Uber has become the envy of Didi

This article is from: Outside the Surface, Author: He Jinyi, Hei Yinke, Zhang Ranran, Editor: Fu Xiaoling, Cao Binling

Uber, which disappeared from China, has become the envy of Didi.

According to the latest statistics, Uber's market capitalization has soared to $160 billion, six times higher than Didi, which is huddled in the pink sheet market.

But in the head-to-head confrontation between the two in the past, Uber obviously lost more and won less:

At that time, Uber, as the pioneer of online car-hailing, entered the Chinese market with $2 billion in dimensionality reduction, and finally ended up "selling" Didi, giving Didi the title of "Uber butcher".

At a time when Didi was chasing and threatening to "compete with Uber in the global market", Uber was riddled with scandals, not to mention taking the offer, and even the founder Karanik was bombarded by investors and stepped down.

When competing in the capital market, the contrast is even more stark, Uber broke at the opening, and Didi rose 18.9% on the day of listing.

In the past, the defeated generals and the drama of the reversal of the situation are inevitably embarrassing. Some investors strongly support Didi, believing that in terms of efficiency, Didi's ride-hailing business is much higher than Uber's, and it is completely dragged down by the living environment.

But in fact, today's Uber is not only the global version of "Didi", but the global version of "Meituan + Didi". It can be seen that its food delivery business is comparable to the online car-hailing business and goes hand in hand.

Obviously, the business scope of the two companies is no longer in the same competitive dimension.

1. The United States' "Beijing, Shanghai and Guangzhou" is actually a "poor mine for takeaway"

When Uber was kicked out of China by Didi, its North American base business was also undergoing a catastrophe.

"Unless you can invent a flying bike, you don't have to worry about competition from Uber. At the 2016Q1 financial report meeting, GrubHub, the "first brother of food delivery" in the United States, disdained Uber Eats, which was born out of nowhere.

At that time, Uber had more than 2 million potential delivery workers (drivers), more than 8 million potential delivery users (online car-hailing users), and more than ten years of accumulated urban road maps.

GrubHub should have been prepared for it, but the reality was unexpected.

GrubHub's arrogance is evident from what users say about Uber Eats: A New York user complained on Facebook, "When I ordered lunch, it showed that it would be delivered in 15-26 minutes, but it made me wait 50 minutes." ”

Are the migrant workers here already starting to get angry if they take this kind of delivery efficiency into account? Of course, the migrant workers in the United States will not buy it.

Uber didn't expect such a bad situation either.

Like most food delivery players, it prefers New York, Washington, D.C., and other large cities with a high concentration of merchants and users.

However, the level of congestion in these cities is much higher than expected. In New York, for example, in 2017, the average driver spent 100 hours stuck in traffic.

In such road conditions, driving and running takeaways, the delivery time is like opening a blind box, and the basic advantages established by Uber's online car-hailing business have been broken.

In contrast, GrubHub avoids this thunderbolt by not providing a delivery service at all, mainly matching users and merchants. This determines that even if the delivery time is not guaranteed, users cannot blame the platform.

And more importantly, thanks to the early entry of the market, it has a first-mover advantage of a large number of enterprise users in first-tier cities - the direct connection between GrubHub software and the company's financial software allows employees to not only place orders with one click, but also directly reimburse.

In this way, the user's grievances are completely dispelled: for the workers, they can eat for free, and any mistakes can be forgiven.

It can be seen that even if Uber Eats spills out overwhelming subsidies, it still can't steal high-frequency users on GrubHub.

"If you can't beat it, join it", Uber Eats gave up its original advantages and began to learn from its peers, adding two-wheeler delivery services in New York, Washington and other areas.

But the problem is that the takeaway artifact electric car has been almost "blocked" by the New York government due to safety hazards, and the bicycle has nothing to do with "fast" at all.

Due to the timeliness problem, Uber Eats did not do it in first-tier markets such as New York until 2018, and continued to lose money.

On the contrary, GrubHub, the main player, is "as stable as Mount Tai" in these regions, such as New York, which has a market share of 71% in 2018Q4, and the gross profit margin of the platform once reached 52.26%.

However, this first-mover bonus is a kind of luck and a shackle.

Outside of large cities, the income level of second-tier cities and suburbs in the United States is not weak, for example, the average household income in second-tier cities in the United States in 2016 is equivalent to 99% of that of first-tier cities.

This means that users in these regions also have the ability to pay for food delivery.

However, GrubHub has shied away from these areas, and by 2017, nearly 70% of its business was concentrated in a few large cities.

If you don't eat the fat in your mouth, it's not because GrubHub isn't greedy, it's because you're not blessed.

In second-tier cities and suburbs, they have lost their corporate customer base, and they can only rely on timeliness to attract users to use takeaways.

Compared with first-tier cities, these areas have a sparse population and business density, and unified delivery is the most effective way to improve timeliness, which means that GrubHub can only start building its own logistics.

