As the icon of the app-driven sharing economy, Uber never lets its followers forget that it sees itself as more than a ride-hailing service. The eight-year-old’s company’s aim is to become the logistics standard-bearer for the digital world and beyond. FedEx disrupted the package delivery business, and Uber has made clear that their mission is to follow that lead into the future digital world.
Depending on the source, Uber is valued at between $30 billion and $60 billion. Therefore, the San Francisco-based company is long on resources which drive its vision to explore all avenues in profitably moving things from point A to point B. The March 2014 move into restaurant delivery was easy and a low-risk one for the company building the new service as an adjunct to its existing infrastructure and brand.
UberEATS is now in 65 cities in North America, Europe, Asia, South America, Australia, and Africa. While that total pales compared to acknowledged industry leader GrubHub, with more than 1,100 locals in its fold, UberEATS is coming on strong. UberEats poses a major threat because of the massive reach of its ride-hailing business, thus providing the company access to a huge total available market. In addition, major chains such as McDonald’s are more favorably inclined to work with Uber than its competitors because of its army of drivers.
In Southern Florida, McDonald’s is running a test with 164 area restaurants where customers can order Big Macs and other fast-food delights using the UberEats app. A $4.99 service charge is added to all orders. “We are most certainly very interested in the fast-growing delivery business not just in the U.S. but globally, so we are excited about the opportunity to provide even more convenience and more accessibility to our customers who have been asking for us to deliver, “Pam Williams, director of growth platforms for McDonald’s USA told the Miami Herald. Uber has more than 10,000 drivers in the Miami area alone that provide food delivery service.
UberEATS is positioned to take a bite out of the food delivery market. According to App Annie, a measurement site for app downloads, UberEats is the number one app for food and delivery. That ranking compares to competitors GrubHub at number seven and Postmates at number eight. However, UberEATS does not offer its restaurant’s partners an API to allow integration of its service with the eatery’s Point of Sale System. Most of its competitors, including GrubHub, Postmates, and DoorDash offer POS APIs which allow the restaurant to gather customer data and push directions and special instructions to drivers.
Even with all its digital ducks in a row, UberEATS might be little more than an experiment for the high-flying startup. In addition to its lack of an API for its partners—a vital element—there is little transparency on how it reimburses its drivers as well as the percentage it takes from the restaurants it serves. There is driver concern over the lack of guarantee hourly rate, as well as some major bumps in its logistics platform. Many drivers complain that deliveries that appear to be nearby can be much further than indicated, negatively impacting their daily delivery totals. And then there is the rule that UberEATS does not allow tipping. In summary, Uber offers little beyond its brand and dynamic driver network to differentiate itself in this space.
Much like other digital companies in growth mode, Uber has a number of new products and service trials in the pipeline– UberPool is a new service aimed at providing corporations carpooling services; working with Daimler; the company is experimenting with self-driving cars in San Francisco; and with partner Ehang, it is looking at drone taxis with vertical takeoff and landing capabilities. Where does food delivery fit into this future scape?
Unlike its closed-loop ride-hailing business, the food delivery business includes the reputation and brand of its restaurant partners. Once a meal leaves to the establishment for a customer’s home, the eatery loses control of its brand. For that reason, many restaurateurs maintain their own delivery drivers which give them some control of their name and reputation. As it scales, quality control for its food delivery arm will be something UberEats must address. Uber cannot afford more negative headlines such as the $20 million settlement ordered by the FTC for misleading drivers about potential earnings.
Nearly three years after the launch of UberEATS, food delivery is still a high-risk, high-reward proposition for Uber. Tempting data about the eating habits of millennials point to opportunity in the food delivery business. In order to be successful, Uber must also contend with an overcrowded market, plus the entry of Amazon which has more money, a superior infrastructure, a larger footprint and more experience in home delivery. Perhaps the wisest decision for Uber is to buy one of its competitors and marshal its resources into getting people—rather than food—from one place to another.