- Uber Grocery and new delivery verticals are a $1.5 billion business for Uber.
- Uber said Tuesday that its customers can order household goods from instant delivery startup Gopuff.
- With grocery delivery, Uber joins a crowded field dominated by Instacart and DoorDash.
- See more stories on Insider’s business page.
The pandemic has fueled demand for the doorstep delivery of groceries and convenience-store goods, which has led to an explosion of new delivery options for consumers.
Uber is now looking for a piece of the action. The tech company launched Uber Grocery last July and has been scaling up its services ever since.
The ride-hailing giant’s Uber Eats division, which became a vital source of revenue for the company during the pandemic, is bullish on its new grocery-delivery service. On Tuesday, the San Francisco-based company announced plans to offer Uber Eats users household goods from Gopuff, a fast-growing leader in the “instant needs” delivery space.
The exclusive partnership with Gopuff, whose name reflects its origin as a delivery operator of smoking supplies, means Uber Eats customers will be able to order from Gopuff’s growing selection of nearly 3,000 goods.
Gopuff sells everyday essentials such as eggs, ice cream, pet supplies, beer, chips, cleaning supplies, and drugstore goods from micro-fulfillment centers across the US. The Philadelphia-based company, on average, delivers items in less than 30 minutes and 24 hours a day in most markets.
Delivery of Gopuff goods through Uber will kick off in June in 95 cities including Chicago, Miami, Houston, and Tampa. More cities will come on board by the end of summer.
Uber’s partnership Gopuff comes as the company expands its Uber Delivery business unit, which includes Uber Eats and Uber Grocery.
Though less than a year old, Uber Grocery and other new delivery verticals are “already a $1.5 billion business” for Uber, said Raj Beri, the global head of grocery and new verticals at Uber.
“We’re really kind of pushing toward a world where if you want to get anything within an hour, or instantly, in your city, we want you to be able to do that with Uber,” Beri said.
In 2020, Uber Eats saw revenue increase 224% year over year. During the peak of the pandemic, the delivery division of Uber had generated more revenue than its ride-hailing division in fiscal Q2 and Q3.
“Grocery deliveries could be considered a lot more cutthroat than restaurant food delivery,” said Hetal Pandya, a cofounder and an analyst at Edison Trends, referring to the number of competitors out in the space.
Online grocery is a jam-packed market
Uber Grocery is entering a crowded space, with multiple companies of all sizes vying to be the one-stop shop for instant needs. And those instant needs are facing an uncertain future.
“Post-pandemic, I don’t think that people are going to want to have delivery as much as everybody thinks, whether it’s DoorDash, whether it’s Uber Eats, and so on,” said Phil Lempert, a supermarket analyst.
Still, year-over-year demand continues to grow for online grocery orders, recent data from Edison Trends showed.
The firm, which tracks online grocery transactions, said e-commerce grocery spending was up 88% in February 2021, compared to February 2020. But in March, spending increased by 37%.
While March orders were down compared to February, Pandya said the transaction data indicated that there was still a desire among consumers to order groceries online for either delivery or pickup.
“Not everybody has tried it yet. More people will grow into this channel,” she said. “Even if there was some leveling that happens, people are not going to abandon this altogether.”
Customers who want to try online grocery orders have lots of options. Restaurant delivery company DoorDash is pushing grocery options to compete with Instacart, which has raised millions to secure its dominance in the $100 billion e-commerce grocery sector. Dozens of same-day grocery-delivery startups such as Gopuff and Farmstead are also entering the sector and have received millions from investors. Kroger, Target, and Walmart are also ramping up their delivery operations to improve speed.
DoorDash, which has headquarters in San Francisco and went public in late 2020, has been expanding its services beyond restaurant delivery since before the pandemic. DoorDash delivers from more than 1,800 stores through partnerships with Wegmans, Walmart, 7-Eleven, Wawa, CVS, and Hy-Vee. Additionally, DoorDash operates “dark warehouses,” dubbed DashMarts, that deliver curated groceries and household goods directly to consumers. Dark warehouses or dark stores are spaces entirely devoted to online orders.
Instacart is also casting a wide net. Besides supermarkets, it now delivers from Sephora, Best Buy, Michaels, Walgreens, Costco Prescriptions, 7-Eleven, and Dick’s Sporting Goods.
Uber Grocery’s strategy
For Uber, its grocery strategy is the same as Uber Eats, Beri said, it wants to dominate in the cities it serves.
“We have stated even just globally that we want to be the No. 1 or No. 2 in markets that we operate for Uber and Uber Eats, and our aspirations for grocery are no different,” Beri said.
Last July, Uber jump-started its entrance into grocery delivery by taking a majority stake in Cornershop, a popular e-commerce startup in Santiago, Chile. That move allowed Uber to launch grocery-delivery services quickly in global markets and the US.
As the platform expands to new markets, the company’s “seeing really strong retention,” Beri said.
Uber’s grocery rollout started in select cities in Latin America. It has since expanded to 17 countries. In the US and Canada, Uber Grocery is available in more than 20 major metro areas in Texas, Florida, and New Jersey.
In the US, Uber is working with mostly smaller, regional grocery chains such as Southeastern Grocers, Red Apple Group, Fiesta Mart, Westside Markets, Streets Markets, and Morton Williams. In Canada, Uber Grocery is partnering with Walmart. Uber Direct, the delivery fulfillment and logistics part of the business, offers white-label services. Uber works with grocers, retailers, and other businesses that want to deliver but also want orders to come via their own websites or apps.
“Our business, as well as our aspirations, are global. And we are also pushing fairly aggressively in the US as well,” Beri said.
Axel Springer, Insider Inc.’s parent company, is an investor in Uber.
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