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Uber’s unusual dilemma: Is it going to be Food or the investors?

Uber written on a phone

Uber is a company that is going public in the coming weeks. The company has been fighting off many problems including the one where investors are questioning the profitability of the company. Uber has managed to be the company that is present everywhere but is struggling most of the times. The company faces competition from a local company almost everywhere is astonishing, to say the least. There are countries where UberEats is doing brilliantly and then there are countries where it has to shake off the competition.

Uber, however, is a company that is now more than just a ride-hailing company. It has entered different businesses and the revenue of the Uber is scattered across all those businesses. UberEats, in 2016 contributed 3% to the total Uber’s revenue and today it contributes up to 13%. The growth patterns and the revenue generation is out of the box for Uber. The revenue grew to $1.5 billion last year which was more than its growth rate of 42% worldwide.

The numbers speak a different story altogether but there were rumors that the company might never hit the profit mark with its ride-hailing business. This might be true but the restaurant business, the food delivery business to be specific might just help Uber out. There are many such businesses which might help the company make its case stronger and convince the investors that there is profitability in the future.

That being said, UberEats is something which competes with many other delivery companies. It is Uber’s best bet but is the business strong enough? Let us find out.

UberEats competes with Deliveroo in the UK, Swiggy, Zomato, and Foodpanda in India and GrubHub, Postmates in the US. These are the major rivals of UberEats. The business model, however, is crooked. That is because the companies delivering receive a major profit through beverages as it requires lower labor cost and provides a higher margin.

That being said, almost all the people want their drinks at the table in a restaurant rather than at home. The food is what they want at home and food does not offer good margins at it requires a lot of waiting and time. For one order to be placed, cooked and delivered, takes around an hour. An hour is what a delivery guy takes to complete one order which is a lot of time. One delivery guy completing 12 orders a day when millions are placed requires a lot of manpower and a lot of money.

This is why the business model is crooked. The food delivery business might grow and hit the sky but the profits and the margins remain the same. It will just get harder and harder to deliver the food and the profitability through UberEats might just not be possible for Uber.

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