Uber’s food-delivery company is outgrowing the taxi business in some cities

 

Source: http://www.businessinsider.com/

Sam Shead

Dec. 26, 2017

 

Uber’s food-delivery business is called UberEats.

 

It was born in Los Angeles in 2013 and is on target to take $3 billion in sales, according to a recent report in the Financial Times.

 

Toussaint Wattinne, an UberEats general manager, told Business Insider how the subsidiary had become such a success so quickly.

 

Uber’s fast-growing food-delivery business is now bigger and more important than Uber’s conventional taxi business in numerous cities across the world.

 

Uber told Business Insider that UberEats was bigger than Uber’s transportation app in 19 European cities, and Toussaint Wattinne, a general manager for UberEats in London, described UberEats as among the world’s fastest-growing food-delivery services.

 

“When we attribute our growth and try to improve our service, the first thing that plays a big role is the restaurant selection we’re able to provide,” Wattinne said at Uber’s London office in the Aldgate neighborhood. The office has about 45 UberEats employees, a figure that is expected to grow by about 50% in 2018.

 

Fueled by the billions of dollars that Uber has raised from investors, UberEats operates in more than 30 countries. The UK is one of the largest geographical markets for UberEats, Wattinne said, adding that the service was live in 40 UK cities.

 

“We’ve partnered with over 8,000 restaurants now in the UK,” he said. “The most popular brands on the platform range from McDonald’s to Duck and Waffle to Pret and Prezzo. Being able to offer those restaurants is a key factor in people not only downloading the app and testing it for the first time but coming more often. As we grow this selection we see that people come to the app more often.”

 

Wattinne added: “The second thing we look at is how quick and how reliable we are when we deliver your food. And so typically that’s a strength of ours given our history of the logistics and the technology that we have in that regard. We are able to deliver – London is one of the fastest cities in the world – in under 25 minutes on most occasions.”

 

UberEats is bigger than Uber in Milan, Madrid, and Grenoble

 

UberEats now brings in more revenue than Uber’s ride-hailing business in cities like Milan, Madrid, and Grenoble, France – three European cities where the business has doubled in size since launch.

 

The Uber subsidiary – born three years ago in Los Angeles as UberFresh – is on track to do $3 billion in sales by the end of the year, according to a leaked document seen by the Financial Times. UberEats reportedly had a turnover of $700 million (£527 million) to $870 million (£656 million) for the second quarter of this year, while Uber’s total gross bookings during the period were $8.7 billion (£6.6 billion).

 

Wattinne refused to comment on the report or go into any detail about UberEats’ financials. “They’re healthy and they’re very promising,” he said. Wattinne also refused to disclose how many meals UberEats delivered a day and what the average size was for each order.

 

A rival, Deliveroo, has roughly 2,000 active couriers in the UK and takes a commission of about 30% on all orders made through its app. Some analysts, however, have questioned whether companies like UberEats and Deliveroo can be profitable when the margins are so low, but Wattinne disputed this.

 

“When we think of margin it has to be from the courier, the restaurant, and the platform standpoint, as that’s the only way we have a long-term business working,” he said. “However, what we are seeing is very strong potential and very strong numbers in a number of markets already, and the UK is definitely on a very healthy trajectory. But in short, the business model is very healthy. There is room for all these three players to make a reasonable and quite decent margins.”

 

Amid strong competition from companies like Amazon Restaurants and Deliveroo in the UK, UberEats is exploring how it can build customer loyalty. It hasn’t ruled out the idea of introducing a paid-for subscription plan that would most likely give customers the opportunity to get their food delivered free of charge and may also give them access to more restaurants or special menus. Deliveroo introduced a subscription plan of its own this year, which costs £7.99 a month in the UK.

 

UberEats has no plans to open Deliveroo-style kitchens

 

One area where UberEats has no plans to follow Deliveroo is setting up its own kitchens and leasing them out to busy restaurants that need more space to handle takeaway orders.

 

“We’re a tech company, and what we know how to do is provide the data and provide the technology and logistics infrastructure,” Wattinne said. “We do not have the ambition to run our own kitchen, to operate our own real estate, or to start producing our own food. That’s just not what we are best at.”

 

But Uber seems keen to distance its food-delivery business from its main business. Uber has had a tough year. There are the accusations of corporate sexism. The video of its founder angrily berating a driver. The revealing of its secret “Greyball” software designed to evade authorities. Its executives obtaining the medical records of a rape victim. Lawsuits around the world. The resignation of CEO Travis Kalanick. The company also lost its operating license in London, though it is appealing.

 

Unlike Uber’s ride-hailing business, UberEats has largely managed to stay out of the limelight since launching. The UberEats app, which uses the same payment card and profile information as the main Uber app, recently underwent a redesign, possibly in a bid to further distance itself from its naughty big brother.

 

“We want to make it clear and make it up front that it is a separate app, it’s a separate experience, it’s got its own advantages,” Wattinne said. “Yes, we’re on the same fundamentals of logistics, of efficiency, of speed of delivery. But we’re bringing you an entirely new experience.

 

“You are going to get to experience new food, you are going to get to experience the best food around you, and so we want that to be front and center. So that’s what this does by making ‘Eats’ a bit bigger and more front and center.

 

Prices could increase if UberEats is forced to classify couriers as workers

 

One potentially challenging issue is whether it will have to classify its couriers – who are paid about £4.50 for each delivery – as workers. Some couriers say they struggle to earn minimum wage on the UberEats app when it’s quiet.

 

Asked to speculate how this would affect UberEats, Wattinne said: “It would change the operating model, which would very likely increase the cost structure due to the lower flexibility. And that value is lost and therefore needs to be redistributed somewhere, so, most likely, it might be the end user. Putting numbers behind that would be very, very hard.”

 

In Wattinne’s view, the environment isn’t as toxic for those in the office as some media reports might lead people to believe.

 

“I don’t think we’ve got a workaholic culture at all,” he said. “When I started four years ago in Paris we were crunching like tons of hours and super-late nights. It was probably a little bit imbalanced. But I think it’s improved a lot. As a company we’ve done a lot of effort both globally and at the UK level, so what that means is there probably aren’t that many people in the office after 7:30 p.m., and those that are there are probably just there on a rare few occasions.”