Companies

Uber on a drive to grab a bite of food-delivery pie

Priyanka Pani Varun Aggarwal Mumbai | Updated on January 11, 2018 Published on May 02, 2017

UberEATS is planning to tie up with delivery partners who have two-wheelers and haven’t had the opportunity to offer rides to people   -  REUTERS

UberEATS could lead to consolidation in the segment, say analysts

Cab aggregator Uber has launched its global product UberEATS, a separate on-demand food-delivery app, in India, as it tries to replicate its success with the taxi app to the vast food delivery-business in the country, which has so far seen several companies calling quits.

San Francisco-based UberEATS, founded in 2014 in Los Angeles, has rapidly expanded to 26 countries over the past 18 months as a standalone app. In India, the service has been launched in Mumbai to start with, but will soon be extended to other cities this year, the company said.

Too many cooks

Experts believe while Uber’s entry into the Indian food-delivery segment speaks volumes about the opportunity in this space — especially beyond the top seven cities that are going to witness a major explosion of internet-powered smartphones with cheaper data — it would also lead to a major consolidation as the space is already crowded with over two dozen big and small players.

Vidhya Shankar, Partner at Grant Thornton, said: “They (Uber) are coming to India because they see a lot of potential. It will be interesting to see how they are going to gain customer loyalty — whether it will be through great customer experience or discounts, we don’t know. I feel discounts don’t work in the food segment, but Uber is known to disrupt the market with that strategy.”

The food-delivery segment in India has been going through a challenging phase for the past 12-18 months with many well-funded start-ups, such as TinyOwl, iTiffin, Dazo and Bite Club, shutting shops and many others getting acqui-hired. Uber’s arch rival in India, Ola, had also entered the segment with Ola Café, but had to shut it down within a year due to logistical challenges.

According to various industry reports, including data from Tracxn, there were over 300 start-ups in the food space in 2015; this came down to less than 50 in 2016, and has further come down in 2017. Experts feel many of these companies lacked focus and did not bother about cost efficiencies, which backfired. Also, many of them were ahead of their time as infrastructure was poor and the market immature.

Besides cost efficiencies, skilled labour and unpredictable traffic in cities are major challenges on-demand food-delivery apps face, say experts.

A tough nut

Sharanya Ranga, Partner at legal advisory firm Advaya Legal, said: “The sector looks set to, perhaps, mature and grow with home-grown start-ups such as Zomato, Swiggy and FreshMenu, that may end up competing with global players with deep pockets.” Ranga further added that the food segment is tough to crack; it has a very high burn rate and global players are better placed when it comes to investing in innovations and technology to improve customer experience.

Internet giant Google is also testing the waters with the launch of its food-delivery app, Areo, last month in select areas in Bengaluru.

On whether Uber will be able to crack the segment and become the leader, Sanjay Mehta, an angel investor who has invested in food start-up Box8, said: “There is an opportunity to fix the broken supply chain in the food segment, but it’s all about cost-efficiencies management. If Uber can match that criteria, it can lead the business segment.”

“They should leverage the edge they have in proprietary software and use the learnings to solve India-specific problems,” he added.

Meanwhile, talking to BusinessLine, UberEATS India Head Bhavik Rathod said Uber has been studying the market for the past couple of months and has learnt there exists a huge unmet demand.

“In a survey we did, we realised that three out of five online consumers want to order food online. So there exists a large consumer base who wants their food delivered to their doorstep and that’s what we are trying to address with UberEATS,” he said.

He further added that in the last 3.5 years as a transport company, Uber has gathered enough data on traffic, congestion, logistical challenges and low-connectivity areas, and this will help the company run a successful food-delivery service in India.

UberEATS’ strategy is similar to its sister taxi app. The company is planning to tie up with delivery partners who have two-wheelers and haven’t had the opportunity to offer rides to people. These delivery partners can choose the hours they want to work and the app will provide step-by-step instructions on how to go for pick-ups and deliveries, Rathod added.

Uber is also looking at several customisations, wherein a vegetarian customer will only get to see vegetarian restaurants and cuisines on their app.

Published on May 02, 2017
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