UberEats was not the first food delivery service, in fact, the concept of takeaway has been prevalent for decades. Nevertheless, in today’s modern age when we think of ordering food, we now think of UberEats. So how has UberEats grown exactly to become such a chief player in this landscape in which it has forever changed the way we eat?
What is UberEats?
UberEats is a leading online food delivery platform that partners with businesses around the world by acting as a mediator service that successfully connects consumers and restaurants 24/7. In fact, its revenue grew by 149% to $1.5 billion in 2018 and is set to become a $200B global empire by 2025 (Singh 2019). The app’s global success can be credited to its three key features of convenience, quality and choice that made getting food delivered just as easy as requesting a cab (UberEats, 2019). Furthermore, its user-friendly online formatting and evolved three-sided business model of sharing economy has revolutionized the online food order and deliver industry and fostered great social change. Also, UberEats operates with an automated payment system that directly charges the user’s previously provided credit card details. This system allows for greater accessibility as users don’t have to carry cash or even their credit card to be able to use the service.
The video below provides further insight into what UberEats is and how it operates:
UberEats was launched in 2014 by Garret Camp and Travis Kalanick who also founded, in 2009 UberEats’ parent company, Uber, a ride-hailing service. Camp and Kalanick first introduced the food delivery service in Santa Monica, California as an expansion of Uber and under the name of UberFresh. Throughout the next couple of years, the platform has actively worked to develop and advance it. The most notable changes perhaps are the rebranding of UberFresh to UberEats in 2015 and the separation of ordering software from the Uber app in 2016, remodelling the platform as an independent, food delivery app.
The separation of Uber and UberEats proved to be crucial as the ambitions of UberEats became much greater than the transportation app built for Uber (Carson, 2016). UberEats’ Product Manager, Chetan Narain told Business Insider that “food was much more emotional and people were willing to spend time scrolling through photos and menus to decide what they wanted” (as stated in Carson, 2016). This is very different from how consumers tend to use the Uber app, which is much more transactional and thus holds less emotional attachment. Other key developments of UberEats include expanding partnership with more restaurants around the globe, cutting delivery time to be under 10 minutes on average and lengthening its service from just lunch-time menu to become a 24/7, breakfast, lunch and dinner, operation (UberEats, 2019). This remodelling has allowed the service to enter food markets all over the world and expand operations significantly.
UberEats operates on a three-sided business model that operates as a sharing economy. This essentially involves the customer, provider, and driver who are all connected and mediated via the UberEats platform. The concept of sharing economy is relatively new, yet growing rapidly, especially with the rise of businesses like Uber, UberEats and Airbnb. Essentially, it is an economic model that involves short-term, peer-to-peer or business-to-business transactions that share the use of assets or services, or that facilitate some form of collaboration (Addady, 2016). How UberEats and its partners generate revenue is through a simple chain: Restaurants provide commission on the orders taken via UberEats; Customers pay the small, yet varying, delivery charges, as well as the cancellation fee, is required; And drivers earn money by completing their deliveries efficiently. Overall, UberEats middle-man position functions well as a facilitator of restaurants, through its inclusion of a diverse range of cuisines. For drivers, particularly those unemployed, UberEats occupying them and allows them to work at their chosen/available capacity; For consumers their expressed demands and cravings are satisfied at an efficient rate.
The video below explains in greater detail how UberEats generates its revenue through its three-sided business model:
The platform also generates a large amount of its revenue from other channels, such as online advertisements, promotions and campaigns that are often in collaboration with renowned restaurants and celebrities. For example, UberEats Australia successful campaign has attracted Australians to its service through its ‘Tonight, I’ll be Eating…’ campaign launched in 2017 that features a wide range of Australian celebrities voicing their favourite dish to order on the app and why. The campaign is also tailored to each capital city’s best local restaurant options, to inspire more Australians to actively engage with the platform. Steve Brennen, Marketing Director for Uber Australia, also states that they wanted to “put some real local favourites front and centre…and celebrate this with a fun and humorous campaign featuring some well-loved faces” (Cuofano, 2019).
A snippet of the ‘Tonight I’ll be Eating…’ campaign can be viewed below:
The online food delivery giant has reached its leading position through the indispensable value provided to its consumers. These include various features that give the platform a significant advantage over competitors as they address all the critical factors of food delivery. These assets include the app’s offer of free delivery when ordering in a certain area, from a certain restaurant, at a certain time. Also, UberEats doesn’t have a minimum order concept integrated into its services, thus users can order as much or as little as they want with no added costs. Furthermore, the standard delivery fee ensures that all orders, regardless of its size, is completed up to the company’s high standard every time. UberEats’ existing customer base is arguably the most valuable asset.
Since UberEats branched from Uber, the ridesharing service shares its already millions of global active customers, thus UberEats can easily match increasing demand and draw upon this existing customer base. Another resource of Uber that UberEats effectively utilizes is its established transportation and system of drivers. Consequently, there was no need for UberEats to build such capacity from scratch, in fact, UberEats helped in increasing Uber’s service as the same driver can easily switch between services as they operate on the same unique system.
