Uber Eats Postmates for $2.6B, Bolsters Ground Game


Uber Eats Postmates for $2.6B, Bolsters Ground Game

Being in a position to choose up the telephone and order meals — and never simply pizza — was one of many little luxuries of life. These days, because the pandemic ravages the U.S., it is turn into virtually routine.

“Contactless commerce and delivery have skyrocketed over 70 percent,” Ray Wang, a principal analyst at Constellation Research, advised the E-Commerce Times. “Most consumers are enjoying the convenience of not having to ever walk into a store or pick up a takeout.”

Food supply is a US$120 billion market, Wang mentioned. “The food delivery apps market is worth about $20 billion in 2020.”

Uber is trying to meals supply for rescue from falling revenues attributable to individuals staying at residence due to the pandemic.

Gross bookings for Uber Rides fell three % 12 months over 12 months, Uber famous in its Q1 2020 monetary report.

In response, it’s decreasing its buyer assist and recruiting groups by about 3,700 full-time individuals. In addition, Uber CEO Dara Khosrowshahi will waive his base wage till December 31, 2020.

The firm additionally just lately exited eight unprofitable markets for its Uber Eats meals supply service. Nevertheless, belt tightening is just not essentially sufficient to maintain an organization afloat. Better enterprise alternatives are an important a part of the equation.

On July 6, Uber introduced that it is buying on-demand meals supply service PostMates in a $2.65 billion all-stock transaction. Uber will problem about 84 million shares of frequent inventory for 100 % of Postmates’ absolutely diluted fairness.

Gross bookings for Uber Eats grew 54 % 12 months over 12 months in the course of the first quarter, and Khosrowshahi mentioned the corporate is focusing further sources on the service.

“As more people and more restaurants have come to use our services, Q2 bookings on Uber Eats are up more than 100 percent year on year,” Khosrowshahi disclosed within the announcement.

Uber’s acquisition of Postmates has been permitted by each firms’ boards of administrators and obtained a dedication of assist from stockholders representing a majority of Postmates’ excellent shares.

The deal is anticipated to shut in Q1 2021, topic to the approval of Postmates stockholders, regulatory approval, and different customary closing situations.

Postmates’ Proven Presence

Postmates “has shown particular strength in communities where Uber Eats has not been as strong, including Los Angeles, Las Vegas, Orange County (Calif.), San Diego, and Phoenix,” Canaccord Genuity analysts Maria Ripps and Michael Graham wrote in a notice to buyers July 7. This foothold comes on account of Postmates’ partnerships with in style native manufacturers.

“Two factors — population density of its markets and popular restaurants — have led to an industry-leading three trips per hour for its couriers,” Ripps and Graham acknowledged.

The acquisition “is about gaining scale and giving drivers more work and creating more loyalty,” Constellation Research’s Wang remarked.

Postmates gives pickup and supply service from greater than 600,000 eating places and retailers, with 41 % of these unique to its platform. It is the market chief in Los Angeles and operates in all 50 states.

Postmates had eight % of meal supply gross sales within the United States, in keeping with Second Measure, a know-how firm that claims it analyzes billions of anonymized purchases.

The market chief is Door Dash, with 44 %. Uber Eats positioned second with simply over 23 %, excluding purchases made with Uber Cash and purchases made by company prospects. GrubHub was a detailed third, with slightly below 23 %.

The Postmates acquisition will assist Uber “gain the number two spot overall in the U.S., and help them gain the number one or number two spot in cities such as Los Angeles, Miami, Phoenix, Washington, D.C., and Atlanta,” Wang noticed.

“Uber Eats will be battling GrubHub to be the number one or two player in each market as they all go after Door Dash,” Wang mentioned. “We see continued growth amidst the post-pandemic environment.”

Uber mentioned it’ll hold the consumer-facing Postmates app operating individually, supported by a extra environment friendly mixed merchant-and-delivery community.

Competing With Lyft

In the long term, the acquisition will probably be good for Uber as a result of “its goal is to make sure every driver has a passenger or order,” Wang mentioned. “The company that can do this the most efficiently, and frequently, wins.”

That ought to assist Uber fend off Lyft.

Nearly 75 % of trip sharing customers within the United States will use Uber this 12 months, and 54 % will use Lyft, eMarketer predicts.

However, Lyft will develop its share quicker than Uber over the subsequent three years and can account for 59 % of trip sharing customers by 2023.

Criticisms and Antitrust Concerns

Uber’s acquisition of Postmates is “one failed company buying another,” Global Equities Research advised shoppers in a notice concerning the deal. Uber Eats “will never be profitable,” the enterprise is just not sturdy, and it’ll decline steeply because the pandemic fades away.

Concerns have additionally been voiced that the acquisition may breach antitrust legal guidelines.

The Open Markets Institute mentioned the key supply apps’ enterprise mannequin depends on monopolization and warned that the acquisition would violate the Clayton Act and lead to an oligopoly that controls 99 % of the market.

In April, three customers filed a class action lawsuit alleging GrubHub, Door Dash, Postmates and Uber Eats use their dominance in restaurant meal deliveries to impose exorbitant charges which are handed on to customers.

Antitrust considerations helped scuttle Uber’s earlier try and buy GrubHub. Opponents included Sen. Amy Klobuchar, D-Minn., and three colleagues, who urged the U.S. Department of Justice and the U.S. Federal Trade Commission to launch an investigation if the businesses agreed to merge.

However, opposition to the Uber-Postmates deal might not forestall the inevitable.

“The food delivery space is consolidating,” Ray Wang famous. “These are the newest digital giants in the age of duopolies in the post-pandemic model. Less ride hailing, more food delivery.”

Richard Adhikari has been an ECT News Network reporter since 2008. His areas of focus embody cybersecurity, cell applied sciences, CRM, databases, software program improvement, mainframe and mid-range computing, and utility improvement. He has written and edited for quite a few publications, together with Information Week and Computerworld. He is the writer of two books on consumer/server know-how.
Email Richard.

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