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Uber is shifting from moving people to delivering essentials

An Uber Eats food delivery courier wearing a protective face mask rides a bicycle as the spread of coronavirus disease (COVID-19) continues in Amsterdam, Netherlands
Reuters/ Eva Plevier
Essentials delivered.
  • Michelle Cheng
By Michelle Cheng

Reporter based in New York

Published This article is more than 2 years old.

Back in December, Uber CEO Dara Khosrowshahi was touting the broader potential of the company’s food-delivery model.

“We can extend that model to essentially every single local retailer, so that anything you want in New York City can be delivered to you, hopefully in under 30 minutes,” Khosrowshahi said in a speech at the Economic Club of New York. The future of Uber, Quartz concluded, is basically Amazon.

If that was the plan, Covid-19 has suddenly accelerated it. This week, Uber rolled out two new services to deliver essential goods during the pandemic, marking an aggressive foray into courier services. Building upon its recent expansion into grocery- and convenience-store delivery, Uber is now working with a range of businesses to deliver items from medication to pet supplies. In select cities, customers can log onto the app and send packages to friends and families, all in the same day.

A pilot with pharmacy startup Cabinet has Uber delivering over-the-counter drugs in New York City. In Portugal, the company is working with the national postal service to deliver packages. In Australia, Uber is delivering pet supplies from Petbarn, City Farmers, and the Greencross Vets clinics; and in South Africa, the company is working with the Bill and Melinda Gates Foundation and the Western Cape Department of Health to deliver medication to vulnerable residents.

Uber is looking into alternative revenue streams to offset the slump in its main business: ride-hailing. Uber’s US ride-sharing business was down 46% in March versus the same month last year, according to data from analytics firm SecondMeasures. In hard-hit markets such as Seattle, Uber saw booking declines in the range of 60% to 70%, Khosrowshahi told investors on a call on March 17.

In the race to diversify, the company’s Uber Eats business gave it a head start. On the investor call, Khosrowshahi said that in the US, Uber’s small-business sales team was signing up two and a half times as many restaurants versus the normal daily average. And earlier this month, Uber struck deals with French supermarket chain Carrefour as well as e-commerce giant Flipkart in India to deliver essential goods globally. (Uber’s main US rival, Lyft, is catching on, announcing last week a new service for delivering essential items in the US.)

Uber says the delivery business offers drivers new earning opportunities. As of February, Uber had roughly 5 million drivers around the world, which is more than five times the combined global staff of delivery giants Fedex and UPS, as Quartz’s Alison Griswold has noted

It’s unclear how much the new delivery efforts will help the ride-hailing giant weather the pandemic. Margins are spread thinner when there are more parties (i.e. restaurants or retailers) involved in each transaction.

Last week, the company withdrew its 2020 earnings guidance, saying it’s “impossible to predict with precision the pandemic’s cumulative impact on our future financial results. In February, the company had forecasted gross bookings of $75 billion to $80 billion, adjusted net revenue of $16 billion to $17 billion, and an adjusted Ebitda loss of $1.25 billion to $1.45 billion.

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