Six years ago, Uber officially started as a taxi service in San Francisco, currently it is used in more than 200 cities in dozens of countries by more than milions of people. For the first time, Uber has broken a product out into its own standalone app. A few months ago, the company launched its long-awaited UberEats app in the US. Now, it’s Amsterdam’s turn to prove its success. Because of the low switchting costs in the food delivery market, UberEats Amsterdam is determined to steal market share from the popular Thuisbezorgd.nl (owned by Takeaway.com) which currently serves 80% of the Dutch food delivery market. (fd.nl 2016) In order to do so, UberEats created some advantages compared to their competitors.
First, UberEats delivery service charges no minimum order amount and additional delivery fee. If people just want to order a simple ice cream or a sandwich from across town, then UberEats does not charge the customer anything extra. Another advantage UberEats is likely to profit from is its’ current database of customers who are already using the regular Uber app. These customers are only one ‘click’ away from UberEats and therefore even the most loyal Takeaway customers become a prey for UberEats. Another advantage UberEats is likely to accomplish is the amount of time needed for delivery. Because they are already familiar with efficient fast tracks and ways to move through the city, the delivery time can be reduced to a minimum amount of time.
However, apart from Takeaway.com, earlier this year two other food delivery services entered the market. Deliveroo and Foodora, two fast growing key players, should not be ignored. They might be the future of food delivery because of the strong partnership with different high-end restaurants and their focus on healthy and nutritious take-away food. However, because of this partnership with high-end restaurants they charge the customer 2,50 euro commission on top of their order, which is a 30% margin. It is up to Uber if they can realize the same service in a less expensive way.
Uber might be a latecomer in the race to deliver food, but by watching other companies’ stumbles, the UberEats team believes it’s learned what it takes to be the winner. What do you think?
Source:
https://fd.nl/ondernemen/1169051/ubereats-is-vastbesloten-de-bezorgmarkt-op-te-schudden
http://www.businessinsider.com/why-uber-launched-uber-eats-2016-3?international=true&r=US&IR=T
Thank you for the interesting read Alex!
I am really curious how UberEats will operate. It seems to me that it would be difficult to make profit when you are just delivering a single ice cream, without any additional delivery costs. Will the fees be hidden into the product prices? Would the prices be adapted if there is a lot of demand the same way Uber does with the rides? Very interesting to see how Uber will manage this. Apart from this I think it’s really smart to profit from a legacy system as stable as Uber’s. If there are a lot of drivers around that have no passengers, they might as well deliver your food. I saw on a video about the introduction of UberEats that the food is not delivered at your doorstep, but you have to walk to the car to get it. That might be a barrier for customers because they do get that service from their competitors.
Personally, I think that Foodory and Deliveroo are competitors that Thuisbezorgd must take into consideration. The problem with all three website that I experience is that the delivery costs are only added after placing the products in your basket. This way your food is always a bit too expensive if you ask me. Conversely I totally understand why the companies chose that strategy, you don’t want to scare customers off in the beginning of the ordering process.
All in all, I am looking forward to try UberEats. It is always nice to have some extra competition in the market, I hope it will lead to lower prices for us!
Source:
http://www.emerce.nl/nieuws/ubereats-komt-naar-nederland
Thank you for your interesting post Alex! First of all, this is one hell of a way to deliver food. Kudos for the ones at Uber that came up with the idea. As Florine mentioned earlier, it seems difficult to deliver food without charging delivery costs. Will costs arise when there is a large enough demand and supply platform? Do you know whether they will use a different business model than in the US or the UK for instance? I do not think that Uber is late to the race, it depends on the strategy it incorporates. They could go for the differentiated segment of this market and form partnerships with niche food suppliers. This in combination with the fast delivery time is a match made in heaven! Hope this works out in Amsterdam for it to be introduced in Rotterdam.
Good article! As you mention in the blog post, Uber is planning to ask no delivery costs for their service. Probably to capture a lot of marketshare in the delivery market. When reasoning on the long-term, when Uber might have captured a lot of marketshare, it might be the question whether this service is going be profitable for Uber. As restaurants also have their own margins it becomes hard to make a profit on such a service when Uber also has a lot of costs related to delivery. For example, the Uber taxi service is a product they created themselves and established their own margins. That is why I think that, once Uber claimed some marketshare related to their delivery service they cannot keep their free delivery service.
October 9, 2016 at 10:52 pm
Thank you for the interesting read Alex!
I am really curious how UberEats will operate. It seems to me that it would be difficult to make profit when you are just delivering a single ice cream, without any additional delivery costs. Will the fees be hidden into the product prices? Would the prices be adapted if there is a lot of demand the same way Uber does with the rides? Very interesting to see how Uber will manage this. Apart from this I think it’s really smart to profit from a legacy system as stable as Uber’s. If there are a lot of drivers around that have no passengers, they might as well deliver your food. I saw on a video about the introduction of UberEats that the food is not delivered at your doorstep, but you have to walk to the car to get it. That might be a barrier for customers because they do get that service from their competitors.
Personally, I think that Foodory and Deliveroo are competitors that Thuisbezorgd must take into consideration. The problem with all three website that I experience is that the delivery costs are only added after placing the products in your basket. This way your food is always a bit too expensive if you ask me. Conversely I totally understand why the companies chose that strategy, you don’t want to scare customers off in the beginning of the ordering process.
All in all, I am looking forward to try UberEats. It is always nice to have some extra competition in the market, I hope it will lead to lower prices for us!
Source:
http://www.emerce.nl/nieuws/ubereats-komt-naar-nederland
(I forgot to login before posting this comment!)
Nice read, Alex.
I agree; both Uber and UberEats probably complement each other. And I also agree with you that the sound of free delivery and no minimum order sounds great. I really do. However, I am a little sceptical.
Firstly, no delivery costs and no minimum order are probably temporary offers; to cite “tijdelijk geen bezorgkosten of minimale besteding” (UberEATS launch email). Its clever and probably they will gain some market share with this aggressive campaign. But I am curious until when they keep this offer; without doubt, they have deep pockets and will do anything in their power to try to make this product a succes.
Because, secondly, Uber had a number of partnerships fall through in recent months. They were talking with Starbucks to deliver coffee, and with food ordering app Eat24 (From Yelp). No agreements were ever made.
Thirdly, especially in Amsterdam and other dense cities, I believe that delivering food with cars brings an extra challenge, compared to ‘just’ transferring customers from A to B. With the food delivery service, chauffeurs do actually have to briefly park, get out of their car, get the food, drive to the customer and park often illegally waiting for the customer to get their food at their doorstep. In contrast, you mentioned Thuisbezorgd that deliver by bike, and Foodora and Deliveroo who do the delivery on a bicycle. I can imagine that in a busy city as Amsterdam, delivery per bike or bicycle is faster and more flexible/convenient for the driver (regarding picking up, traffic, and delivery at the door).
I believe that for many the current “no delivery costs and minimum order value” offer outweighs the possible longer waiting times (compared to Foodora and Deliveroo etc). I am really curious how this product will roll out in Amsterdam and other dense cities.