Uber Eats UK New Swot and Strategic Recommendations PDF

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Summary

Case analysis and development of strategic recommendations. Case: "Uber Eats UK: Leveraging the Uber brand to provide round-the-clock food delivery"....

Description

Uber Eats NEW SWOT ANALYSIS & STRATEGIC RECOMMENDATIONS

March, 2019

Contents Executive Summary Contextualization

New SWOT Analysis Strategic Recommendations

STATUS

Takeaway is a growing market in the UK, especially in the online ordering segment, where Millennials and the mobile paradigm have been driving demand.

As a 3 sided marketplace, Uber Eats must balance all of its business partners (customers, restaurants and drivers), while focusing on growth and the competition.

Uber Eats is still lagging in terms of penetration, and in restaurant portfolio as well. Furthermore, it is seen as the least appealing company to work for.

Increase attractiveness to ensure commitment from drivers/riders, ensuring Uber Eats is set to withstand the impact of Brexit on the labor force.

Achieve service excellence by imposing operational standards on associated restaurants. This aligns them with Uber Eats, ultimately increasing their performance and sales.

Lock in high value customers by rewarding platform loyalty via a lump sum delivery rate, or an incremental purchase bonus. This will reduce costs with customer acquisition and improve data consistency.

RECOMMENDATIONS

Uber Eats is an online food ordering and delivery aggregator platform. Present in the UK since 2016, the company has experienced great success, and is currently the 2nd preferred platform for delivery. It faces a well established competition, that will fight for every inch of competitive space.

CONTEXT

Executive Summary

Contents Executive Summary • Company at a glance; • Sector at a glance;

Contextualization

• Environmental Analysis; • Competitive Landscape;

New SWOT Analysis

• Clients.

Strategic Recommendations

The company at a glance Profile & Key Data Name

Uber Eats

Headquarters

San Francisco, USA

CEO: Dara Khosrowshahi

Founded

2014

VP: Jason Droege

Sales (FY18)

$6 billions*

Mission Statement

To make eating well effortless for everyone, everywhere.

Implantation (UK)

+60 towns & cities**

Customers (UK)

51k daily app users***

Business Model

Uber Eats is a subsidiary of Uber, the company famous for its ride hailing app. Eats is an online food ordering and delivery aggregator – a 3 sided marketplace platform, connecting customers, restaurants and couriers, through an app that allows for convenient ordering of take-away food. Revenue is ensured through delivery fees to customers, commissions on restaurant’s order sales and marketing services for associated restaurants. Couriers are not employees of Uber Eats, but “Delivery Partners” payed a variable fee per delivered order.

Leaders

*- Press estimates, based on Uber Technologies’ Q4 global financial release – gross bookings value are not split by geographies or products. ** - Data for 2018. Source: Market Line *** - Data for 2018. Source: Financial Times

Key Partners

The sector at a glance Food industry 55 Billion GBP/year*

Grocery Stores

Grocery Deliver

Prepared Groceries

Meal Delivery

The food industry, has seen a shift towards the side of convenience. An ever-growing number of people have abandoned the usual routine of weekly trips to the local grocery to purchase a week’s worth of food, ready to be cooked at home. The adoption rate of services that offer to break this cycle leaves little doubt that people want to buy back their time and attention, to focus on activities that are not seen as chores. Meal delivery services are perhaps the most extreme expression of this necessity, and as they approach the promise of high quality, highly diverse, ready-to-eat food, delivered under 30 minutes and at reasonable prices, they may break the hegemony of traditional grocery retailers. *- Data for 2017, based on household expenditure on food and non-alcohol drinks. Source: UK Department for Environment, Food & Rural Affairs

The sector at a glance Takeaway Market Software Only

Marketplace

Conventional

Click & Collect

Price Variety

ORDER

Software Only Marketplace

Takeaway Restaurant

Market Valuation: 10 Billion GBP/year*

Cuisine Variety Delivery Exp. Mktng Insights Branded Drivers

(By associating with Stuart)

Fast Food 2.0 – refers to companies who have opted for a full integration of the process: developing their own app, offering a limited range of meals, prepared in their distribution centers and delivered in under 15 minutes by their delivery fleet. They trade choice for convenience, but with a highly curated menu. DELIVEROO is moving into this space.

