery industry offer extremely important business lessons for small and medium-sized enterprises and sole proprietors across all industries.

① Strictly manage “contribution margin per transaction” rather than top-line revenue (sales)

As the Demae-kan case study shows, no matter how large the sales volume (28.2 billion yen) may be, a business model cannot be viable if the cost-to-sales ratio reaches 99.5%. The top priority is to accurately determine
your company’s “true profit (contribution margin) per product and per transaction.”

② Avoiding the “scale trap” in businesses with high depreciation rates and high variable costs

For small and medium-sized enterprises lacking capital, pursuing a “volume-driven” business model in sectors where the cost of goods sold is extremely high is tantamount to suicide.
They need either a business model that minimizes fixed costs to the absolute limit or a strategy that focuses on sectors where high gross profit margins can be secured (a niche strategy).

③ “Front-end products,” which are expected to operate at a loss, should be managed based on thorough LTV calculations.

Just like the coupon campaigns used by Rocket Now and other restaurants, a “front-end product” strategy—which involves taking a loss on the first transaction to acquire customers—is viable only when the subsequent retention rate (LTV: customer lifetime value) is sufficiently high and the company has sufficient financial resources. Discount campaigns that lack a mechanism to retain
acquired customers will simply result in a drain on funds.

Summary: The Future of the Next-Generation Food Delivery Battle

The withdrawal of certain menu items from the food delivery market was an event that symbolized the limitations of unplanned expansion and the capital-driven competition. The current industry structure can be summarized as follows:

• Uber Eats maintains its dominant position thanks to
  a robust, high-turnover cycle and is entering a phase of profitability.
• Improving Demae-kan’s
  cost ratio is an urgent priority, and a fundamental restructuring of the business within the next few years is inevitable.
• Rocket Now: The final showdown to see if it can break Uber Eats' stronghold through price-cutting fueled by
  abundant capital.

Going forward, attention will focus on which platform will dominate the “local last mile”—including expansion into “quick commerce (Q-commerce),” which goes beyond mere meal delivery to include the immediate delivery of daily necessities and groceries.