On-demand delivery apps have taken the food industry by storm. One such food delivery start-up that has made big and is popular amongst the consumers is Uber Eats. With over 66 million active users, the app has garnered around $4.8 billion in 2020. The app is a one-stop destination to treat all the cravings and get them delivered to the doorstep. While food delivery apps have made it convenient for people to get the food of their choice delivered at the doorstep, it is always interesting to know how the food delivery apps work and how they generate income. Let us take a look at how Uber Eats makes money.
How Does Uber Eats Make Money?
Uber Eats is a platform connecting the customer with the restaurant owner via delivery personnel, making Uber Eats a three-sided marketplace with the platform at the center. The platform revolves around three players- the customers, restaurant owners, and delivery personnel.
Here’s how Uber Eats makes money- the customers pay a nominal fee as delivery charges and the cancellation fee in some cases. The restaurant owners pay the agreed commission percentage on each order, while the delivery personnel pays a portion of the amount they make as the driver’s fee. Let us take a detailed look at how Uber Eats makes money.
- Delivery Charges- As mentioned earlier, Uber Eats charges a nominal fee as delivery charges from its customers. The delivery fee of each order depends on the following factors- location of the customer and the order total.
Orders below $10 are charged with a small order fee of $2. Likewise, a variable delivery fee is applied depending on the customer’s location. In addition to this, the platform also charges service fees amounting to 15% on an order’s subtotal.
- Cancellation fee- Uber Eats doesn’t have fixed cancellation charges. The cancellation policy that they follow entirely depends on the order status. Customers needn’t pay any additional charges if they cancel the order before the restaurant accepts it. However, they will only receive a partial refund if the restaurant has already accepted the order or been picked up by the delivery partner.
- Surge Pricing- The algorithm of the Uber Eats platform follows dynamic pricing during busy/surge hours. The surge fee is charged on two main factors- the total number of orders in a particular area at a given point of time and the availability of delivery partners. Based on these factors, the surge price can be as low as 1.13X or as high as 3X.
- Delivery fee- Delivery partners have to pay nearly 17% of the total amount they make from each order to the platform. Uber Eats charges more delivery fees from drivers delivering in the surge areas.
- Commission on every order-b
- Promotions/Advertisement- Uber Eats partners with several restaurants and food chains to promote their business on the platform. Restaurants partner to gain more visibility and sales, while Uber Eats profits from the commission it receives from the partnership. As part of the partnership, the platform features issues special discount codes or advertises its restaurant partner.
Working of Uber Eats
Founded in August 2014 as an experimental service, Uber Eats became popular with customers in the USA and worldwide. Ranked as the USA’s top 3 food delivery service, Uber Eats is growing fast consistently into a brighter future. So, what is Uber Eats’ business model that garnered tremendous success and popularity?
As discussed earlier, Uber Eats is a three-sided marketplace involving customers, delivery partners, and restaurant owners. The working of the platform is simple and understandable. It has three strategies employed- Business to Consumers (B2C), Business to Partners (B2P), and Business to Business (B2B). Here are some simple steps of how the platform works for the three key players-
- The customer creates an Uber Eats account.
- They search for a particular restaurant or cuisine.
- They select the desired payment method and place the order.
To become a delivery partner, the individual should meet the minimum requirements mentioned on Uber’s website.
- Uber delivery partners have a separate app- the Uber Eats delivery partner app.
- Interested candidates should upload the required documents and meet the minimum requirements to get enrolled on the app.
- After creating a delivery partner account, the app will display orders from nearby areas with estimated fare per order.
- A delivery partner has an option whether or not to accept an order.
- After delivering the order, the platform displays their earnings per day and the delivery fee they need to pay the platform.
The restaurants listed on the Uber Eats platform need to focus on preparing the food and packing it. Everything else is taken care of by the platform. Restaurant owners need to follow the below-mentioned steps to get started on the platform.
- Head to the Uber Eats website, scroll to the footer section, and click on the “Add your restaurant” option.
- Fill in all the restaurant credentials like name, address, contact number, etc.
- Wait for the partnership confirmation from Uber Eats.
- After partnership confirmation, Uber Eats sends a starter kit that includes online ordering software and a tablet.
- The platform conducts an onboarding session to make the restaurants get acquainted with the software.
- After completing the onboarding process, the registered restaurant will go live on the app, and it will start receiving orders.
Key Duties of The Platform
The platform connects all the three key players, maintaining the food triangle. In this process, Uber Eats has several activities to focus on. These include-
- Maintaining the platform
- Developing and updating the app and its algorithm as per the growing demand
- Marketing the restaurants listed on the platform
- Drafting advertisement campaigns to market the platform and generate new users and partners
- Working on customer feedback and communicating the same to delivery partners
Expenses And Revenue
While the platform has some key activities to execute, it requires some spending. The expenses of the platform include-
- Maintenance of the platform
- Spending on research and development
- Marketing to acquire new customers and partners
- Legal costs
- Customer support costs
- Credit card processing fee
As previously mentioned, the platform generates its revenue from commission on every order, delivery fee, surge pricing, restaurant partnership, cancellation fee, promotions/advertisements.