High Marketplace

Click & Collect

Medium Low

Fast Food 2.0

As of now, the marketplace model of Uber Eats and Deliveroo, is the one that offers overall best value for the clients, be they consumers - with their large choice and reliable delivery; or restaurants, that can now access incremental demand, without the hassle of setting up a delivery fleet, but also because of the optimization potential brought by Data Intelligence.

Takeaway Restaurant

COOK

*- Data for 2017, based on household expenditure on take-away. Source: UK Centre for Economics and Business Research

Logistics

DELIVER Adapted from

link)

The sector at a glance Online Ordering Platforms Eaters Consumers have become accustomed to shopping online via apps or websites, with maximum convenience and transparency, and so have come to expect the same experience when ordering food. Platforms like UberEats offer unprecedented variety, speed and ease to the consumer, with just a few taps on their mobile. Cost is slightly higher than alternatives, but evens out when convenience and time saved are factored in.

Restaurants For restaurants that want to reach incremental consumers, especially via mobile orders, but prefer to shy away from the delivery business, these platforms are stepping in with the promise of boosting to-go business and solving operators’ off-premise headaches. These services imply high fees, in an already thin margin sector, but restaurants can benefit in many ways: Capacity optimization of kitchen; Exposure to a much larger customer base; Data-driven recommendations; Reduced dependence on prime real-estate.

What’s on offer in these 3-sided marketplaces?

Couriers These platforms offer an easy way for workers to enter the “gig economy”. Being a courier requires no qualifications, allows for flexible working hours and, under the right conditions, can reel in significant wages. Hence, it attracts several types of workers, from students or free-lancers that do it part-time to earn some extra cash, to immigrant workers looking for a steady cash-flow. However, being self-employed “delivery partners”, means riders have no formal association with the platform, limiting its responsibilities in terms of social-security or insurance.

Environmental Analysis PEST Analysis UK Government has been urged by the Hospitality and Restaurant sector to loosen immigration rules for skilled workers, in order to meet demands in the sector. Currently visas are granted according to EU laws, but this is set to tighten in post Brexit.

Authorities are investigating the modern employment practices for several online platform companies, and stating that these companies pay should link more closely to the minimum wage. This could lead to a dramatic increase in costs with drivers for online food delivery services.

With the UK reaching historical levels of employment, delivery companies must start looking into new workforce sources (e.g. student labor) to meet demand. Millennials value convenience and diversity, creating a demand for a new philosophy of take-away meals, one that meets their craving for sophistication and transparency on food sourcing; Media coverage on healthy food options is causing a cultural shift away from the traditional unhealthy takeaway food, and a focus on healthy alternatives, leading more people into cooking at home, but also creating a demand for healthier takeaway.

POLITIC

ECONOMIC

1. Pressure on the UK government to loosen immigration rules in a post-Brexit scenario;

1. Economic growth slowed to near recession levels; 2. Weakened consumer and business sentiment amid heightened Brexit uncertainties;