But this is not an easy task for GrubHub, which has already been listed.

In 2015, GrubHub tried to build its own delivery team and measured the profitability of this model — the profit margin fell from 76% to 31%.

In the eyes of investors, this was like saying "I'm going to burn your money and turn GrubHub into a less profitable model", and panic quickly spread, and GrubHub's stock price continued to plummet, forcing management to shelve the plan.

And the expansion of GrubHub is "held down", leaving a gap in competition for other players.

It can be seen that when Uber Eats launched its independent app, New York and Washington were not included in the first batch of cities, but were replaced by second-tier cities such as Seattle, Atlanta, and Houston.

Clearly, Uber Eats is trying to follow a path where "the countryside surrounds the city".

Second, without McDonald's, you can't win the dislocation war

In 2016, Lucy, a senior vice president at McDonald's, suddenly visited Uber Eats, and as soon as she came up, she put on a top hat for Uber Eats that "you are a good fit for our brand" and pleaded for cooperation.

Uber Eats was also excited, and quickly finalized the cooperation to tailor the service for McDonald's, and it only took two months and three days to enter the trial operation stage.

And gave McDonald's "VVIP" treatment, for example, always let McDonald's restaurants hang in the first place in the recommendation column, and promised to give McDonald's more promotional support.

Uber Eats is so urgent because the "dislocation war" outside the big cities is not easy to fight.

In second-tier cities, although Uber Eats has a basic order volume based on the wealth laid by the ride-hailing business, it cannot help Uber, which has been losing money for seven consecutive years, to block the crowd of investors.

In the suburbs of big cities, it is even more difficult to "open up wasteland", not to mention takeaways, and it is difficult to even enter the online car-hailing business.

At that time, the U.S. catering market had already matured, with a chain rate of nearly 55%, showing the characteristics of "reverse chaining" - the more suburbs and small cities, the more chain stores.

This means that the food delivery market in suburban and second-tier cities has become fatter, and Uber Eats can't afford to miss these two market cakes if it wants to counterattack.

At this time, McDonald's delivered to the door is exactly what Uber Eats wants.

McDonald's completed the layout of stores nationwide early, reaching 13,000, and in the hearts of 96% of primary school students in the United States, McDonald's grandpa is second only to Santa Claus in popularity, and the "McGate" masses have a wide base.

Note: Due to the small changes after 2017, the situation in 2024 will be replaced.

What's more, McDonald's at that time also had a demand for Uber Eats, even if the food delivery commission was as high as 15%-30%, and it even stood for Uber Eats at the performance meeting.

In those years, Burger King stores expanded rapidly, and Chick-fil-A was voted the most popular fast food restaurant among Americans in 2016, while McDonald's itself lost 5 million customers, and store sales declined significantly.

The anxious McDonald's did a customer survey and realized that it was losing "not fast enough".

Take Chick-fil-A as an example, its self-made ordering app, diners can order in advance, dine directly at the store or take it away.

This hits the pain point of diners who "hate queuing in the store the most", and once it was launched, it continued to top the free download list of the App Store in the United States.

McDonald's also tried to launch its own APP, but the internal process was too long, and the self-developed product was only implemented after 5 years.

It was too late, and at a time when it was too late, information about the Chinese market caught the attention of the headquarters - China was the only region that did not decline in the results reported from various places, and 20% of its revenue contribution came from food delivery.

This opened McDonald's thinking: 75 percent of its global customers live within three miles of restaurants, which is exactly within the optimal delivery distance for takeaways.

Uber's delivery capabilities and global layout coincide with McDonald's global food delivery demand, so a cooperation between you and me has begun.

But things didn't go as smoothly as expected, and in the case of the first test of the two companies in Florida, Uber Eats immediately increased its orders by 20%-30%, but it was not enough to be at a loss.

Fortunately, many new users have been attracted to it, and the repurchase of users is also remarkable, and Uber's goal of opening up new markets is gradually being realized.

It can be seen that Uber Eats quickly opened up its sphere of influence, single-handedly lifting suburban areas such as Livonia to the list of the fastest growing food delivery in the United States.

Taking advantage of the highlight moment of performance, Uber accelerated its listing and used 2 pages of "thanks" to McDonald's in the prospectus.

Just when the market was expecting Uber to help McDonald's alleviate the loss pressure of the ride-hailing business, and even dreamed of turning a profit, McDonald's franchisees stopped doing it.

The ultra-high delivery commission kept them working for Uber Eats, and in order to save profits, they formed a national homeowners association to force McDonald's to cut seats with Uber.

In desperation, McDonald's had to end its exclusive cooperation with Uber Eats in the United States and the United Kingdom, and began to cooperate with other food delivery companies such as DoorDash and JustEat.

This made the market gasp, you know, Uber Eats itself is burning money for growth, data shows that even by 2019Q4, the food delivery business still contributed less than 25% to Uber's overall order volume, resulting in a loss of more than 75%.

