Why Uber Wants To Be In The Food Game

January 22, 2016

The competition for Uber is not Lyft or your local Yellow Cab service, it is every supermarket and restaurant on the planet

Originally published at Forbes.com.

Uber revealed Wednesday it is expanding its UberEats delivery service to include full menu offerings from dozens of restaurants in 10 cities across the U.S. over the next few weeks. Make no mistake, the competition for Uber is not Lyft or your local Yellow Cab service, it is every supermarket and restaurant on the planet.

Uber’s foray into food began on a hot summer Friday on July 18, 2014, when the company delivered ice cream on demand in 144 cities in 38 countries. In summer 2015 they did it again and expanded to 252 cities and 57 countries. Great publicity for sure; more importantly they were terrific experiments into supply chain management.

Food delivery on a mass scale is not a new trend. Looking back over 50 years ago, the once-mighty chain Chicken Delight offered delivery from its over 1,000 restaurants. Today, local restaurants use services such as TakeOutTaxi,Yummy, PinkDot, Eat24, GrubHub, DoorDash and even Amazon.com to deliver their foods to those who would rather eat-in. There is even a trade association (of course!) to support the industry, the Restaurant Marketing & Delivery Association, and the National Restaurant Association offers “8 Ways to build delivery sales.”

So why would Uber want to join this already crowded space?

Living in Los Angeles I’ve been fortunate to enjoy lunch and diners from UberEats – and I have never been disappointed. The daily offerings started as one specific meal from one or two local restaurants, then expanded to include brunch and late-night snacks; Uber then added a few more choices and a few more restaurants.

The expansion is all about continuing to push the logistics system to its potential. Uber tested this latest full menu iteration in Toronto with over 100 restaurants before announcing the 10-city launch.

Uber has had some missteps in its other attempts at local logistics. uberESSENTIALS promised “everyday items you need in ten minutes or less” in Washington, D.C., and the UBER Corner Store didn’t live up to its promise of “bringing the neighborhood shop to your door step.” I would not be surprised if the company is using this food delivery push to learn more about the dining habits of their customers in order to lay the foundation for grocery delivery, based on the success of InstaCart.

Kroger KR +0.00%, Walmart, ShopRite, Wegmans, Publix, Aldi, Fresh Direct, Amazon Fresh and just about every other chain and independent grocer is offering some type of pickup or delivery service. According to a June 2014 Harris Interactive Poll, a sizable share of U.S. consumers would pay a premium for same-day delivery. Business Insider reports that food and beverage is a $600 billion a year industry, the largest retail category, and has “been the least disrupted by e-commerce, with less than 1% of sales online.”

Travis Kalanick, Uber’s CEO and co-founder, has said many times that he sees Uber as a luxury brand and his vision includes “if we can get you a car in five minutes, we can get you anything in five minutes.” So why not take on the largest retail category?

What Uber and InstaCart bring to the party, and can do better than traditional grocers through the lens of Silicon Valley, is own the customer experience. While many supermarkets have instituted frequent shopper programs, the use of data is inadequate (except in the case of Kroger through their partnership with Dunnhumby and now 100% control of the 84.51 spinoff). The supermarket industry needs disruption and having C-suite leaders who started as baggers or stock boys may just not be enough to evoke the changes necessary.

Kimbal Musk, in an interview with CNNMoney said it all: “I think food right now, it feels like 1995 in the Internet days. The amount of innovation and excitement and enthusiasm is unbridled” and the money invested in food start ups by Silicon Valley topped half a billion dollars last year. 

We have witnessed great supermarkets like A&P, Pathmark, Walbaum’s, Dominick’s, Sweetbay and Haggen of yesteryear disappear and are seeing more closings from Walmart, Ralph’s and others; typically these have been replaced by other brick and mortar banners – this time it’s likely that with the Millennial and Generation Z shoppers, who grew up with mobile devices, want to buy 24/7 and see no difference between buying online or in a store the next great supermarkets may well be called Uber and InstaCart.