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UberEats to remain for a long-haul in India

Written by Moulishree Srivastava Published on   3 mins read

Since its IPO in May 2019, Uber is cutting down on freebies to boost its loss making entities.

After Uber Technologies’ multiple failed attempts to sell off its Indian food delivery unit, UberEats, to its local rivals, the global ride-hailing giant is not planning to give up on it yet.

Manik Gupta, Uber’s chief product officer, in an interview to a local media Economic Times, said the company will not be folding UberEats operations in the country, even as it lags behind homegrown food delivery giants Swiggy and Zomato.

“It’s very early days for food, and I don’t think anyone has figured it out globally. Solving for a three-sided marketplace is a complex problem, and it will take a few cycles for the market to mature,” the report quoted Gupta, who was talking about customers, drivers, and restaurants.

According to Gupta, India constitutes about 12% of trips or transactions of Uber’s global volume, and is a strategic market for the company. He claimed that from an India perspective, UberEats is growing very substantially.

UberEats has been looking to sell its loss-making business in India, at a speculative valuation of about USD 300 to 500 million. According to multiple media reports, since the beginning of 2019, the ride-hailing company has been in talks with food-delivery majors Swiggy and Zomato, as well as e-commerce behemoth Amazon India that recently entered into food delivery space, for a possible buyout.

The move was in line with Uber’s global business strategy of exiting loss-making markets by selling its local business and acquiring stakes in competitors. In the past, Uber has made exits from several markets after enduring heavy losses.

In 2016, it sold its China ride-hailing business to local rival Didi Chuxing, taking an 18.8% stake in the latter. In March 2018, Uber exited Southeast Asia, by selling its ride-hailing as well as food delivery operations to Asian giant Grab, in which it now holds a 23% stake.

But India has proven to be more difficult. Given that none of the buyout talks in India have been fruitful, Uber has no choice but to turn around its food-delivery business.

In September, Uber integrated food delivery service into its main ride-hailing app to give better visibility, and made it easier for users to place order from UberEats. A month later, the mobility giant restructured its corporate holdings, bringing its India business, including food delivery, under Uber India Systems, a company it registered in the country. Earlier, the India business was a part of a Netherlands-registered entity called Uber BV.

According to a report in TechCrunch, UberEats has lost “more than a third of its business” in India in recent months.

Uber is now grappling with steadying its UberEats operations, hoping to turn the tide in one of the fastest-growing markets for food delivery in the Asia Pacific region. The Indian food delivery market is pegged to touch USD 17.02 billion by 2023.

The San Francisco-based ride-hailing company brought UberEats to India in May 2017, to compete with incumbent players Swiggy and Zomato. In December 2017, Ola joined the bandwagon by acquiring food delivery company Foodpanda India from German company Delivery Hero for USD 31.7 million.

Two years of splurging money on discounts to acquire customers, fighting for market share, and expansion across the country, has left all food-delivery firms reeling with heavy losses. After its listing on New York exchange in May 2019, Uber seems to be cutting down on freebies in the food delivery business–slashing discounts to customers and incentives to delivery persons to curb costs.

Uber is not alone in reducing investments in the food-delivery space. In May, Ola dropped out of the food-delivery race, pivoting to become a “food-first” company, that will focus on creating a portfolio of its own brands.

On its part, Uber is investing substantial resources in its grocery delivery business. The USD 600 billion online grocery segment is already crowded with Amazon, BigBasket, Grofers, Swiggy, and now Walmart-owned Flipkart, fighting for a larger pie of the market.

According to Gupta, the company is “expected to evaluate the local market.”

“We haven’t made any decisions in terms of when we are going to do it, but it is definitely an area we are looking at, at the corporate level,” Gupta told Economic Times.


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