This week, Uber has acquired a majority stake in the South American grocery retailer start up, Cornershop. Herewith, Uber enters into the grocery delivery service platform, hence seeks to enlarge its business in food and freight delivery businesses. Cornershop is a South American retailer currently active in Mexico, Peru, Chile and Canada (Conger, 2019). The acquisition enables Uber to move Cornershop into new markets, such as the United States. This acquisition of Uber is an example of platform envelopment. Platform envelopment articulates the entry of a platform provider, Uber, into another platform market (Eisenmann, 2010). Herewith Uber combines its own functionality with the target’s functionality in a multi-platform bundle. In other words, this acquisition allows Uber to extend their ride-hailing service market into the online groceries delivery service market.
Uber’s CEO motivates the Cornershop acquisition, by expressing Uber’s reposition strategy – transforming from a ride hailing service to a daily operating system, by changing the way both people and food move across cities (Conger, 2019). Subsequently, Uber aims to partner with as many retailers as possible, in order to realize an on-demand grocery delivery system on its platform. Given the favorable achievements of Uber Eats, Uber’s CEO expects that the Cornershop acquisition will lead to a successful business expansion (McGee, 2019). Uber’s vision, expanding its business and becoming more than a mobility platform, is reinforced by the recent launch of the Uber Works application, which matches temporary employees to short jobs in security or hospitality.
From my perspective, this acquisition is a challenging move from Uber. Their growth has currently slowed down and given the fact that Uber Eats is consuming a lot of Uber’s cash while driving up costs in order to gain more market share. In addition, I think the fear of late deliveries might cause that the on-demand online grocery platform is not particularly favored by the market.
How do you foresee the future of Uber as an online on-demand grocery platform? Would you say the acquisition of this grocery delivery start up is a smart move after its disappointing IPO? Also, do you think the platform envelopment strategy of Uber presents an excellent opportunity for its path to profitability? Looking forward to reading your opinions!
Conger, K. (2019). Uber Acquires Cornershop, a Grocery Delivery Start-Up. Retrieved from: https://www.nytimes.com/2019/10/11/technology/uber-cornershop-grocery- delivery.htm
Eisenmann, T., Parker, G. & Van Alstyne, M. (2010). Platform Envelopment. Harvard Business School
McGee, P. (2019). Uber moves into online groceries with Cornershop deal. Retrieved from: https://www.ft.com/content/c57938d2-ebf2-11e9-a240-3b065ef5fc55
Interesting read. I can certainly imagine Uber’s grocery service could be succesful albeit not within the grocery delivery market as we know it. I can’t see it establishing a competitive advantage over supermarkets offering delivery or online supermarkets that are upcoming as they have their logistics already designed for this. However, I can imagine that it could work for incidental groceries rising from cravings or because you are cooking and realise you forgot an ingredient in the supermarkt. In those cases, depending on its delivery time of course, I think its current platform could be leveraged and on-demand grocery delivery could become a potential profitable market for them.