Uber will cut fees for food delivery in the UK and Ireland and allow restaurants to use its app but carry out their own deliveries as competition intensifies with Just Eat and Deliveroo, its biggest food delivery rivals outside the US.
Uber Eats, the company’s food delivery arm, will cap the fees it charges to restaurants at 30 per cent of the value of an order, compared with a current maximum fee of 35 per cent.
It will also roll out a “marketplace” in the UK, Ireland and the Netherlands, to capture restaurants that want to be listed but make their own deliveries. It represents the “first step” to further international expansion, said Rodrigo Arévalo, the head of Uber Eats in Europe, the Middle East and Africa.
The move will put Uber Eats in direct competition with Just Eat, the UK’s largest food marketplace, which connects diners with restaurants that use their own couriers.
By contrast, until recently Uber Eats and Deliveroo have mainly used their own couriers to deliver to customers, while charging restaurants higher commissions.
“It’s no secret that the industry where we’re playing is highly competitive,” said Mr Arévalo.
Uber’s food delivery business is an important part of its pitch to investors as it prepares for an initial public offering that is expected this year.
Uber Eats is on track to deliver $10bn worth of food orders this year, up from $6bn in 2018, according to projections from Uber. It is the first business outside the company’s core ride-hailing business that has achieved significant scale and growth.
But the competitive nature of food delivery, and the need to pay a cut of food sales to both couriers and restaurants, has meant Uber Eats and its rivals are burning through cash to fund their expansion and keep prices low.
The share Uber keeps from food deliveries, after paying couriers and restaurants, is on average lower than the cut the company takes from rides.
Uber Eat’s decision to launch a marketplace comes as takeaway apps experiment with new ideas to gain an edge over rivals. In the US, DoorDash and Postmates have both launched subscription offers that waive delivery fees on orders in exchange for a flat monthly payment.
DoorDash, which like Uber has the backing of SoftBank’s Vision Fund, overtook Uber Eats in terms of US market share in November, according to Second Measure, a research group that analyses anonymised credit and debit card data.
To increase choice for consumers, Uber Eats has worked with restaurants to open 2,000 “virtual restaurants” around the world by using their extra kitchen space to launch new delivery-only menus.
Deliveroo has gone a step further, leasing and fitting out so-called “dark kitchens” to increase supply and variety. Deliveroo also launched marketplace services last year, as it jostles for position with Just Eat and Uber Eats in the UK. The decision, which also saw it add 5,000 restaurants to its platform, sent Just Eat’s share price down 10 per cent.
Travis Kalanick, the billionaire co-founder of Uber, has been secretly ramping up his own food delivery kitchen network, called CloudKitchens, and looking at expanding outside the US. One person close to Uber Eats said it had no current plans to partner CloudKitchens in Europe, the Middle East or Africa.
Uber Eats’s marketplace decision comes at a challenging time for the UK’s Just Eat, which has come under attack from activist shareholder Cat Rock. The company’s chief executive, Peter Plumb, stepped down this year so the business could search for a new boss to execute its strategy amid tougher competition.