Uber, there are problems with the Meal Delivery business:
- You are 3rd in market share with 20%.
- In Q3 2019 your losses grew 67% year over year to $316 million.
- Loyalty is dead.
Don’t worry, it’s not just you, let’s look at some recent industry headlines:
- Jun. 2019: Amazon Restaurants announced it was shutting its doors for good.
- Oct. 2019: Postmates delays IPO citing “choppy” markets.
- Nov. 2019: Grubhub CEO states customers are becoming more “promiscuous” and that we “don’t believe now, that a company can generate significant profits on just the logistics component of the business.” Grubhub also gave guidance indicating little to no growth in Q4.
With that being said, the meal delivery industry is growing and consumers increasingly prefer to choose their restaurants from a range of choices through delivery apps. That is great news for the industry but on the near horizon is a growing pressure to generate ACTUAL profits. The jury is still out whether this is possible as no one has put together a plan showing a clear path to profitability. It seems like absolute madness for Uber to want to be in this difficult business. How should they move forward? Let’s explore a few ideas on how this will play out.
- As margins continue to get squeezed it seems it is a race to the bottom on who can provide the meal delivery service for next to no cost. Is your plan to have your ride sharing business prop up your eats business long enough to wait the others out? This is feasible but would require a significant amount of patience from shareholders. With the recent negativity towards Silicon Valley i’m not sure how long this could last. We all know Amazon is executing this quite successfully having their marketplace prop up other ventures but they are a much different, and larger, beast.
- Others are exploring an option to pivot by changing the business model to drive revenue through advertising (think Yelp). If this is the case you are no longer leveraging logistics, your bread and butter. Ad sales is a different ball game which may be even more competitive!
- Sell/Write the business off and get back to rider growth, reducing costs and increasing margins. Focus on what you do best and what was once your slogan. Everyone’s private driver.
I personally believe #3 is the best path forward. Everyone wants a private driver and making the rider business profitable globally needs to be a priority. From the moment I downloaded your app and began riding with you in the summer of 2012 (see receipt below for what I believe was my 3rd trip) you have changed my life and millions of others. It is what you do best and it is what makes people feel connected to your service.
What do you think the best route is? E-mail or leave a comment below.