The world-class algorithm already developed for Uber’s ride-hailing was leveraged and re-modelled to suit the specifics of online food order and delivery. This algorithm is renowned for its neat organisation of prime factors, such as order management, order allocation and order dispatch (Carson, 2016). UberEats’ utilization of such allows them to organize logistics of available cars, listed restaurants and awaiting customers, much more efficiently, both costly and timely. The strong global presence of Uber ultimately established the strongest platform for which UberEats could leverage from. Despite facing lots of local competitors, such as Deliveroo and Menu Log in Australia, UberEats is one of the only online food delivery platforms that operate globally, thus generating more appeal as users, wherever they are can rely on the application for its service.
The success of UberEats’ business model doesn’t stem purely from its value offered to users, but also from the various value propositions offered to its partners and other intertwined actors (Onassis, 2017). As UberEats is the top food delivery app worldwide (Singh, 2019), restaurants can reach a greater and global customer base and utilise the platform’s ever-evolving and innovative technology. The effective and accurate data collection provides partnered business with valuable insights regarding relevant consumer behaviour in which restaurants can actively utilise and better meet consumer needs. For example, it can inform restaurants of their most highly reviewed dishes or when their quality is dropping (Onassis, 2017).
Furthermore, as UberEats has the largest network of partner-drivers, orders can be delivered efficiently, especially with the help of Uber’s custom GPS technology. This benefits both restaurants, drivers and consumers as more and more deliveries are completed quicker. Also, UberEats’ 24hr, 7 days a week operation provides the opportunity for restaurants to trade at all hours in which they can become flexible when meeting consumer demands.
UberEats’ Strong Ecosystem
Significant advances in technology and society’s increasing globalisation have changed the idea and operations of a business ecosystem. Hayes (2019) defines a business ecosystem as a network of organisations that includes all impacting parties such as distributors, suppliers, customers, competitors and government agencies. Hayes continues explaining that these parties are all “involved in the delivery of a specific product or service through both competition and cooperation” (Hayes, 2019). As each entity are so closely intertwined, there is a “constantly evolving relationship in which each entity must be flexible and adaptable to survive” (Hayes, 2019). Furthermore, these ecosystems actively work to create strong barriers, inhibiting the admittance of new competition into the market.
UberEats ecosystem made up of its owners, partners, customers, competitors, service providers and regulators, is transformative and innovative. The platform’s leading position results in great, direct competition of other online food delivery services, such as Deliveroo and Grubhub. Indirectly, UberEats is competing with restaurants that don’t partner with them as well as the still prevalent consumer habit of going out and sitting down for a meal.
A summary of UberEats ecosystem is shown below:
The concept of disruptive innovation perfectly encapsulates UberEats and its impact on the food ordering and delivering industry. This concept was first introduced by C. Christensen in 1997 and refers to the use of a technology that significantly changes how a market or industry functions and was first (Chappelow, 2019). The meaningful and loyal partnership developed with consumers and drivers, as aided by Uber’s already established based, has attracted invaluable partnerships with restaurants. The exclusivity of restaurants available to order on UberEats adds to the list of the unique and leading services provided. Furthermore, as the process of ordering and receiving food has evolved to become efficient and accessible 24/7 as well as includes the widest range of cuisines to select from. This has changed the perception of take-away food from associations of unhealthy, fast-food to be endless choices available on the app that fulfil every craving.
UberEats’ success is largely credited to its shared economy model as it allows for flexibility in its operations as consumer eating habits are constantly changing, in fact, there is a great shift in societal values towards convenience over price. This embodies the operation of UberEats, as its services work to provide an extensive range of food, at any time with an ensured efficient delivery time. Thus, app-based food delivery services are advancing significantly and disrupting the restaurant industry, enforcing innovation and adaption for businesses to survive.
These delivery apps have contributed significantly to the development of delivery processes, as demonstrated through increased sales that drive restaurant sales. Another key development is in the efficiency of ordering as customer orders via the app are automatically transferred to the restaurant’s system, thus cutting out a whole step of traditional ordering systems, eg. using the phone or manually entering data. UberEats’ algorithm personalizes data for customers, restaurants and drivers, benefiting each by analysing past behaviour and trends to offer the best option or advice. This strengthens both customer and partner loyalty, which supports the whole UberEats ecosystem.
Critics have analysed the possible future trends of foodservice and delivery, introducing concepts such as ‘Dark Kitchens’ (Isaac & Yaffe-Bellany, 2019). Dark Kitchens is simply the use of a delivery platform, such as UberEats, to identify the top-selling meals, from the top-rated restaurants and then recipes are duplicated and prepared in a kitchen that is in a cheap and delivery-optimal location, thus offering cheaper versions of their favourites to be ordered directly from these ‘dark kitchens’. These kitchens build customer satisfaction as they provide data-driven menu choices that groups several cuisines into one, strategically located place.
Without a doubt, UberEats has revolutionized the idea of take-away through its world-class leading algorithm and services that benefit all involved actors. UberEats success was aided considerably by its parent company, Uber as the resources provided gave a significant competitive edge in the market. The flexibility of its three-sided and shared economy business model has strengthened its position amongst competitors as it satisfies a diverse and extensive range of consumer needs.
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