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Uber should stop driving people & start driving goods?

by Nicole on May 13, 2020
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In a pre-pandemic world getting food delivered to your house was a luxury. Even as we return to a new normal, the amount of goods we’re getting delivered to our homes will be higher than before.

Uber has been making some serious moves to change their business model. Investing 170M into micro mobility services Lime and the rumor that they’ll be buying GrubHub fits the shift. During lockdown Uber’s ride sharing service dropped 70%. They could be reacting to try to diversify their business model and are getting serious about the business moving things.

Even as lockdowns begin to ease, shopping patterns won’t return to normal. It won’t be profitable for many restaurants to open at reduced capacities because we will still have social distancing. The current delivery infrastructure will continue to be under pressure for quite some time.

Don’t forget Uber is a logistics company.

Uber is a specialist in connecting a customer to a driver to pick something up and drop something off. The problem with making this shift is their fleet is passenger cars, not vans or refrigerated food delivery trucks. But, you can still deliver a lot of things using the point to point model, most groceries would be fine sitting in a car for 30min and not need refrigeration. Or stores can use reusable refrigeration boxes to ensure their frozen good weather the journey.

What is UberEats doing Globally?

Quartz pulled together a list of the places which UberEats has been making moves. Sadly, Germany is absent. The Financial Times reported, they struck a deal with French supermarket Carrefour, among other retailers. In India, where 1.3 billion people are on lockdown, Uber partnered with e-commerce company Flipkart, online grocer BigBasket, and chain Spencer’s Retail to deliver essential goods in Bangalore, Delhi, and Mumbai. UK convenience store chain Costcutter started delivering staples like milk and bread last fall.

In China, ride-hail leader Didi Chuxing launched a delivery service in 21 Chinese cities in mid-March after the coronavirus devastated demand for rides.

Uber is also awaiting regulatory approval of its October 2019 acquisition of Cornershop, an online grocery startup based in Santiago, Chile, that delivers from supermarkets and big-box stores like Walmart and Petco in Chile, Colombia, Peru, Mexico, and Canada.

The challenge of UberEats in Germany

Lieferando has a monopoly on food delivery in Germany. To make matters worse Uber is operating with regulatory handcuffs.

The handcuffs I’m referring to, is their fleet is primarily rental companies that provide drivers with cars. If Uber were to try to use their existing fleet to launch Uber Eats in Germany, they would have to renegotiate these contracts. The current set up wouldn’t work because it would be too expensive.

Factor in Lieferando primarily uses bicycles, whose cost is basically 0 compared to a car. Things aren’t looking good for Uber to take on this delivery giant.

Is Lieferando Next?

If rumors are true about Uber’s aquisition of GrubHub, is Lieferando Uber’s way into food delivery in Europe?

Lieferando is owned by The Dutch Takeaway Group, TakeAway.com, operates in Austria, Bulgaria, Germany, Luxembourg, Israel and Vietnam all countries that don’t have Uber Eats. They also have a presence in Belgium, Poland, France, Netherlands, Portugal, Romania, Switzerland which do compete with UberEats.

It makes sense for Uber to focus on their home market first. If the rumor is true that GrubHub is on Uber’s shopping list, Takeaway.com could be next. They’re not as big as GrubHub who did 1B in revenue last year while TakeAway.com rang in 415M with 115.5M in profit. Then again, after dropping 170M on Lime Uber might not have enough left to buy their way into the European food delivery market.

It’s clear that Uber is making fundamental moves to adapt it’s business model to the changing times. Uncertainty creates opportunity, GrubHub could be Uber striking while the iron is hot gaining a foothold to remain a legitimate threat. If GrubHub is reality, Lieferando could very well be next.

Will delivery be Uber’s lifeline?

At its core Uber is a logistics company, overhauling parts of the business to be more relevant to consumer demand should be second nature for this silicon valley native.

There is still a lot of uncertainty about the role of ride sharing in a post corona world. Delivering goods is a stable area in which to diversify. As of February, Uber had roughly 5 million drivers around the world, which is more than five times the combined global staff of delivery giants FedEx and UPS. If they figured out how to make their existing infrastructure work, expanding through buying food delivery companies would solidify their position in the market.

It won’t happen overnight but it makes sense that Uber is looking to gain a rapid foothold in the delivery of goods. For Germany, it could mean trading one monopoly for another.

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