Aggregation losses indicate the value of the platform model

As food delivery services in the United States and abroad struggle to make the model work, Uber stands out as a rare success story, at least for now.

The Indian food delivery group Zomato announced Friday, February 11 third quarter losses lower than those of the previous quarter, but still significant at 36 million dollars. Similarly, another Indian food delivery giant, Swiggy, amid a major sales slump, has also seen its losses narrow significantly, according to multiple reports on the company’s recent regulatory filing, but those losses continue. are still high at around 215 million dollars.

Read more: Stocks fall as Zomato delivers lukewarm third-quarter results

Additionally, German food delivery giant Delivery Hero said Thursday (February 10) that it too is likely to post losses this year.

See more : Delivery Hero sees record drop amid bleak backdrop

These grim results and projections come less than two weeks after news broke in late January that super-fast grocery delivery services popping up in the US and other parts of the world can lose up to $20. per order on average, including advertising spend.

Read more: Ultra-fast grocer losses rise amid uncertain future

Taken together, these numbers suggest that the economy of on-demand food delivery just isn’t working. However, Uber Eats now provides a counterpoint. After years of losses, Uber’s delivery business finally achieved its first profitable quarter in the fourth quarter of 2021, the company announced on Wednesday (February 9).

“There is no doubt now that delivery is here, both in food and other verticals,” Uber CEO Dara Khosrowshahi told analysts on a call. “Delivery reached a major milestone in the fourth quarter, generating $25 million of Adjusted EBITDA by segment…We see the shift to EBITDA profitability as a big moment, but ultimately just a step on the road of creating a self-sustaining and incredibly valuable business. Once this is achieved, delivery is well positioned to self-fund the growth of grocery, retail and local commerce.”

The success of the company’s delivery business stems in large part from Uber’s diverse platform approach. Rather than building an entire logistics network just for food delivery, Uber can double down with its rides and delivery business, and the company is also leveraging its delivery business from groceries, vending to detail and more.

“We are now making a cross-distribution between the conduct of people and the conduct of things, [and] it creates higher utilization for wage earners and makes the market more efficient,” Khosrowshahi said.

He added that as more merchants enter the market, more consumers order from it, and with more businesses and more orders, the business can handle shorter delivery times, which improves efficiency.

Given the relative newness of these food delivery services compared to other business models, a lot is still evolving. The expectation of local regulations could significantly affect these companies in the future. For example, New York City has moved to impose new laws on third-party delivery marketplaces, most recently requiring them to be licensed by the Department of Consumer and Worker Protection (DCWP).

See more : New York aggregators face new regulations and increased competition from direct channels

Such regulatory initiatives could significantly influence the price of these companies with very thin margins.

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