The history of food-ordering apps is one filled with successful competitors who never shied away from going the extra mile to make customers happy.
And as Uber Eats becomes one of the strongest players in the industry, despite its origin as a ride-sharing app, it’s become even clearer that when there’s a need, the market will find a way to make it possible. And it’s the customer who benefits as a result.
Unfortunately, the government is still here, taxing all do-gooders until there's nothing left to tax.
After Seamless disrupted the food-service industry by offering companies an online system for ordering food from restaurants and caterers in 1999, GrubHub tagged along, giving customers an alternative to paper menus in 2004. In just under 10 years, the two companies merged, becoming the top food-ordering app in the market.
Now, Uber Eats is about to deliver $10 billion worth of food around the world this year, becoming one of the globe’s largest food-delivery services and leaving U.S. competitors like Postmates, Caviar, and DoorDash in the dust.
In America, however, Uber Eats still trails behind GrubHub. But for how long?
Uber Eats and Taxes
Ten years after its inception, Uber is making food delivery a major part of its business.
As Forbes notes, Uber Eats is on track to generate about $1 billion in revenue in 2019. For the San Francisco-based company, that is something to explore — especially because the firm has been losing millions thanks to high operating costs, taxes of $411 million, and extra spending it does to keep the business popular.
In order to keep the business going, the firm is hoping to make Uber Eats the gem that will make its value jump from $76 billion to $120 billion. After all, Uber’s ride-sharing business is struggling in some parts of the world, and its self-driving car tangent is losing steam following a deadly accident involving an autonomous vehicle and a pedestrian in March 2018.
To persuade investors that they should invest in Uber instead of competitors, the firm will have to showcase Uber Eats as its most successful arm. Unfortunately, it could take a few years, if not more, for Uber Eats to stop losing money. Even CEO Dara Khosrowshahi admits he doesn’t know when the food-delivery app will be profitable.
But as GrubHub has shown it’s possible to survive and make an extra buck in this industry while paying drivers and marketing the service, Uber Eats head Jason Droege thinks that being profitable is only a matter of time. One of the reasons Uber executives stay positive is that most Uber Eats users don’t actually use the company’s ride-sharing app.
Even former competitors agree that the firm is focusing on the right market.
“Of all the side bets that Uber has made over the years, whether it’s autonomous or delivering other things or different modalities of transportation, this has come out as the clear number one in scale and executive attention,” former CEO of delivery rival Eat24 Mike Ghaffary told reporters.
With Uber Eats’ market share growing from 3 to 24 percent in 2018 and GrubHub losing some of the market control in the same year, Ghaffary might be right. However, it’s not going to be easy to cut costs by just adding more restaurant partnerships and batching orders so drivers pick up multiple meals at once. The firm will also have to find new ways to pay less in taxes, whether executives admit it or not.
As the Mises Institute’s Jeff Deist explains, taxes impact business and their behavior more than we might imagine. And if Uber is not able to find a way to cut expenses in other ways, it may have to radically alter its future decisions to avoid losing investors’ confidence.
With the app giant venturing into so many different markets, it’s hard to ignore that it might be slowly making its presence a guarantee. But if the company is unable to cover its costs and make some profit, there will be no incentive left to stay in business.
Washington’s newly elected lawmakers are all up in arms against major companies like Uber itself, and increasing tax revenue is one of their main goals. What’s left for us to see is whether Uber and other tech giants will survive or just pack it all up and move if lawmakers get their way.