Uber has been testing its food delivery service, UberEATS, in a few markets. Now, they’re gearing up to launch it in San Francisco, the current home of all sorts of food delivery startups. It is the land of “convenience tech” — and, as some would argue, too many of them are running around.
In the time that Uber started exploding around the world and this week, when UberEATS is set to launch, a whole range of food-related startups have sprung up. Food, like transport, presents the ultimate “daily active use” case, and founders (and investors) have been anything but shy in pursuing those channels.
Over the past few years, one of the biggest debates in the on-demand sector centered around centralized or federated apps — would consumers prefer to (a) use single-purpose and single-branded apps to execute certain functions; or would they prefer to (b) have everything ordered and fulfilled through one app that ruled them all?
An informed rationalist could argue (a) or (b) and make sense. The problem with (a), however, is each company then would have to fight for distribution and fight a CAC war to keep going; the problem with (b) is would consumers have the mental model to go to the Uber app for things like a salad, and would the platform provide enough choice for consumers, given that so much about food is choice and variety?
An initial glance at UberEATS in SF (click here) shows a scheduled menu with limited choices, reasonable prices, and a “reminder” button. The visual design reminds me of a mix between Sprig and Munchery, and that’s likely intentional (and smart). While companies like Sprig and Munchery have to do their work while also acquiring new customers, theory says Uber can “route” their active users to this behavior and piggyback on the behavior change pioneered by these two startups. We will have to see if it actually happens.
Additionally, companies like Postmates, DoorDash, OrderAhead, and Caviar (now part of Square) are trying to provide leads to restaurants, paired with some component of on-demand or scheduled delivery. These companies offer more variety to their consumers (relatively speaking), but don’t have the luxury on a unit-economics basis to control their cost of goods sold and, therefore, their margins, in the same way that Sprig and Munchery could. This is critical to understand because almost certainly UberEATS will not be a centralized model and therefore, could be a loss-leader for quite some time…unless their delivery platform is even more efficient than what exists today.
I do not pretend to know how this will all shake out. In a way, Uber is essentially a big incumbent company that just happens to be private, yet it also an execution machine, showing time and time again it can roll out software, services, and products to compete with breadth and depth. We will eventually, finally, get to answer so many lingering questions: Will Uber acquire a big startup before going public? Will Uber extend into other on-demand verticals on top of its platform? And, if so, will those be done in one app container, or federated into a family of apps branded separately but connected within a holding company (a la Google and Alphabet)?