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Burn. Burned. Acquired.

Updated: Dec 12, 2020

Quick Read :

  • Fighting to gain market share with a burndown of $3bn , Uber Eats called it quits in the india market citing long standing struggles of the food delivery system and the long road to profitability.

  • Deep discounting caused a lot of capital burn to retain customers.

  • Losing first-mover advantage & not having product differentiators gave Uber Eats hard times to gain market share.

  • Customers who used the platform used it extensively due to the deep discounting and the face that their total order value would be lower than that of rivals.

  • Zomato which initially started off as a restaurant data aggregator has acquired Uber Eats in an all stock transaction to boost its capability of topping the food delivery market segment.

  • With this acquisition, Zomato has more than 50% share in food delivery market. Adding to this, the strength of Uber Eats delivery network will boost Zomato's capability to compete more fiercely with Swiggy nationwide.

Why did this model, very successful in other countries, fail in the Indian Market ?

  • Deep discounting was the only strategy Uber Eats used in order to gain more traction. Zomato resorted to schemes such as Zomato Gold, while Swiggy brought out Swiggy Super to increase incentive to order from their respective platforms. Despite this Uber Eats had the lowest prices compared to other platforms for the same listed vendors, which in turn caused Uber Eats to lose more money than the other platforms.

  • India being a developing nation, has a bulk of its population based out of the middle class, a strata of people which tends to be conservative on spending. Customers have gotten accustomed to deep discounting, and tend to diverge to different platforms which offer lucrative deals for the same restaurants, which in turn makeS customer retainment a difficult task.

  • Lacked diversified model architecture and entered the market a tad late as compared to its rivals.

  • Cost of customer acquisition and retainment was high since it entered late in the market and there were already other players. Players like Ola Cafe had to shut shop relatively fast since they did not have enough cash to burn through to retain customers.

  • Uber Eats did peak at half the amount of orders as compared to its rivals who consistently hit the 1M order mark each day. (Slow-growth).

  • Uber Eats chased existence whereas Zomato and Swiggy looked at driving volumes. What Uber Eats overlooked was the fact that Design can be the key for user adoption & retention.

  • No social presence and gimmicks were used initially, as it only released its first brand campaign only 2 years after its existence in the month of January called : "Everyday Moments"

  • Last mile delivery has very low margins and is heavily relied on labour and operations.

Things Uber Eats did Right ?

  • The main advantage Uber Eats had was a large customer base in Uber, hence it was not hard for Uber Eats to acquire a new customer to its platform.

  • It also gave A chance to the middle class society to access food delivery platforms at better economical rates as compared with the dine-in option. This led to a surge in demand and people getting used to such deals. A lot of the customer base still misses Uber Eats, as it provided really good meals at economical rates, which was a big win for the customer.

  • Adding images and options was a good strategy, especially for the customers who were undecided and wished to explore, as this design allowed hover and click on a type of cuisine even if the customer's were not looking for something specific.

  • Also the options to curate each dish to the liking of the consumer and the customization and combinations were endless.

How Uber Eats fared against it's rivals ?

  • Uber Eats consistently came in 3rd place behind its rivals Swiggy & Zomato. Merging with Zomato now alters the battle of the food delivery domination to a duopoly between Swiggy & Zomato.

  • The value of an order was significantly lower than that of the other competitors.

  • At its peak, was able to absorb half the orders as compared with its rivals.

  • Used only deep discounting strategy to outcompete the rivals.

Factors that led to Uber Eats getting Acquired By Zomato ?

  • Stronger Rivals like Swiggy & Zomato

  • Late mover disadvantage with no product differentiation

  • Sidelined from parent company and deep discounting strategy focus.

  • Cutting down the losses as Uber planned for an IPO.

  • Increasing the volume of audience through celebrity engagement

What's in store for the leftover rivals ?

  • To be honest Swiggy & Zomato haven't cracked the model fully yet.

  • They should try and integrate strategies like divulging into Grocery and pick-drop services with lesser burn rate than just do food-delivery.

  • Reduced investments in the food delivery sector keeping valuations flat.

  • Due to the recent pandemic outbreak, a lot of people have been staying home which has increased the customer base and the volume of orders. In this situation the discounting can be reduced.

  • Work on increasing order values to gain more revenue per order and drive in new innovative expansion tactics.

New Bets:

  • Swiggy introduced multiple membership programmes like Super, Takeaway, an express delivery offering and is experimenting with Swiggy Dash as a delivery platform for grocery and medicines. It has also delved into hyper local delivery space with the launch of Swiggy Stores. It has also envisioned non-rush hours delivery fulfillment as its long term goal.

  • Zomato launched Gold which is now Zomato Pro, a dine out & delivery platform implementation, Hyperpure, its B2B play for restaurants, among many other offerings as it enters segments beyond food delivery.

Rival Peek:

  • Swiggy which previously its grocery delivery services only in tier 1 and tier 2 cities, will now deliver groceries in 125 cities.

  • Swiggy has collaborated with HUL, P&G, Godrej, Dabur, Marico, Cipla, Vishal Mega Mart, Adani Wilmers to deliver groceries through their stores.

  • Zomato has started the Zomato Market services to deliver the essential grocery items at your doorstep. It has also partnered with Vishal Mega Mart and other FMCG to deliver groceries. The service is currently available in 80 cities currently.

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