Uber’s newest advertising campaign for Uber Eats that aired during the Super Bowl this past weekend gathered attention for its interesting marketing strategy of showing people eating non-edible items.
A bold way to gather attention on the fact that consumers can use Uber for more than delivery of food, or themselves. Now Uber and many other companies are looking to capture a new market for delivering products within an hour timespan.
Whenever someone purchases an item online surely they would choose an instant delivery if available at no extra cost. Whether the product is a case of soda, clothing, chips, deodorant, or any other good, consumers would opt to have it in hand immediately almost 100% of the time. However, two huge factors get in the way of this actually occurring, time and money. People don’t want to spend time driving to a brick and mortar store to purchase deodorant and would rather just go through a few clicks on Amazon and have it arrive in two or three days. Anything faster than a few days often results in massive delivery fees on any site.
New services such as Uber Eats or Gopuff are allowing customers to receive goods they purchase online within 30 minutes. Additionally, charges are far below where they used to be for even overnight shipping as it's typically just a couple dollar fee in combination with a tip (hopefully a tip).
While nearly anyone would choose to have items delivered instantly, few are probably even willing to pay the small price of delivery when they could just wait a few days for free shipping. Someone buying a bag of dog food and a pack of batteries can probably stand to wait a few days in most cases. This is where the main advantage comes in for companies like Uber and Gopuff; emergency situations where people need a product immediately and cannot wait for it. The scale of the emergency can range from being totally out of dog food to really really wanting some Mountain Dew cause it sounds delicious right now.
There’s one main competitor though to less than 30 minute deliveries, GETTING IT YOURSELF. Yes people can pay $2 and a 20% tip for a six pack of beer and some pretzels but they could also go out and pick these things up for themselves at the cost of, in most cases where these services are available, a max 10 minutes round trip plus gas. Yes people love to be lazy and having items delivered beats picking it up yourself, but are there really that many people who are paying Doordash (DASH) and Uber Eats (UBER) delivery charges more often than picking up food?
If so, then yes this model for delivering anything in under 30 minutes will have a massive consumer base. Hopefully people are more willing to go to grocery and convenience stores on a regular basis to avoid these situations but if not then some of these companies stand to benefit.
Uber certainly heated up the conversation around this market with Uber Eats now delivering things that can’t be eaten. Uber certainly does have a large infrastructure that is ready to support this service on a massive scale (although it probably will continue to not be profitable unless it cuts costs drastically with a full fleet of self-driving cars or starts charging higher fees). However, it could face serious competition from its competitors in other areas such as Doordash and Lyft if they decide to offer a similar service.
Meanwhile, grocery stores such as Kroger (KR) or Target (TGT) offer their own delivery options to customers that became available and grew in popularity as a result of the coronavirus pandemic. The pandemic certainly led many people to finding alternatives for shopping in stores or picking up items in person. Should people remain uncomfortable with going to stores themselves, it would only increase use of delivery services like these and large retailers such as Kroger and Target can offer both food and other essentials to customers.
Lastly, Amazon (AMZN) of course should be considered its biggest competitor in the long-term as the firm looks to pretty much wipe out all brick and mortar stores and take over for services they provide. Prime shipping has already changed the way many people shop for pretty much any item as it has already gotten to the point of free two-day delivery most of the time. Additionally, Amazon already offers same day delivery in a number of markets and is famously looking to use drones in the future to offer its own 30 minutes or less delivery options that will undoubtedly be able to come in at a lower cost than Uber.
Whether or not people should pay extra to have things delivered to them is an entirely different question of will they. Small fees and tips may be enough to limit the majority of people using services such as these and even at those price points companies like Uber are losing money. In the long-term perhaps costs could be cut enough with self-driving cars or grouping orders together in densely populated areas. However, it's hard to see a situation where Uber is able to compete with the likes of Amazon or even large retailers in the race for delivery supremacy.
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