2. Employment practices associated with the “gig economy” are under scrutiny.

SOCIAL

3. Reduced inflow of immigrant workers due to Brexit uncertainties.

PEST Analysis

TECHNOLOGY

1. Near full employment;

1. Mobile mentality is now the new paradigm;

2. Emergence of Millennials as the main consumption driver;

2. Drones and selfdriving vehicles are being tested for “last mile” applications;

3. Trends towards healthier alternatives in meals and food.

3. Implementation of an ecosystem approach to food delivery.

With Britain preparing to leave the EU, the Restaurant industry faces dire times ahead: • A weakened pound and the upward cost of ingredients traded on the international market are increasing costs for the sector, costs that need to be passed on to the consumer. The eventuality of import tariffs will increase this problem; • Lack of clarity over Brexit has prompted consumers to rein in their spending on all but the essential – eating out is seem as a luxury, and eating in may be an alternative • Being a labor intensive industry, it was typically dependent on an influx of EU workers – staff shortages are already causing some restaurants to reduce working hours or shut down completely. Innovation and dissemination of smartphone technology has led to a growth in the usage of services like Uber Eats to order food. The developments in app capability also contribute to a reduction in traditional delivery service set-up costs. The race to achieve an autonomous delivery service for urban environments is reaching its final stages, and companies failing to innovate in this area will miss out on the opportunity to vastly reduce labor costs. As the whole food sector becomes more integrated (traceability), both clients and value chain partners demand new services that enable easy interactions and reduce friction to achieve seamless operations.

Competitive landscape in the UK

Competitive landscape in the UK Google searches – daily averages (UK) 120

Uber Eats

Deliveroo

Just Eat

100

80

60

40

20

0

2014

2015

2016

2017

2018

2019

While Just Eat is historically the number one provider, by analyzing Google search word trends for the past 5 years, we can clearly identify the moment Deliveroo started to pick up interest, and we can also witness Uber Eats’ rapid increase in popularity, to a point it is as searched as Deliveroo.

Competitive landscape in the UK

Analyzing data for app downloads, we can see recent dominance is split between Just Eat and Uber Eats, with the latter showing prevalence. This data is consistent with market reports that point to Uber Eats being the fastest growing platform of the three.

Competitive landscape in the UK Key Figures Mkt Share*

Users Network

Revenue Model

24% (2nd)

23% (3rd)

80% (1st)

51k daily app users

45k daily app users

500k daily app users

7k restaurants

10k restaurants (+5k order only)

50k restaurants (mostly order only)

Commissions on orders (30-35%)

Commissions on orders (30-35%)

Delivery fee (per order)

Delivery fee (per order)

Marketing Services for restaurants (onboarding fee)

Marketing Services for restaurants (onboarding fee)

Commissions on orders (10-15%)

*- Data for 2018, based on platform usage for frequent takeaway customers. Source: Global Web Index

Marketing Services for restaurants (onboarding fee – 700£)

Competitive landscape in the UK Core competencies of each player

Unique Selling Points

Brand Equity: the Uber brand resonates with consumers, especially if they already use Uber rides.

Emblematic Portfolio: despite Uber Eats’ recent conquests (McDonald’s; Starbuck’s), several iconic British restaurant chains are still exclusive of Deliveroo.

Diversity: by having a larger restaurant portfolio, as well as geographic coverage, Just Eat can offer a more diverse choice to its customers.

Market Insights: allowing for data driven menu adjustments and the creation of Virtual Restaurants

Dark Kitchens: these commissary kitchens, set up near demand hotspots (e.g. London City), allow restaurants to timely serve online orders, without pressuring their main establishments.

Low commissions: the upside to being a “Software Only” platform. Restaurants must have their own delivery services though.

Operational efficiency: through more reliable software, Uber Eats’ operations are just more streamlined (e.g. daily earnings cash out; POS integration)

Comprehensive onboarding program: offers insurance for riders, a rider kit with a jacket, thermobox, phone cradle, etc. (Uber only has Box and charges for it).

N/A

Clients Main segments and profiles Take away meals: weekly household expenditure in the United Kingdom (UK) 2018, by age Average weekly household expenditure

9 8

7,8£ 6,7£

7 6

5,2£

5,1£

5

4 2,7£

3

1,8£

2 1 0 Less than 30

30 to 49

50 to 64

65 to 74

Data for a 2018 survey: UK, 18 years and older; 27150 Respondents. Source: UK Office for National Statistics.

