18/9/2020 Factiva

CE Noticias Financieras English

Uber Eats will leave Peru due to loss of market share, lower demand and high
costs of implementing protocols
535 words
4 June 2020
CE NoticiasFinancieras
NFINCE
English
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The recent announcement that Uber Eats will close its operations in Peru from June 29 responds to a continuous loss
of market share against Rappi and Glovo, to the lower demand for the economic impacts of Covid-19, and to the
costs in the implementation of the health protocols currently required.

They lost ground

The application failed to consolidate in the Peruvian market. After two years of operations, the application has only
10% of the market share. In addition, its level of coverage is lower than that of its competitors; while Rappi and Glovo
have a presence in eight and seven cities in Peru, respectively, Uber Eats is only in four.

The app was also losing exclusivity contracts with restaurants due to its lack of flexibility in negotiating commissions.
"Rappi, for example, gave restaurants incentives to sign exclusivity contracts and began displacing Uber Eats," said
Ivo Pelagatti, general manager of logistics and distribution company Delcorp. The lack of well-known restaurant
brands within the Uber Eats offering was a barrier for users to trust the app, according to sources consulted.

Uber Eats also lagged behind its competition in brand perception, as reflected by a study by the consulting firm
Arellano (see chart). "Glovo and Rappi further developed the brand theme, versus an Uber that stayed quite far away
in that regard," explained Ana Lucía Navarro, the consulting firm's account manager.

Change of strategy and Covid-19

The exit also responds to the app's parent company—Uber—prioritizing its investments in markets where they were
already leaders. "There is no point in continuing to burn money to fight one market that has already been won by
another," said a source who preferred not to be cited because of its proximity to the sector. One of these markets
would be the US, where the parent is already negotiating the purchase of GrubHub, another delivery player. With the
acquisition, the company would achieve a market share of 48%. "It is no longer an accelerated expansion industry.
Now it's approach and profitability search, because there are a lot of businesses that aren't proving sustainable," said
Alonso Núñez, general manager of Glovo.

The smaller support from the matrix made it difficult for Uber Eats' operation in Peru to bear the higher costs
demanded by current health protocols, which would have been the final blow to the app. These involve, for example,
the rental of land to establish disinfection points, personal protective equipment and covid-19 insurance. "[Insurance]
can reach S/50,000 per month, which was not covered by the annual budget," according to Helmut Cáceda, president
of the Peruvian Chamber of Electronic Commerce. "Fleet and distribution costs [according to the new protocols] are
between 30% and 40%," Added Nunez.

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The application would have had to make new investments to avoid continuing to lose share in the Peruvian market,
the sources consulted agreed. This in a scenario where the sector has been hit by the Covid-19 and, as
SEMANAconomics pointed out, will not reach pre-crisis income levels in the medium term.

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