Delivering groceries is Uber Technologies Inc.’s next frontier, at least in Latin America.
The ride-hailing company’s Uber Eats division has until now focused on delivery of prepared food from restaurants. Consumers stuck at home have boosted that business globally by 52 percent to US$4.68 billion in the first quarter, according to the company’s most recent report.
Uber plans to build on that in Latin America by expanding the grocery delivery service, Cornershop. The company is seeking a majority stake in the Chilean startup – a deal that has been approved in Chile and is being reviewed in Mexico. Now that talks with Grubhub Inc. fell through
, the pressure is rising to find a new source of growth at Uber.
“Delivering groceries is what’s next for us,” Uber Eats’ director for Latin America, Eduardo Donnelly, said in an interview. Part of what attracted Uber to Cornershop is the technology behind its app, Donnelly said. This includes updated inventories from all the stores it works with as well as a giant database of users and their consumption patterns.
Cornershop, the largest grocery delivery platform in Mexico and Chile, lets users order groceries from stores such as Costco Wholesale, Petco and Walmart. Some participating stores add a delivery fee to customers’ bill, while others hike each products’ price.
Terms of the deal haven’t been disclosed and Donnelly declined to comment on them. Walmart Inc. had previously tried to buy Cornershop for US$225 million, but Mexican authorities opposed the move for antitrust reasons.
Grocery delivery is an area that has seen rapid growth following the Covid-19 outbreak. Instacart Inc, a leading US service, hit a US$13.7-billion valuation in a funding round last week. For comparison, that matches the price Amazon.com Inc paid for Whole Foods Market Inc in 2017.
The arrangement could play a significant role in Uber’s strategy of layering more profitable services atop ride sharing. In Brazil, many people who only used Uber’s ride feature have only recently started to cross over to Eats, Donnelly said.
Since the deal was announced, Cornershop has started operating in Peru, Colombia, Brazil, Canada and in the US cities of Dallas and Miami.
“That business is absolutely exploding in the right way,” CEO Dara Khosrowshahi said in a Bloomberg TV interview in March. “We have a global brand, and we can essentially take Cornershop and make it a global brand.”
Latin America lockdowns
Uber Eats’ total orders in the region doubled in April and May as shoppers stayed home, Donnelly said. The service also saw a 75 percent jump in shops joining the platform as business dried up amid lockdown measures.
The rapid growth has raised concerns as well: Delivery workers across the region say companies like Uber and Rappi SAS haven’t done enough to protect them given the increased risks they’re incurring for doing what they consider is an essential job – keeping others at home.
Under the hashtag “YoNoReparto
,” which translates into “I Won’t Deliver,” couriers in places from Buenos Aires to Mexico City have organised to ask delivery services for better working conditions and pay. Some went on strike on May 29, vowing to not deliver a single package that day.
Couriers infected with Covid-19 or put in individual quarantine by a public health authority can apply for a payment equal to wages earned in the past 14 days, Donnelly said. The only condition is that couriers have done at least one trip in the past 30 days and have a doctor’s note, he said, adding they decided not to require a Covid-19 test because they’re aware the tests are scarce in the region. Uber Eats has also put in place policies to reimburse expenses for face masks and antibacterial gel.
Delivery workers in Argentina, Chile, Costa Rica, Peru and Mexico are seeking more, however. They’re asking for a higher cut of the delivery fees, increased safety while on the job and affordable insurance against accidents. They are also asking governments to pressure companies to recognise them as employees, not contractors.
“We understand they’re the ones out there, making the deliveries and putting themselves at risk,” Donnelly said. “We’ve designed the policies by listening to them, and we’ll continue to do so.”
Since the start of the pandemic, Uber has slashed 6,700 jobs, about 25 percent of its total workforce. It also closed or consolidated 45 of the several hundred offices it operates globally.
Although Uber’s main ride-hailing division is now profitable, the food delivery operations still lose money. The company reported its first-ever decline in rides during the first quarter, pushing back a goal of being profitable to next year. In order to achieve that, CEO Khosrowshahi said he planned US$1 billion in cost-cutting measures
, including head count, real estate and other reductions.
Last week Khosrowshahi said
Uber’s global rides business was down 70 percent from last year, a slight improvement from its low point in the coronavirus pandemic but an indication that recovery will come slowly.
*via Buenos Aires Times*