75 or over

All households

Clients Main segments and profiles Average weekly household expenditure in GBP

Take away meals: weekly UK household expenditure 2018, by gross income 12 9,8£

10 7,5£

8

6,7£ 5,6£

6 3,4£

4

3,8£

5,5£

4,3£

2,6£ 2

1,6£

0 Lowest ten percent

Second decile group

Third decile group

Fourth decile group

Fifth decile Sixth decile Seventh group group decile group

Data for a 2018 survey: UK, 18 years and older; 27150 Respondents. Source: UK Office for National Statistics.

Eighth decile group

Ninth decile group

Highest ten percent

Clients Main segments and profiles Methods of using food delivery services in the United Kingdom (UK) 2017, by age 60 years and older 0,0%

10,0%

20,0%

4%

Food delivery app

30-59 years

18-29 years

30,0%

40,0%

50,0%

60,0%

31%

58% 37%

Call restaurant 12%

Order online at the restaurants website

12%

Use online food delivery service site

Don't use these kinds of services

Other

52%

42%

5%

12%

31%

40%

33%

55%

46%

0% 1% 1%

Data for a 2017 survey: UK, 18 years and older; 996 Respondents; All that dine out, get take-aways or use food delivery services. Source: Statista

70,0%

Clients Main segments and profiles Reasons for not using food delivery brands in Great Britain 2017 0,0%

5,0%

10,0%

15,0%

20,0%

I don't eat any takeaways/delivery food

21%

They don't operate where live

18%

Using them would encourage me to spend too much money

17% 15%

I can't afford to buy food through them I only use places that do their own delivery

13% 11%

Using them would encourage me to eat unhealthy food

The food you get through them is generally low quality

8% 6%

Using them would encourage me to eat too much food I think all the food you can get through them is unhealthy

6% 5%

I've never heard of them I don't like any of the food I can get through them

Other Don't know

25,0%

4% 10% 11%

Data for a 2017 survey: UK, Adults who have not used delivery services such as Uber Eats, Just Eat, Deliveroo. Source: YouGov

Clients Main segments and profiles •

People who don’t want to cook;

•

Restaurants that do not have their own delivery crew;

•

People who want to eat specific menu items;

•

Restaurants that do not accept orders online;

•

People who want food delivered at their door.

•

Restaurants who want to make use of the platform’s audience.

•

Under 30 years old;

•

Higher income brackets.

Contents Executive Summary Contextualization

New SWOT Analysis Strategic Recommendations

New SWOT Analysis Strengths and Weaknesses

Digital Disruptor – Uber’s expertise is in disrupting established business models, so being a late arriver is no problem; Strong Brand – especially for users of the ride app; Strong Platform – based on the trialed and tested solutions of the rides app; Access to funding – Uber is deemed as “too big to fail” and its investors have a history of securing funding for additional growth; Operational experience and Lobbying experience: acquired during the tumultuous implementations the company has had with its other business units.

Bad reputation in labor relations – both with the original Uber drivers, and also with food couriers; Liability of foreigners – though it is now an international brand, it is still seen as mostly an American company, that is “competing with local players in a market it knows very little about”; Smaller portfolio – being late to the market, and not compromising on the hefty commissions it plans to practice, Uber Eats has been lagging behind the established competition (whose portfolios are still growing).

New SWOT Analysis Opportunities SHORT-TERM

MEDIUM-TERM

LABOR SHORTAGES

STRICTER LABOR LEGAL FRAMEWORK

CONSUMER RETRACTION

CHANGES TO IMMIGRATION POLICIES

INORGANIC GROWTH

ROBOTICS + SELF-DRIVING + DRONE DELIVERY

New SWOT Analysis STRENGHTS

SHORT TERM • • • • • •

Digital Disruptor; Strong Brand; Strong Platform; Access to funding; Operational experience; Lobbying experience.

Inorganic Growth

MEDIUM TERM

Robotics + Self Drive + Drone Delivery

WEAKNESSES

Consumer Retraction Change...