What Sets Uber Eats Apart?
The market is flooded with many food delivery platforms. Certain factors made Uber Eats stand out from the competition, making it a popular food delivery service in the US. Here are some of them-
- Faster Delivery- The platform promises to deliver every order within thirty minutes. The platform has a fast-working staff to ensure faster delivery.
- No minimum order- Unlike other food delivery platforms, Uber Eats doesn’t have the minimum order concept. A customer can order any food they like by paying a standard delivery fee.
- Global Presence- Uber Eats owns 29% of the international food delivery. With this, the platform is leveraging its dominance and using every opportunity to penetrate local markets and beat the competitors.
- Customers- The majority of the platform users belong to the age group between 25 to 30. The platform benefits from the users of its Parent Company, Uber, which already has millions of monthly active users worldwide.
- Functioning of the platform- The platform is developed, prioritizing the convenience of its users. Every aspect of the platform is carefully organized, starting from order management to order allocation and order dispatch.
Competitors For Uber Eats in The US
As the top three food delivery service in the US, Uber Eats has two main competitors, obstructing it from attaining the top one position. The two main competitors for Uber Eats are- Doordash and Grubhub. Let us now get a detailed look at these two food delivery platforms.
Doordash stands first in the list of top food delivery services in the US. With a 56% market share in the US, the San Francisco-based company is one of the largest food delivery platforms in the US. The platform currently has 20 million active users and 2 million delivery couriers in the US alone. Serving over 450,000 merchants, the company made a revenue of $2.88 billion in 2020.
Standing second on the list, preceding Uber Eats is another American food delivery service- Grubhub. With over 31.4 monthly active users, the platform works with over 300,000 restaurant partners, with operations in over 4,000 US Cities. Established in 2014, the platform made a revenue of $1.8 billion in 2020 and is popular among the younger generation.
Future of Uber Eats
Since its launch in 2014, Uber Eats has seen an upward trend and steady rise in the market. The company has overtaken most of its competitors and currently stands as the US’s top three food delivery service. The company has already established itself in the food delivery market by controlling nearly 29% of the global food delivery.
The company is expected to grow even further with a steady rise in the fast-food market and an inclination towards work from home culture. The company has an even brighter future if it continues to satisfy its customer base while maintaining and uplifting the current standards.
The three-sided marketplace platform, Uber Eats, gets its income from the following- delivery charges, cancellation fee, surge pricing, delivery fee, commissions on every order, and promotions/discounts.
Frequently Asked Questions
- What is the current net worth of Uber Eats?
Operating in over 6,000 cities with approximately 66 million active users, Uber Eats controls nearly 29% of the global food delivery. The company was valued at $20 billion in 2020. With a revenue of $4.8 billion in the same year, with a 152% increase year-on-year. Uber Eats is currently ranked as the top three food delivery service in the US and is on the path to surpass its competitors soon.
- What are the payment methods offered by Uber Eats?
All the transactions made on the Uber Eats app or website are processed by the Uber Technologies account, the parent organization of all other Uber departments. As of 2021, customers can pay for their orders by using any of the following methods-
- Payments with debit/credit cards
- Uber Cash
- Bank account, by integrating it with the Uber Eats account
- How to Add or Remove a Payment Method from an Uber Eats account?
As Uber Eats offers multiple payment options, users can add, edit or delete a payment option at any time. However, the Uber Eats account requires at least one payment method set as default. So, if consumers want to delete existing payment methods, they should add a new payment method before deleting the existing one. Here’s how Uber Eats users can add or remove a payment method.
- Login to the Uber Eats account either on the app or on the website.
- Click on the profile icon.
- From the dropdown menu, select the “Wallet” option and click on the payment method you want to make changes to
- Click on the three-dot icon positioned at the upper right corner and choose the “edit” or “delete” option.
- Confirm the changes by clicking on the “Save” option
- What is the minimum hiring age at Uber Eats to be a delivery partner?
The minimum hiring age for an Uber Eats delivery partner varies by location and the transportation method used. For cyclists, the minimum hiring age is 18, while it is 19 for people driving a scooter. The minimum age required for driving a car isn’t specified as the rules differ from city to city.
Regardless of the transportation method being used, all the candidates should present valid government-issued ids, driving licenses, and other documents specified by Uber Eats. Interested candidates can find all information about the requirements on Uber’s website.
- How are Uber Eats delivery partners paid?
The money that an Uber Eats delivery partner makes comprises four factors- base fare, promotions, delivery fee, and tips.
- Base fare- It is calculated based on distance and time. While the company hasn’t shared how exactly they calculate the base fare, delivery partners usually get an idea of how much they can earn from each order before accepting it.
- Promotions- It includes earning in surge areas.
- Delivery fee- This includes pick-up and drop-off charges that are collected from the customers.
- Tips- Customers can tip the delivery partner while ordering the food or while receiving it. The tipped-off amount is completely allocated to the particular delivery partner.
On average, a delivery partner makes somewhere between $15 to $21 an hour after paying the delivery fee.