India performance eats into Uber’s food delivery margins

The interior of the office of ride-hailing service Uber is seen in this picture in Gurugram, previously known as Gurgaon, on the outskirts of New Delhi, India, April 19, 2016. REUTERS/Anindito Mukherjee/File photo

Heated competition and increased incentives in the Indian market weighed heavily on Uber Eats’ take rate in the first quarter of this year, the company revealed last week.

The take rate is the percentage of each dollar a company keeps as transaction-based revenue from the gross food sales on its platform.

For Uber Eats globally, take rates as expressed by the percentage of adjusted revenue to gross bookings fell from 12.42 per cent in Q1 FY2018 to 7.78 per cent in Q1 FY2019.

During the company’s earnings call, Uber CFO Nelson Chai said that increased incentives to consumers, drivers and restaurants in India were behind nearly half of the year-over-year decline in Uber Eats’ take rate during the quarter.

The company has been making significant investments in incentives and promotions to help drive growth in India, a country in which local competitors, particularly Ola, Swiggy, and Zomato, are well capitalised and have local operating expertise.

Swiggy had in December 2018 raised $1 billion in funding, in addition to two other rounds last year, and has since expanded to general deliveries. Uber’s other food delivery rival in India is Zomato, which is backed by Chinese tech giant Alibaba.

“[I]t’s growing very, very quickly. There are two competitors that are very aggressive. We are doing well on holding our own but it is a market where we are funding both the eater, the courier, as well as the restaurant in terms of building the business,” Chai told analysts.

Uber CEO Dara Khosrowshahi added that the company expects the take rate for the Uber Eats business to increase over the rest of the year.

Excluding driver incentives, Uber Eats reported $536 million in Q1 FY2019 revenue, an 89 per cent jump from the same quarter last year and a 23 uptick from the fourth quarter of 2018.

In February, the Economic Times had reported that Uber Eats had held talks with rival Swiggy to sell its India business. Intense competition has also forced ride-hailing giant Ola, which acquired Foodpanda’s local unit in 2017, to pivot the business to focus on in-house brands, TechCrunch reported last month.

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.