One Surprise Standout for Uber: Food Delivery
There is also the threat of Amazon, which has tried food delivery in a few markets. The Seattle retail giant’s recent acquisition of Whole Foods provides hundreds of potential bases for drivers to pick up prepared food for delivery in major urban areas, where takeout orders are popular.
“The number-one concern for all of these delivery companies is Amazon,” said James Cakmak, an analyst at the equity research firm Monness, Crespi, Hardt & Company who follows the food delivery space. “How could Amazon use its network to crush our business? They have the logistical network and the balance sheet to be able to compete on the price side with all of these players.”
Matt Maloney, the founder and chief executive of Grubhub, said his company’s focus on food orders set it apart.
“Uber has built a great company focused on black car service and human transportation, but succeeding in food delivery is a different game,” Mr. Maloney said in a statement. “We are known for one thing only — takeout ordering — and we have engineered our entire product around this purpose.”
Both Amazon and Postmates declined to comment on UberEats.
Uber first dabbled in food delivery in Los Angeles in 2014 under the name UberFresh, offering prepackaged lunches and dinners from restaurants. Uber also tried other experiments, like UberEssentials, a way to deliver pantry and drugstore items quickly.
“If you can hit a button and get a car in a few minutes, what else can you get in a few minutes?” Mr. Droege said.
But the situation wasn’t ideal, with drivers usually carting food around in a safe storage container in their car trunks. That led to issues with food quality, and customers were unhappy when their food arrived cold. People also wanted a greater selection of restaurants, something that competitors like Postmates provided.
In December 2015, Mr. Droege’s division introduced a separate app, UberEats, in Toronto, working with restaurants to provide freshly cooked meals that could be ordered with a few touches of a smartphone button. The service took off, and over the next 18 months UberEats expanded its sales force to bring more restaurants on board and to open in new cities.
Uber executives said UberEats, which is now in more than 120 cities, had several advantages over rivals. For one, Uber has a network of more than two million drivers who can also deliver food. Cars used for UberEats also do not need to pass all of the inspection standards required to carry passengers, widening the potential delivery labor pool. (Drivers need not own a car at all; UberBike is a popular delivery method for food orders.)
Uber has also spent the better part of a decade mapping cities and finding the most efficient routes, which the company said may help improve delivery times. And since the problems with UberFresh, it has invested in better technology and added more drivers in participating cities. The ideal UberEats delivery has the driver arrive at the restaurant just as the food has finished cooking, and has it delivered to the customer while still warm.
“What Uber has are the last-mile logistics, and that’s crucial,” Mr. Cakmak said.
Uber has taken the partnership approach to speed up the growth of UberEats, echoing a strategy of companies like Postmates. Uber struck a deal with McDonald’s this year to offer delivery from thousands of its restaurants. Lucy Brady, a McDonald’s executive, said on an investor call in July that the initial results of the partnership were positive.
The service has stumbled at times, including this month when it faced complaints that an ad in India — telling husbands to use UberEats so their wives could take a day off from cooking — was sexist. The company apologized for the ad.
Uber said it had invested in increasing its UberEats sales force, as well as hiring data scientists to analyze daily information on customer orders and preferences to help restaurants improve their service or promote their more popular menu items.
For Mr. Gordon, the owner of Footprints Cafe, Uber’s investments have been a boon for business. He said the delivery service had helped his restaurant reach new customers outside its loyal Caribbean community, without spending on advertising or promotion on Facebook or Groupon, as he did in the past.
“We’ve employed people who just work on Uber deliveries, and have a counter just for Uber driver pickup,” Mr. Gordon said. “It has definitely been worth it.”
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