Uber’s success in food delivery sector is a “wonderful surprise,” CEO says

As Uber’s new CEO, Dara Khosrowshahi looks to guide the company back to stability after a flurry of corporate upheaval and operational stumbling blocks. Khosrowshahi says the success of the company’s food delivery arm, UberEats, has been a “wonderful surprise,” The New York Times reports.

According to the Times, Uber’s aid UberEats generates more revenue than its ride-hailing operations in certain markets, including Tokyo; Taipei, Taiwan; and Seoul, South Korea. Average daily deliveries grew by a factor of 24 from March 2016 to March 2017.

Uber’s first forays into the food delivery market came in 2014, when UberEats’ predecessor, UberFresh, launched in Los Angeles. Food quality issues born as a result of the way drivers transported the food, along with the limited selection of available restaurants, checked the success of that operation.

In December 2015, UberEverything, the division that handles food delivery and a number of other projects for the company, launched the UberEats app in Toronto. As the service succeeded, it expanded its sales force, partnered with more restaurants and made inroads in additional locations.

Today, UberEats is available in 120 markets. Uber declined to disclose the amount of revenue the service has generated, but the Times says top executives at the company are excited about growth potential in the food delivery sphere.

Several other companies beat Uber to that market, which is worth $100 billion today. Postmates, a delivery service that launched in 2011, employs more than 100,000 drivers, performs 2.5 million deliveries every month, and has raised over $250 million, according to the Times.

GrubHub, another giant in the food delivery sector, has been operational for 13 years, and reported over $3 billion in “gross food sales” in 2016, the Times says. The company serves 8.17 million customers.

GrubHub’s founder and CEO, Matt Maloney, said Uber has spread itself too thin to pose any real threat to his and other established companies within the food delivery sector.

“Uber has built a great company focused on black car service and human transportation, but succeeding in food delivery is a different game,” Maloney said in a statement, per the Times. “We are known for one thing only — takeout ordering — and we have engineered our entire product around this purpose.”

But Uber believes its experience in ride-hailing can translate into a competitive advantage over single-focus companies like GrubHub.

Uber already employs about two million drivers worldwide, the Times says. As UberEats continues to grow, that network will grow as well. As the Times notes, the potential labor pool from which UberEats can pull its employees is wider than that which is available to the company’s ride-hailing business.

While Uber vehicles that carry passengers must meet a laundry list of regulative criteria, guidelines governing the transport of food are more relaxed. In fact, UberEats delivery people are not required to own a car. Many make their deliveries on bikes via a service called UberBike.

Moreover, Uber has spent the last decade or so identifying the most efficient routes from point A to point B in cities all around the world. The company believes it can harness that knowledge to shorten delivery times.

“What Uber has are the last-mile logistics, and that’s crucial,” James Cakmak, an analyst at the equity research firm Monness, Crespi, Hardt & Company who follows the food delivery space, said per the Times.

UberEats has turned to partnerships to further expand its network of available restaurants. In May, the company inked a deal that allowed it to deliver food from over 1,000 McDonald’s locations, the Times says. Lucy Brady, a McDonald’s executive, said in July that the fast-food chain was pleased with the fruits of the alliance so far.

The already-crowded food delivery sector is preparing for the arrival of Amazon, which acquired Whole Foods earlier this year. Many of Whole Foods’ 460 locations already offer a cafeteria-like buffet stocked with freshly prepared food, and Amazon could hire drivers to deliver that food, the Times points out.

Cakmak adds that Amazon, whose business model is based largely on offering the lowest possible prices, has the resources to match or undercut the prices of competitors in the food delivery sphere.

“The number-one concern for all of these delivery companies is Amazon,” he said, per the Times.  “How could Amazon use its network to crush our business? They have the logistical network and the balance sheet to be able to compete on the price side with all of these players.”

Khosrowshahi plans to take Uber public within the next 18 to 36 months.

Featured image via Flickr/Guillermo Fernandes

Lyft Partners With Taco Bell to Allow Passengers to Order Food With the Push of a Button

If you realize you’re hungry in the middle of a Lyft ride, can you ask your driver to go through a drive-thru? The quandary has plagued hungry passengers ever since the ride-hailing company was established in 2012.

But now Taco Bell has partnered with Lyft to create a feature that allows Lyft customers to request a stop at the late night fast food joint with the push of a button, Kate Taylor of Business Insider reports. Taco Mode, as the beta service is called, will be available on a trial basis in Orange County, CA from July 27-29, and again between August 3rd and 5th. It is slated to go nationwide in 2018.

“We realized that for every person who has asked their Lyft driver to make a pit stop at Taco Bell — and we’ve seen many — there are likely those who weren’t sure if this was possible,” Taco Bell CMO Marisa Thalberg said in a statement. “With the advent of this fantastic partnership with Lyft, we will erase any lingering uncertainty and celebrate the ability to ‘ride-thru’ in Taco Mode.”

Taco Mode will give customers access to a “custom, in-car” menu, and will include a “taco themed car” (whatever that means). Free Doritos Locos tacos will be on the table for Taco Mode users as well.

The service will be available between 9 p.m and 2 a.m., making it the perfect option for those who, whether due to fatigue, intoxication, or some combination of the two, are unable or unwilling to pursue more complicated avenues of obtaining food. Taco Bell serves almost 15 percent of its customers between 10 p.m. and 4 a.m., according to Taylor, and Taco Mode will give the fast food chain another means of reaching the key late-night eater demographic.

Uber, arguably Lyft’s chief competitor in the ride-hailing space, launched its UberEats service, which allows customers to get food delivered via Uber, in August 2014. Today, it is available in 50 cities across North America, as well as in select locales in South America, Europe, Australia, Asia, and Africa.

