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

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