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News Article

Home Delivery Gains Momentum as Ride-Hailing Slows Down

By Andrea Villar | Mon, 08/10/2020 - 14:12

Mobility restrictions around the world led ride-hailing companies to focus their efforts on their food delivery divisions. The hit was felt in 2Q20 results, in which Uber reported a 29 percent revenue drop year-on-year reaching US$2 billion. Mobility revenue was down 67 percent year-on-year, while delivery revenue grew 103 percent. The effects of the pandemic caused travel reservations to decrease by 73 percent against the previous year. However, the pandemic boosted demand for Uber's food delivery business with a 113 percent. "The COVID-19 crisis has moved delivery from a luxury to a utility,” Uber CEO Dara Khosrowshahi said on the company's earnings call.

Khosrowshahi said Uber users will continue to order food and other items through Uber's delivery services even after the pandemic subsides and stay-at-home orders are withdrawn. Among other new delivery services offered by the company, Uber Connect allows users to send small packages via UberX drivers to local destinations. The service has made 3 million trips globally since it launched in early June, Khosrowshahi said.

To expand this booming business, in early July Uber reached an agreement to buy food-delivery company Postmates for US$2.65 billion through a stock transaction, which will give the hail-riding company a greater presence in the home-delivery business. “In Mexico, we are present in 49 cities in 29 states. Our goal is to reach every Mexican, with more cities and states on our horizon. We want to go from almost 50 cities to 100. At the same time, we are working to expand our geo-footprint in the cities where we already operate. We recently expanded to a few very large neighborhoods on the eastern side of Mexico City. We want to continue our expansions throughout next year, aiming to increase our square kilometer coverage by 30 percent in 2020,” told to Mexico Business News (MBN) José García-Pimentel, Director and General Manager of Uber Eats México.

In Mexico, home delivery apps have seen an increase in demand due to stay-at-home orders. In March, restaurant consumption through Rappi rose 10.98 percent, while UberEats saw growth of 6.24 percent, revealed a Fintonic report. Likewise, in April, Rappi increased its restaurant orders by 44.34 percent, while Uber Eats surged 24.06 percent and DiDi Food saw a rise in demand for deliveries of 15.12 percent. Meanwhile, in May, consumption in restaurants through Rappi increased 38.58 percent, while UberEats rose 14.80 percent and DiDi Food increased 4.46 percent.

The COVID-19 crisis in Latin America is forcing Uber to adopt the taxi model that it was supposed to displace from the streets of Latin American cities. The company has already offered taxi service in cities such as Madrid, Tokyo and Athens, where local regulation has made it difficult to operate. The company is also considering the launch of taxis in some parts of Mexico where local laws do not allow private transportation service through digital applications, a person familiar with the matter told Reuters.

Didi, Uber’s Chinese rival, has made great strides in recent years in the region. It already has an advantage in working with Latin American taxi drivers and has implemented health measures such as plastic barriers to maintain its market presence. In May, the company launched the DiDi Hero initiative through which the company invested MX$42 million (US$1.77 million) to support health staff in battling COVID-19. In addition, the company supported partner drivers with fixed income programs, as well as economic support should any member of their family got infected.

"We have seen that rides have dropped in some cities between 40 and 50 percent. Definitely this has an impact on margins. However, at this time, our vision is to support the community. We have invested in different initiatives that help the community reduce contagion while keeping partner drivers safe,” said Andrés Panamá, Director of Operations at DiDi México in an interview with MBN in May.

Photo by:   Mak, Unsplash
Andrea Villar Andrea Villar Journalist and Industry Analyst