“The UberEATS app,” Uber’s website says, “connects you with a broad range of local restaurants and food, so you can order from the full menus of your local favorites whenever you want.” Once a customer orders, an Uber driver brings the food directly to the customer’s address, typically within 35 minutes, the site claims.

Lyft is entering the food delivery space from a different angle, and the niche is in demand amongst restaurants as well as customers.

Taco Bell CEO Brian Niccol told Business Insider in April that taco delivery was the “number one request” amongst Taco Bell customers. The restaurant chain has made various efforts to fulfill that demand, including partnering with DoorDash, a service similar to UberEats, but in all cases, Niccol said, “the third party folks, the aggregators — they’re just not fast enough.” Presumably, Taco Bell declined to partner with UberEats because it, too, was not fast enough.

With Lyft’s Taco Mode, though, the food does not have to travel far before it reaches the customer’s mouth: at the most, the driver has to hand it to his fare in the back seat, who may have to wait a minute before the food is cool enough to eat.

In the food service space, Lyft is taking steps to differentiate itself from Uber. The competition increases consumers’ options: if a person gets hungry while lounging around at home watching a movie, he/she can order from UberEats. If someone wants to eat a hot meal in the car on the way home from the bar, he/she can use Lyft’s Taco Mode.

The only real downside is that Lyft drivers everywhere will end up with sauce on their seats and crumbs on their floorboards.

Amazon Looks For Shop Space in London

Amazon has been scouting London for prime central locations that could be used as Amazon Go convenience stores, according to the Sunday Times. The tech firm registered a UK trademark for the Amazon Go stores in December, suggesting it is advancing plans to bring futuristic convenience stores to Britain.

The company first revealed its intention to open grocery stores last December in a video for the service. It is currently testing its first Amazon Go with a trial store in Seattle.

The Seattle store is not yet open to the public and is only used by employees.  The store is expected to open its doors to the public within the next few months. Devoid of tills and human employees, it uses sensors to track customers and record the items taken off the shelves. When the customer leaves the store, the bill is automatically charged to their Amazon account.

This is not the only brick-and-mortar structure Amazon has brought into local competition. The company first opened a physical bookstore in Seattle in 2015. Shops continued to pop up in San Diego and Portland. Another bookstore is slated to launch in New York City this spring.

The November 2015 of Amazon’s flagship bookstore alarmed many booksellers. James Daunt, managing director of Waterstones said he hoped the tech giant’s venture would “fall flat on its face.” Amazon Books’ website lists several more stores to come in different cities, including one in Chicago, Illinois, two in Massachusetts, and one in New Jersey.

Amazon Go’s physical presence in London will most likely alarm the big four supermarkets. Tesco and Sainsbury have already had their profit margins crushed by German discount chains Aldi and Lidl. Amazon’s June launch of fresh food deliveries in parts of London further escalated the assault on Britain’s supermarkets.

Groupon Acquires OrderUp

Groupon has acquired OrderUp, a food delivery service that caters to over 40 cities and 25 states in the United States.

The price of the deal was disclosed, but the six-year-old food service company, which claims to have served over 10 million people, couldn’t have come with a cheap price tag.

Groupon saw a slow decline in the past few years as the “daily deal” concept, making the company thrive, got some competition.

CEO of Groupon Eric Lefkofsky said,

“The potential in delivery and takeout is apparent –especially with the growth of mobile – and OrderUp’s operational ability, coupled with Groupon’s engaged customer and merchant base, bring tremendous scale to the space.”

The company has long since been established in the coupon giving business, ideal for large groups of people who are on a budget.

What makes OrderUp different from its competitors such as GrubHub and Eat 24 Hours is that it has its own delivery system.

OrderUp allows for restaurants who don’t normally deliver to have drivers do it for them; this is especially the case for places that don’t have enough staff or the capability to set it up. Without this feature, restaurants limit themselves to only certain cliental and the money that’s to be made off of delivery costs.

Owner of Di Pasquale’s Marketplace Joe Di Pasquale said,

“When I heard about OrderUp, I was very hesitant. Customers asked us all the time about delivery. However we didn’t have the staff or know-how to organize our own delivery service. OrderUp is the perfect fit for Di Pasquale’s. It’s the easiest way to start a delivery service. Honestly, I should have done it earlier.”

OrderUp uses contracted drivers who can either accept or deny a potential delivery based on their own hours.

In the announcement, OrderUp wrote that Orlando and Cincinnati will be two of the newest cities to have access to the delivery service.

Revolution Ventures managing partner Tige Savage, who is an investor in OrderUp said,

“Consumers love the convenience of ordering online. Yet, outside the major metropolitan markets, its shockingly difficult to find online food delivery options.”

OrderUp sees this acquisition as a great opportunity for the company to expand its outreach.

CEO of OrderUp Christ Jeffery said,

“Groupon’s reach and ability to connect supply and demand at scale make it the perfect destination for us to grow even faster and expand in our targeted local markets. We look forward to bringing the thousands of great restaurants that we feature to hungry Groupon customers across the country.”

Despite the acquisition, OrderUp will still function as a standalone company and will keep their headquarters which are set in Baltimore. This will all be done while still promoting themselves through Groupon’s merchant pages, called Pages, which were created in 2014.

In a press release, it’s described as giving users access to

“ratings, tips, money-saving opportunities and other useful information for local businesses in the United States.”

The feature is similar to that of Yelp and will be a great feature to help promote OrderUp.

This is not the first combination between food delivery services. GrubHub and Seamless are two takeout food establishments that primarily generate business through computer and phone.

The thing that makes this merging of Groupon and OrderUp so different is that they are each bringing something to the table, with Groupon having a background in a variety of deals and OrderUp’s delivery feature.

Image: Via OrderUp