Uber sees grocery delivery sparking growth
Delivering groceries is Uber Technologies Inc.’s next frontier, at least in Latin America.
The ride-hailing company’s Uber Eats division has until now focused on delivery of prepared food from restaurants.
Consumers stuck at home have boosted that business globally by 52 per cent to US$4.68 billion in the first quarter, according to the company’s most recent report.
Uber plans to build on that in Latin America by expanding the grocery delivery service, Cornershop. The company is seeking a majority stake in the Chilean startup — a deal that has been approved in Chile and is being reviewed in Mexico. Now that talks with Grubhub Inc. fell through, the pressure is rising to find a new source of growth at Uber.
“Delivering groceries is what’s next for us,” Uber Eats’ director for Latin America, Eduardo Donnelly, said in an interview. Part of what attracted Uber to Cornershop is the technology behind its app, Donnelly said. This includes updated inventories from all the stores it works with as well as a giant database of users and their consumption patterns.
Cornershop, the largest grocery delivery platform in Mexico and Chile, lets users order groceries from stores such as Costco Wholesale, Petco and Walmart. Some participating stores add a delivery fee to customers’ bill, while others hike each product’s price.
Terms of the deal haven’t been disclosed and Donnelly declined to comment on them. Walmart Inc. had previously tried to buy Cornershop for US$225 million, but Mexican authorities opposed the move for antitrust reasons.
Grocery delivery is an area that has seen rapid growth following the COVID-19 outbreak. Instacart Inc., a leading U.S. service, hit a Us$13.7-billion valuation in a funding round last week. For comparison, that matches the price Amazon.com Inc. paid for Whole Foods Market Inc. in 2017.
The arrangement could play a significant role in Uber’s strategy of layering more profitable services atop ride-hailing.
In Brazil, many people who only used Uber’s ride feature have only recently started to cross over to Eats, Donnelly said.
Since the deal was announced, Cornershop has started operating in Peru, Colombia, Brazil, Canada and in the United States.
“That business is absolutely exploding in the right way,” CEO Dara Khosrowshahi said in a Bloomberg TV interview in March. “We have a global brand, and we can essentially take Cornershop and make it a global brand.”
Uber Eats’ total orders in the region doubled in April and May as shoppers stayed home, Donnelly said. The service also saw a 75-per-cent jump in shops joining the platform as business dried up amid lockdown measures.
The rapid growth has raised concerns as well: Delivery workers across the region say companies like Uber and Rappi SAS haven’t done enough to protect them given the increased risks they’re incurring for doing what they consider is an essential job.
Under the hashtag “Yonoreparto,” which translates into “I Won’t Deliver,” couriers in places from Buenos Aires to Mexico City are demanding better working conditions and pay. Some went on strike on May 29, vowing to not deliver a single package that day.
Couriers infected with the coronavirus or put in quarantine can apply for a payment equal to wages earned in the past 14 days, Donnelly said. Delivery workers in Argentina, Chile, Costa Rica, Peru and Mexico are asking for a higher cut of the delivery fees, increased safety and affordable insurance against accidents. They are also asking governments to pressure companies to recognize them as employees, not contractors.