UberEATS – Proposed Business Model

UberEATS, since its entry into the Indian economic landscape in May 2017, has shaken the market up
with its potential for disruption of the online food delivery industry. New things we propose to do:
I. Integrate Uber Cabs services with UberEATS – Customer in a cab gets alerts in Uber app about
the restaurants on the way to his destination. He can opt for a short time detour for grabbing a to-
go order. This helps in improving visibility of restaurants and offers new service vista for consumers
(customers can also pre-order to save wait time)
II. Restrict the delivery of food items from restaurants with very low preparation time – shorter
menu helps to make choice easier for the customer and delivery times are not compromised.
1. Value Proposition to Stakeholders – a) The customers (i) unparalleled delivery service (average
10 mins compared to 30-45 mins by others), hence delivery of food in fresh condition; (ii)
combining Uber Cabs with UberEATS - ordering food and consuming it during journey (iii) no
minimum order value; (iv) nominal delivery fee of Rs. 15 per order; (v) entry-level cross-
promotional offers with Uber Cabs; (vi) brand reliability b) The drivers (i) receive greater income
(based on pick-up + drop-off + per km travelled); (ii) they may bundle orders and reduce travel
distance, saving on fuel; (iii) greater carrying capacity (four-wheeler and two-wheeler fleets), c)
The restaurants (i) combining Uber Cabs with UberEATS – on the go promotion of restaurants;
(ii) perception value of food joints to improve since food to reach customers in freshest possible
state; (iii) UberEATS may provide customer preference data to restaurants to help them reshape
their menu periodically and adjust prices accordingly.
2. Customer Segments – Target segments include corporate professionals, business executives i.e.
segments with the need for lightning fast service of fresh food in Tier I and Tier II cities.
3. Key Resources/Marketing Channels – UberEATS needs minimal expenditure on technology as
it already has the existing infrastructure and manpower through Uber Cabs. A mobile application
similar to the one for Uber Cabs may be prepared and the existing fleet of vehicle may be
simultaneously used for the food-delivery business. Cross-marketing should be done so that both
businesses promote each other by print and app-based advertisements and cross-promotions, for
example, a certain percentage discount on food order value when one uses Uber Cabs.
4. Cost Structure – Capital expenditure is minimal; overheads may be absorbed by Uber Cabs as the
same infrastructure is being used, hence UberEATS may remain unaffected; The expected distances
covered by the cabs is projected to increase by around 25% and hence, a 25% increase in fuel costs.
5. Revenue Generation Model – Recognizing average order values for competing online delivery
services, a safe estimate of the value in the Indian market is Rs. 400. The economics of variable
costs are as follows:
a) Estimated Order Value Rs 400
b) Delivery Charge Rs 15 (Fixed Delivery)
c) Commission Charged by Uber EATS from restaurant 30% of order value = Rs. 120
d) Amount received by restaurant Rs. 280 (a – c)
e) Average (Target) order pick-up to drop-off distance 5 km (maximum allowable avg.)
f) Amount received by drive Rs. 10 (Pick-up) + Rs 10 (Drop-
off) + Rs 40 (5 km travelled at
avg. Rs. 8 per km) = Rs. 60
g) Amount received by UberEATS Rs 60 (c -f)
Hence, we can see that the model generates an average revenue of Rs. 60 per order. This value
may be scaled down by a factor of 1.5 to Rs 40 per order, owing to negative externalities such as
traffic, unfavourable weather, and other adversities. Even so, it is evident that the model is profit-
generating and break-even analysis is not required, since other operating costs such as fixed costs,
customer acquisition costs and support costs will be absorbed by the existing taxi service. The
calculation does not consider the bundling of order which would further increase profits due to a
reduction in operating costs and greater efficiency of delivery.
6. Scalability of the business – The business will attract more customers with the unique value of
lightning-fast delivery that it provides, and hence revenue generated would only grow over time.
Also, order values are slated to go up as restaurants start adding new items on the menu, allowing
customers a greater variety to choose from. The company has the logistical backup to absorb the
increased demand as the demand for the taxi service is expected to grow alongside leading to the
proliferation of the fleet. Innovation would lead to a more fool-proof bundling feature leading to
lower operational costs. With greater understanding of the process, the drivers would also become
more efficient in the interchanging between the ride-sharing system and the food delivery system.
All these factors indicate a potential for massive scaling of the business.