When early investors were informed of Uber’s initial plan for a car service application in 2008, it was not until the penultimate slide, that they realized that delivery could be another source of revenue for the company. Ten years later, delivery is no longer an afterthought. According to forecasts by its director general, Dara Khosrowshahi, Uber Eats is expected to deliver some $ 10 billion worth of food around the world this year, up from more than about $ 6 billion last year. Uber takes 30% off and delivery fees, then pay the drivers, suggesting that Uber Eats could generate at least $ 1 billion in revenue this year, or between 7% and 10% of the total. This means that Uber Eats is already among the largest food distribution services in the world and ranks second in the United States behind rival GrubHub (probably a billion dollars in 2018) and ahead of the competition with Caviar, Postmates, and DoorDash.
Uber Eats – The Only Thing Working For the Brand
Uber could certainly use some good news. The San Francisco-based loss-making company was estimated at about $ 76 billion in its last fundraiser in August 2018, and bankers hope its IPO, scheduled for later this year, could bring it to $ 120 billion. The problem is that there is no chance that Uber’s core business is so important. Its explosive growth is showing signs of slowing down and, internationally, the taxi service has experienced difficulties, selling its operations in China to its local rival Didi Chuxing in August 2016, as well as to its holdings in Southeast Asia. Uber’s autonomous car business, once seen as the solution to rising driver costs, suspended testing and fired workers after the death of an autonomous pedestrian in March 2018. Uber is now preparing to explain to investors why they should buy their Lyft shares, Uber Eats looks like a distinctive factor.
Losses despite Some Success
Despite the growth, Uber Eats loses a lot of money and even Khosrowshahi does not know when it will be profitable. Potential Uber investors will have to decide if food delivery is a smart bet on future growth or a foolish task in an overcrowded market. Of course, Uber Eats receives a large portion of a restaurant bill and charges a delivery fee of typically $ 2-8. But Uber must pay the driver to pick up and drop the food, in addition to marketing the service. The share of Uber’s bill is lower, on average than that of the bicycle company. The restaurants are, at best, semi-voluntary partners who can hardly afford a blow to 30%. And since Uber is not yet willing to share expenses with a paying customer, there is less network efficiency to exploit.
Competing With GrubHub
Its main competitor, GrubHub, listed on the stock exchange, has proven that you can make profits in this sector. This success has made him a formidable rival, and it is not the only one – just in the United States alone, Uber is competing with Caviar, the subsidiary of Square, well-capitalized startups DoorDash and Postmates and the potential giant behind the scenes, Amazon. Most exciting for Uber executives is that many Eats customers do not even use this service – four out of ten people who used Eats were new to Uber, which allowed the company to have access to new customers who could later be convinced to try the car service. To reduce costs, Uber Eats puts batch orders so that one driver can take several meals at a time. It is also appealing to customers with free delivery of restaurants that already have a courier en-route. To further develop, Uber Eats has to attract more customers and restaurants. Uber also copies GrubHub’s business model and lets some restaurants make their own deliveries in exchange for greater note-taking.