McDonald's is one of the largest sources of orders for Uber Eats, with sources close to Uber Eats in the UK saying that McDonald's once contributed 60% of its size.

Now that McDonald's is leaving, the days of Uber Eats making money are even more distant.

Uber understands this, but from a company's perspective, the long-term value of the food delivery business may be more important.

3. The epidemic catalyzed "Meituan + Didi"

"It took us three years to create a second Uber internally. ”

In 2020Q2, when the global online car-hailing track was bleak due to the epidemic, Uber executives said in a high-spirited manner at the results meeting that the company had found a "second curve" for growth.

At that time, the volume of Uber's food delivery business officially surpassed that of the ride-hailing business, and to some extent offset the latter's decline, making Uber's performance more resistant than Lyft and other peers.

Uber's later performance meeting also mentioned that more than 20% of users in the United States and more than 40% in the United Kingdom are food delivery consumers.

It can be said that without the support of the food delivery business, Uber's cold winter may come more violently.

In the early days of the pandemic, there was a massive loss of ride-hailing drivers due to fears of infection. During this time, they usually live on relief subsidies from the state government.

And this money ($600-1,000/week) is higher than the income of some drivers (around $700/week), so when the epidemic eases and places try to open up travel, many drivers are reluctant to risk returning.

"No one is available" travel platforms have to spend money to attract drivers to return to work.

Lyft says drivers will be rewarded with $800 when they return to the platform, and Uber has launched a $250 million "stimulus package" to ensure that drivers (excluding tips) earn more than $35 per hour on a median hour.

However, this caused dissatisfaction among investors, and at the current performance meeting, all management companies were caught by analysts about profit loss.

In this situation, compared with Lyft, which only has a travel sector, Uber's advantage of "walking on two legs" is highlighted - playing the card of food delivery.

It can be seen that Uber first integrates the delivery and travel in the app to guide the driver to maneuver between the two, and then uses the cross-scheduling algorithm to deliver travel orders for drivers during the commuting rush hour and delivery of food orders during the meal rush hour.

In this way, drivers can smoothly connect between carrying people and delivering food, reducing the distance they run and increasing their revenue. As shown in the chart below, Uber drivers earn more than other single travel or food delivery platforms.

And wearing multiple hats inevitably requires more work. The data shows that the working hours of part-time drivers are 1.1 times that of simple online car-hailing drivers and 1.7 times that of simple food delivery drivers.

Drivers naturally don't have the extra energy to take orders on other platforms, and Uber has been able to firmly "hold" the drivers.

Seeing that the number of drivers has been rising, Uber has begun to switch to the "hunting" mode and constantly raise the take rate.

Of course, union-backed drivers are not easy to bully, and ride-hailing drivers across the United States have risen up one after another, striking to resist the squeeze of Uber and Lyft, and demanding higher wages.

The pressure is coming again.

Uber, which is reluctant to subsidize anymore, has once again chosen to use food delivery to relieve itself: the new Uber One membership model has reduced the membership fee from $24.99 to $9.99 per month, which is on par with other platforms.

From the user's point of view, for $9.9, you can have preferential rights and interests covering both daily needs of taxi hailing and food delivery, and it is difficult to refuse such a temptation.

Reflected in the data, in 2022-2023, Uber membership rose from 12 million to 19 million.

Taking takeaway as an example, Uber members not only drive the order volume, but also contribute half of the takeaway orders.

What's more, Uber has already dug all kinds of gold holes and is ready to harvest users.

Starting in Q2 2020, Uber changed the name of food delivery (Eats) to Delivery, incorporated the intra-city delivery service of grocery stores and supermarkets, and launched Uber Connect, which is similar to Meituan Flash Delivery.

According to the data, from 2020Q4 to 2023Q4, the number of users who switched from catering to ordering retail increased from 8% to 14%, and these cross-category consumption users contributed more orders to Uber.

In addition, the transaction data generated during the period can also be used to optimize the algorithm of accurate recommendation and increase the purchase amount.

With such an increase in consumption frequency and consumption amount, the driver's income will rise, and the platform will naturally not continue to go on strike, and the platform can also make money to tide over the crisis.

It can be seen that Uber's "Meituan + Didi" model has gradually become clear and powerful in the catalysis of the epidemic.

brief summary

In 2018, Didi also expanded its takeaway business, but the planned investment of 10 billion yuan, after burning 1 billion, disappeared.

At that time, many people attributed Didi's shallow taste to "Meituan and Ele.me are both strong, and Didi's rush can't bring much noise".

But digging deeper reveals that competition may only be a façade.

In Didi's eyes, "if internationalization fails, we will also become a diversified company in China, but this is a strategic failure." ”

It is this business idea of "taking internationalization as the only success" that determines the fate of Didi's takeaway expansion.

From this perspective, Didi may also find it difficult to become an Uber.