on September 19, 2023
UberEats Business Model & Revenue Model
The online food delivery market has been gaining momentum, especially in the past few years. Understandably, the ease with which users can order food now with a few taps has contributed to the surge. Not to mention how swamped work and social lives of people push them to opt for easy ways. The on-demand food delivery platforms assure prompt delivery to the users.
Uber launched UberEats – an on-demand food delivery application, in 2014. Headquartered in San Francisco, it started as UberFresh before acquiring the name UberEats. Initially, UberEats offered delivery service only for lunch with limited options instead of the whole menu. Uber’s late entry into the on-demand food delivery business is perceived to have given it a leg up over its competitors.
UberEats has grown from less than 5% of the US food delivery market to nearly 25% in 2022. It is available in over 6000 cities across 45 countries.
How does UberEats Work?
UberEats has simplified the food delivery process by enabling users to order food with a few taps. They can relish their favorite food from restaurants in no time.
Users can make orders on the UberEats app or website. UberEats delivers food from restaurants to customers through its delivery partners. The workflow of an online food delivery business is as follows:
Users can browse through the restaurants enlisted on the UberEats app after signing up and navigate through the menus to select the food from the outlet that interests them. UberEats only accepts card payments to create a safer working environment for its riders.
The outlet that the customer has ordered from receives a notification. After this, the outlet works on getting the food prepared and ready for delivery.
The restaurant confirms the order depending on the availability. UberEats riders stationed near the restaurant then receive notifications. Riders collect the food from restaurants and deliver them to the customers at their doorstep without compromising the quality.
UberEats Business Model
The UberEats platform connects restaurants, customers, and delivery partners. Restaurants pay a certain amount as commission fees to partner with UberEats to expand their reach. UberEats introduced a tiered pricing plan where outlets can choose between 15%, 25%, and 30% per order, with business goals and the magnitude of marketing support being the key determining factors in going for a plan.
Customers ordering food on the UberEats app are mandated to pay delivery fees. Delivery partners earn through their uncompromising delivery services.
UberEats works on bringing their customers food from local restaurants. When a user makes an order from a restaurant, delivery partners working for UberEats pick up the food and deliver it to their doorstep.
UberEats Customer Segment
The key stakeholders of the business model of UberEats are customers, restaurants, and drivers.
Customers of UberEats order food on the app or website after signing up. Restaurants nearby are listed on the app, from which users select the food of their preference. They can then pay using any of the multiple payment options provided.
Restaurants partner with UberEats to increase their visibility and reach a large customer base. UberEats makes a much larger set of restaurants available for its users. Being one of the biggest food delivery platforms, UberEats has partnered with nearly 900,000 restaurants globally.
Delivery Providers
Delivery providers signing up earn through their reliable delivery services. They get to enjoy a flexible schedule. UberEats also ensures their safety by covering all their deliveries with insurance. UberEats has also introduced UberEats Pro – a rewards program that benefits their delivery partners.
UberEats Value Proposition
UberEats, unlike its competitors, consider taking up orders with small delivery distances.
The intent to deliver food in good condition has been a driving factor in UberEats limiting the delivery radius.
UberEats believes in transparency in pricing and claims it does not charge any hidden service fee.
UberEats does not practice the “minimum order” concept. It charges a standard delivery fee irrespective of the order value.
UberEats Revenue Model
UberEats has been gaining momentum over the years since its inception. It has bolstered its position as one of the largest food delivery platforms. UberEats generated $8.3 billion in revenue in 2021, which accounts for 48% of the total income made by Uber.
UberEats generates revenue through advertising, commission fee, and delivery fee.
Listing and Advertising
Restaurants getting listed on the UberEats app can increase their chances of discoverability. Restaurants may be unable to reach a large customer base due to their inability to provide delivery services. These outlets pay a certain amount to get promoted by UberEats.
Commission on Orders
UberEats charges restaurants for every order made on the app. Commission fees can be as high as 30% per order. Restaurants can choose between the plans introduced by UberEats depending on their interests to get more exposure and maximize their sales.
Delivery Charges
Delivery fee is another way that food delivery platforms like UberEats rely on to generate income. UberEats charges its customers for the food delivered through its services.
Bottom Line
The UberEats business model exemplifies the need for building a strong value proposition to stand out from other competitors in the business. Despite being a late entrant, UberEats has managed to gravitate consumers with its strong foothold. There is no denying how the prominence of its parent company has given UberEats a position of advantage.
The online food delivery business will continue to see a boom, with projections showing that by 2027, it will be a $223 billion market. The forecasts predicting the acceleration of the on-demand food delivery industry have brought about general inducements to venture into it.
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