Uber’s sales are slowing down as the company is spending more in its food delivery business. The quarterly loss surged to $1.1B. The revenue in the third quarter growth of Uber rose 38 percent from the previous year. But it is almost half of what the growth rate was six months back, though there is a 5% increase from the previous quarter.
Uber has withdrawn from the foreign markets where it faced heavy losses. It has already withdrawn it services from Austin, Denmark, Budapest, and Bulgaria. Expensive ventures like the self-driving trucks also were responsible for the losses and Uber has shuttered them too. Uber has been investing a lot towards becoming a major player in autonomous cars. It has also agreed to buy vehicles from Volvo to start off self-driving taxis. The series of missteps and scandals over executive misconduct could also possibly be one of the reasons behind the sales getting affected.
At the Code Conference, Dara Khosrowshahi said, “We have to compete against the economy for drivers.”
He further added, “We have three million driver partners around the world, and there are some that are disgruntled. All of them, I think, wanna make more money, but fundamentally, they get to be their own bosses, and they get to work on their own terms. In general, I think driver earnings are going up, and we have an increased time and distance in certain places.”
Uber Eats’ healthy appetite
Despite this quarter’s massive losses, the company seems to be quite excited about its food delivery business, Uber Eats. Uber Eats is turning out to be the fastest-growing meal delivery service in the U.S. According to data from Second Measure, in nine out of the 22 most populous U.S. cities, people are now spending more on Uber Eats than on any other food delivery services.
CEO, Dara Khosrowshahi said onstage at Code Conference at Rancho Palos Verdes, California, “Eats is an exploding business in a good way. It’s now at a $6 billion bookings run rate, growing over 200 percent. Eats is only in 250 cities on a global basis and it’s got 350 cities to go, to catch up to our rides business.”
Uber Eats was launched in several cities last year. It is now profitable in 27 of 108 cities worldwide. Uber Eats dominated in three Texas cities, six months ago, namely, Houston, Austin, and Dallas. It has beaten out DoorDash in Fort Worth, GrubHub in El Paso, and Postmates in Phoenix. It has also beaten out Amazon Restaurants in Amazon’s home city of Seattle!
The food delivery companies usually fall under one of the two categories. The first one is aggregators, which collect restaurant options and menus through an online portal for customers. They usually require restaurants to handle delivery themselves. An example of this category is GrubHub.
The second one is full delivery services, which take orders through an online portal and also, deliver the food for restaurants. The restaurants have to fork out a fixed percentage of an order as a fee, while also, customers pay a fee to the delivery service. Postmates and UberEats are examples of this category.
Uber Eats have an advantage over GrubHub as it’s just not an aggregator. It also has the benefit of existing driver networks around the country from its parent company Uber, unlike Postmates.
There is some uncertainty about the profitability of Uber’s core ride-hailing business as food is boosting Uber’s gross revenue but it’s shrinking the company’s margins. Only time will tell if Uber Eats can really make a difference to the company’s economy!
Read more about this news on the official website of Bloomberg.