There’s one less seat at the meal delivery vendor table. This is because Uber plans to buy Postmates to go along with its own Uber Eats business. The restaurant meal delivery industry has been a cash burner for vendors since there are too many players trying to execute an expensive business model that involves order technology integration with restaurants as well as a costly last mile delivery network.
It’s also no secret that restaurants are not happy with the vendor delivery fees that eat into already thin operating margins. The delivery companies have been fighting for market share by offering consumers discounts. Meanwhile, Grubhub was recently bought by Dutch firm Just Eat Takeaway.com for a tasty $7 billion. So now it’s a 3-way race in the U.S. market among big players DoorDash, Uber Eats, and Grubhub. The new Covid-induced stay-at-home lifestyle has driven up meal delivery so that’s good for the delivery companies, but restaurants will still be challenged to make money using third party delivery vendors.
The following Wall St. Journal article reports more on the topic:
Uber Technologies Inc. said its $2.65 billion deal for rival Postmates Inc. will help it better compete in restaurant delivery and the market for delivering groceries and other staples, a signal of the ride-hailing company’s ambitions to provide a wider range of items to consumer doorsteps.
San Francisco-based Uber said it was attracted to Postmates both for its large delivery presence in U.S. cities in the South and West, and for its efficiency and reach into delivering groceries and consumer staples. But Uber executives said the deal also presents an opportunity to bring more customers to its ride-share business, which has been rocked as the coronavirus pandemic has hurt demand across its markets for months.
The pandemic, though, has provided an opportunity for Uber and its rivals in food delivery. Grubhub’s orders grew 28% in April and May compared with the previous year as diners turned more to delivery during the pandemic, according to an investor presentation.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group