Uber’s Expanding Its Grocery Delivery Business


Uber (NYSE:UBER) is pushing down the gas pedal on its new grocery delivery business. It announced its first major expansion of the service after signing a partnership with Albertsons (NYSE:ACI) grocery chains to serve its 1,200 stores. Uber’s grocery delivery service is now available in 400 cities across the United States.

Despite entering many markets after rivals Instacart and DoorDash (NYSE:DASH), Uber has the advantage of millions of users already using its app. That should allow it to make quick progress as it expands nationwide.

A bag of groceries spilling out on a table.

Image source: Getty Images.

Growing the groceries business

Uber says it already has almost 3 million customers ordering groceries through its app every month. That compares well with the well-established Instacart, which has an estimated 9.6 million monthly users. DoorDash, meanwhile, says less than 10% of its estimated 20 million users ordered delivery from a nonrestaurant during the first quarter.

Uber just launched its U.S. grocery delivery business a year ago, after acquiring Cornershop in 2019. It snatched up Postmates in July of last year just ahead of its U.S. launch. Earlier this year, Uber also acquired Drizly, which specializes in alcohol delivery.

For reference, DoorDash expanded into convenience and grocery store deliveries around the same time last year, and it just signed a deal with Albertsons last month. Management is also focused on expanding to general merchandise delivery from just food delivery.

READ:  Why Moderna Stock Is Slipping Today

While those acquisitions give Uber the logistical and operational capabilities to deliver groceries (and bring important partnerships along with them), Uber’s also been able to grow the grocery delivery business organically as well. It made the decision to integrate Eats into the main Uber app in late 2019, and the timing was fortuitous. With millions of Uber riders already using the app and receiving push notifications, Uber is able to market its delivery capabilities most efficiently.

Sales and marketing expenses decreased as a percentage of revenue last year despite one of its major segments getting absolutely crushed by the pandemic and increased competition for its delivery business. Investors should look for improved marketing efficiency from Uber as it continues to expand the delivery business to new markets and scale the business.

As of the end of the first quarter, Uber had 98 million active users around the world. That far exceeds its competitors: DoorDash with around 20 million and Instacart with about 10 million. So, even if just a small percentage of those users take grocery delivery, Uber can take significant market share.

Redefining Uber

The coronavirus pandemic brought Uber’s delivery business to the forefront. Uber rides out to restaurants were replaced with Uber Eats deliveries to the home. Delivery gross bookings grew nearly enough to offset the 50% decline in the mobility segment’s bookings by the company’s fourth quarter.

READ:  3D Systems Earnings: What to Watch

But Uber has been thinking well beyond the original ridesharing business for years. During a recent interview with The New York Times, CEO Dara Khosrowshahi said the delivery business will be bigger than the mobility business in the long run. Ultimately, he said, Uber wants to “get anything and everything that you want in your house.”

Groceries are a natural extension of Eats, and it further builds on the idea of Uber as a delivery business, not just a network of drivers. Since consumers buy groceries frequently, the category can get users in the habit of hiring an Uber for store deliveries. If Uber’s going to meet Khosrowshahi’s dream of “pushing a button and getting a piano delivered to your home in an hour and a half,” groceries is the place to start.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/07/24/ubers-expanding-its-grocery-delivery-business/

Xem thêm bài viết thuộc chuyên mục: investing

Related Articles

Leave a Reply

Back to top button