Somewhere, in a town or city near you there is a poor little cyclist with a bag of food on their back frantically cycling to their next destination (and I’m probably about to overtake them). I think Deliveroo and Just Eat really are the big fish in the food delivery market and it seems as though Uber Eats is aiming to be the next big shark to destroy all competition.
Even with my car sitting in the drive, more often than not I will happily pay a small fee for my takeaway to be delivered via Just Eat just because it is 10x easier than getting up from the sofa and getting it myself. The problem for Uber Eats is that the food delivery in the UK in particular, really is a highly competitive industry. Which explains Uber Eats’ recent moves such as their decision to cut their fees from 35% to 30% for delivery and allowing restaurants the option of delivering their own food to the customers. This likens the business to companies such as Just Eat which already adopt this process. In regards to decreasing its fee, I personally think the move is well timed with Just Eat being heavily criticised in the media in recent weeks by Cat Rock.
I didn’t realise that the delivery fee paid to Uber Eats would be so high, just for delivering the goods. Which leads me to question whether the restaurants who pay the delivery fee such as 30% have to make up for the fee by cutting prices elsewhere, or whether this would balance out by simply being on the Uber Eats platform where the restaurant has access to more customers.
With the firm’s recent entry into the market, the company is looking at ways in which it can bring fresh ideas to differentiate themselves. For example, the firm has started working with restaurants to create ‘virtual restaurants’ around the world. This is where restaurants create delivery only menus which are exclusively designed for Uber Eats’ customers. I think this is a rather innovative idea as the company could play on its exclusivity to attract new customers. It could be said that Uber Eats is therefore clearly demonstrating the potential which the company has to maximise value for its shareholders as they expanded into the food market as well as bringing innovative concepts to the table.
It is also important to note that the company forecasts that it is on track to deliver $10 billion worth of food orders which would be $6 billion more than last year. Although the food delivery industry is clearly a lucrative industry surely concentrating on Uber’s taxi service which has faced countless attacks in the media would create more value for its shareholders? The business is burning through cash in order to fund its expansion into food delivery and is having to keep prices low (to match its competitors) which is contributing to Uber’s losses each year. This is a similar strategy which Uber has used in the past as it relies on its funds from its ‘angel’ investors to destroy competition. I think that this clearly shows that even though Uber is clearly hoping to make a profit sometime soon, they are clearly decreasing value for its shareholders. But when will Uber start to actually make money?
I think that rather than investing in an industry where it sees pound signs, it should concentrate on making a profit in the industry it decided to tackle in the first place. The company is well known for its ill treatment of its drivers with one media outlet describing Uber as treating its drivers as Victorian-style sweated labour (some drivers take home less than the minimum wage).
Personally, I believe the firm should create value in the business overall by treating their drivers better and with the benefits they deserve which could ensure the longevity of the company. This could be a strategy adopted by the business which would address reputational damage caused by the media backlash. Once Uber has achieved this, I think it would then make sense for Uber to expand into several markets relying on its brand name.
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