- Uber Eats is the cheapest delivery service for a hamburger and fries meal based on an informal study by MarketWatch.
- The meal, which was ordered from a Five Guys in New York City, cost $15.54 compared to Grubhub, DoorDash and Postmates, all of which had higher fees.
- Compared to Grubhub, which had the most expensive order, the total price for Uber Eats was $7.76 less. MarketWatch reported that Grubhub disputed the claim by pointing to a report done by investment bank BTIG that called its delivery service the most cost effective.
While Uber Eats could likely benefit as the lower priced option among consumers, it won't be able to keep prices low if it's not able to consistently grow its revenue stream.
While Uber's IPO prospectus revealed that Uber Eat's revenue has been growing and surpassed $1.4 billion in 2018, it will need to continue increasing, especially with Postmates and potentially DoorDash looking to go public. What Uber Eats has on its side is that it has a much larger global reach than its other U.S.-based competitors. It partners with 220,000 establishments in more than 500 cities around the world and reaches 15 million users, according to its prospectus.
But the third-party delivery space is getting tighter. Waitr, which went public in November, boasted a 287% increase in revenue during the fiscal 2019 first quarter following its acquisition of BiteSquad. It also added over 3,600 restaurants to its platform, added over 240,000 active diners and expanded into 49 new cities, according to an earnings release. Grubhub grew revenue by 39% to $324 million during the first quarter of 2019 compared to the year ago quarter, according to an earnings release. Its active diners grew 28% to 19.3 million during the quarter.
With increased competition nationally, Uber Eats will need to move into more U.S. cities and add restaurant partners domestically. However, if it can can grow at scale despite its pricing structure, it could push other providers to lower their fees to compete. But so far, DoorDash overtook Grubhub for market share for total consumer spend even though Uber Eats has the highest number of food orders. If it were to increase fees, its total share of the market based on spend could easily rise.
Uber Eats could be under additional pressure to raise fees following Uber's disappointing IPO, but some analysts blame its poor showing on the impending trade war between the U.S. and China, fallout from Lyft's IPO performance and a wait-and-see approach from traders, all of which could change by its first earnings release in a few months. If any of those situations were to shift, Uber Eats may not need to raise its prices.
The company already revised its fee structure in March removing its $4.99 booking fee and implemented a sliding scale of fees that varied depending on the consumer's location and availability of couriers. It also added a fee for small orders.
Uber Eats also has been renegotiating its exclusive partnership with McDonald's, which could end up with a better fee structure for franchisees and the loss of its exclusivity. This could be detrimental to Uber Eats, which has expanded this partnership to 13,000 locations globally, but it may be some time before the true impact is realized.