Earlier this week, Uber acquired Postmates, the number four player in the food delivery space, for $2.65 billion. It was a clear statement that Uber is no longer just a rides company, but a home delivery company. Now, Uber is rolling out a new design in its main app that gives its Uber Eats business equal real estate with rides on the app’s home screen. This shift in Uber’s business began last year, but was dramatically accelerated by the coronavirus pandemic. As people began sheltering in place, the company’s rides business fell by 80% in April, and Uber Eats, the restaurant food delivery business, suddenly became its most popular product. Now, Uber Eats’s success has established it as a model from which Uber can design other services that rely on its advanced logistics platform. “We’ve really doubled down on our Eats business, extending not just in food, but from food into adjacent categories like delivery, like grocery, and essentials,” says Uber CEO Dara Khosrowshahi in an exclusive interview. “There we’re seeing a pretty extraordinary acceleration, which is good for the business, but it’s also a really important lifeline for the restaurants and other local stores in every city, that frankly our customers are interested in keeping alive in an unbelievably difficult situation [with] COVID.” Uber’s new focus on Eats may help it survive the pandemic, in which the company has already shed a quarter of its 26,000-odd person global workforce in two rounds of layoffs. But it’s unclear whether Eats and other new Uber services can speed the company’s path toward profitability. Uber has lost a lot of money since its ill-fated IPO last year: It reported a $8.5 billion loss for full-year 2019. It reported a net loss of $2.9 billion in the first quarter of 2020, its biggest loss in three quarters. Before the pandemic hit, Uber said it expected to hit profitability in the last quarter of 2020, but was forced to withdraw that guidance in April, saying the coronavirus had made its 2020 financial performance “impossible to predict.” [Photos: courtesy of Uber] Even amid growing losses, Uber has placed a big bet on Postmates as central to the future of its business. With the addition of Postmates, Uber Eats will control 37% of the food delivery service market but will still trail the market leader, Doordash, which owns 45%, according to Edison Trends. But Uber didn’t buy Postmates just to beef up its food delivery market share, as some have suggested. Postmates’s technology and people will very likely be used to deliver home products such as groceries, pharmacy products, home goods, hardware, and packages (the Postmates brand will live on, at least for now). Khosrowshahi suggested as much in the Postmates deal announcement Monday: “Uber and Postmates have long shared a belief that platforms like ours can power much more than just food delivery,” he stated. Dara Khosrowshahi [Photo: courtesy of Uber] This flexibility is key to understanding how the coronavirus has expedited Uber’s transformation from a ridesharing company to a logistics platform that can deliver people, food, and things. Read More …
