Investing

UberEats On Its Way to Become the World Leader in Online Food Delivery

The online food delivery industry has born some of the most successful online-to-offline (O2O) companies in the world, ranging from GrubHub in the US to Just Eats in Europe and Foodpanda (i.e. Delivery Hero) in Asia. And this series of success has been attracting tech giants to enter the market on their own, with Facebook being one of the latest entrants after Amazon and Uber. According to ValuePenguin's study of download rankings for the top food delivery apps in the world, it seems that Uber's UberEats is actually gaining a lot of user share globally since its launch in 2016. Notably, UberEats seems to be quickly catching up to its competitors in markets by leveraging Uber's brand and infrastructure.

UberEats Follows Uber’s Success

In countries where Uber has been already successful, UberEats is either winning in the online food delivery market or is catching up quickly to its local competition. For instance, UberEats is ranked as the top online food delivery app in the Apple App Store in terms of downloads in the US, Australia, France, Indonesia and Taiwan.

In the Philippines, Thailand, the UK and India, where Uber is one of the top on-demand ride apps along with Grab, UberEats has been quickly catching up to the local market leaders like JustEat and Swiggy. For example, UberEats only ranked at average of 7.4 in terms of downloads in UK's food and drinks category as of January of 2017, well below Just Eat's average of 2. In May, its rank has already risen to an average of 3, just below Just Eat's rank of 1.2.

Where Uber Eats Isn't Doing So Well

However, UberEats could not recreate its sucess in markets where Uber did not have a significant user base. For example, Uber has not been all that popular in Germany and Spain due to public sentiment and regulatory problems, UberEats has not been able to take off in a meaningful way in the country.

Interestingly in Singapore, Uber and UberEats had been winning their respective categories until Grab started to beat out Uber as the top ride-hailing app since January of 2017; since then, UberEats had also started to lose to its competitor Foodpanda. However, it's worth noting that both Uber and UberEats are still quite successful in Singapore and are continuing to compete neck to neck with Grab and Foodpanda.

Reason For UberEats's Success

What’s driving UberEats success where Uber was also successful? Most online delivery services solve one problem: they connect the consumer with restaurants through an online market place. In most cases, restaurants have needed to make the actual delivery on their own with hired personnel.

The problem with this "traditional" model is that most restaurants are not loyal to one particular platform. The restaurant business is a notoriously difficult one, and therefore restaurant owners are more than willing to use several of these food delivery apps at hte same time: more order is always better, no matter where they come from. Therefore, it's actually not that difficult for a new service (i.e. UberEats) to enter the market and provide a "good enough" list of restaurants for users to order from. Once it acquires enough number of restaurants, it can easily garner the user base by providing discount coupons. This competitive dynamic has existed in markets like the US and, most notoriously, China, where well funded startups waged discount wars to fight for customers.

In this kind of market dynamic, UberEats enjoys a competitive advantage that others do not possess: Uber's driver (or biker in some parts of Asia) network. Because it can leverage its existing network of drivers to provide delivery, it can provide deliveries from restaurants that usually don't deliver, and can even provide a better customer experience by showing exactly where your food is. Essentially, because of Uber's infrastructure, UberEats can leverage that logistics network to provide fast and efficient delivery service at a lower cost. Uber’s brand name and balance sheet also give another advantage in marketing and providing discount coupons to attract more customers.

UberEats vs Grubhub, Just Eat & Delivery Hero

Given these findings, there are important questions to answer regarding market leaders like Grubhub, JustEats and Delivery Hero, who are all either already publicly listed or set to IPO soon. While it's relatively easy for Uber to replicate their success, it is much more difficult for them to replicate Uber's delivery infrastructure; how can they encourage drivers to join their network when they can only offer food delivery jobs while Uber can provide that and more? In fact, Grubhub has been acquiring local delivery companies that own fleets of cars just to compete in a few regions.

True, both Grubhub and JustEats benefit from their massive market shares in metropolitan cities like New York and London where bikes are more often used than cars for food deliveries, rendering Uber's driver network less useful there. However, Uber's advantage in other markets is bound to have some meaningful impact on their growth in other areas. With all of these companies valued at astronomical valuations, investors must tread carefully when considering buying these companies' stocks.

Market Capitalisation2017 PE2018 PE
Grubhub$3.2bn39x31x
JustEats$5.5bn37x27x
Delivery Hero$4.5bn

Detailed Monthly Download Ranking Data of Online Food Delivery Apps by Country

CountryCompanyJan-17Feb-17Mar-17Apr-17May-17
USUberEats 1.68 1.36 1.29 1.50 2.24
DoorDash 10.84 10.39 9.84 7.60 5.71
Grubhub 7.23 7.68 7.23 7.30 8.29
UKUberEats 7.42 5.29 4.19 3.30 2.95
Just Eat 1.97 1.68 1.65 1.00 1.19
FranceUberEats 1.45 1.00 1.03 1.57 2.29
Deliveroo 3.94 3.32 3.10 3.73 3.00
GermanyUberEats 65.77 54.82 60.10 65.03 63.10
Lieferheld 5.00 4.79 4.81 5.03 4.67
SpainUberEats 25.19 10.46 18.71 20.00 20.00
Just Eat 2.03 1.68 1.65 1.97 2.48
AustraliaUberEats 1.03 1.04 1.03 1.10 1.23
Deliveroo 4.87 3.82 4.58 4.10 6.18
IndiaUberEats 19.81 18.93 21.74 19.50 7.81
Swiggy 1.48 2.39 2.71 2.00 2.10
Foodpanda 3.74 4.07 4.13 3.93 3.86
Zomato 5.19 5.96 5.58 5.07 5.48
IndonesiaUberEats 13.90 12.18 13.26 10.43 10.19
Foodpanda 28.04 18.33
PhilippinesUberEats 10.71 8.64 9.68 9.87 8.10
Foodpanda 2.35 1.68 1.97 2.70 2.24
ThailandUberEats 16.77 3.00 6.58 4.23 4.33
Foodpanda 3.74 3.04 3.65 2.37 2.90
MalaysiaUberEats 9.16 9.39 11.23 11.23 9.57
Foodpanda 2.48 2.50 2.45 2.97 2.52
TaiwanUberEats 9.35 11.00 8.06 7.10 8.86
Foodpanda 10.55 8.54 9.26 10.27 11.00
Hong KongUberEats 3.87 2.86 4.16 3.97 4.95
Deliveroo 6.90 7.18 6.48 3.63 4.86
SingaporeUberEats 1.42 2.71 2.29 3.37 3.14
Foodpanda 1.68 1.18 1.06 1.07 2.33
Korea배달의 민족 1.16 1.21 1.00 1.23 1.43
배달요기요 2.06 1.96 2.74 2.53 2.43
배달통 2.84 2.82 2.42 2.53 3.48
JapanUberEats 37.35 36.29 24.13 29.80 36.38
出前馆 - Delivery House 21.58 23.00 25.16 25.30 30.05

Methodology

To gauge popularity of the top online food delivery apps in each country, we collected their download rankings within the food and drink category of the Apple App store. We focused our research to the top two or three apps in 16 different markets: Australia, France, Germany, India, Japan, Korea, Hong Kong, Indonesia, Malaysia, Taiwan, Philippines, Singapore, Spain, Thailand, the UK and the US. From the daily download rankings, average monthly download rankings were used to determine the app’s popularity in each market. For purposes of this study, delivery apps of specific food chains like McDonald's were not considered.

Comments and Questions