UberEats margins dip in Q1 due to increased discounts & incentives

Uber, a US-based ride-hailing giant’s food-ordering subsidiary ‘Uber Eats’ has reportedly witnessed a drop in margins to 4% on a year-on-year basis. The drop in the margins were the cause of huge discounts to customers along with extra incentives to drivers and restaurants, cited ET.

In its first quarterly earnings report as a public company, Uber reported that the commission earned by UberEats dropped 4% on a year-on-year basis, half of which was attributed to increased investments in its India food ordering unit where it competes with bigger rivals Swiggy and Zomato. 

American multinational transportation network company Uber and its parent food company was founded by Garrett Camp and Travis Kalanick. Uber Eats made its entry into food delivery business in 2014 with the launch of the UberFRESH service in Santa Monica, California. In 2015, the platform was renamed to UberEATS.

“In India, increased incentives to consumers, drivers and restaurants drove nearly half of the decline in UberEats’ take rate to 8% from 12% a year ago,” Nelson Chai, Uber’s chief financial officer, said.

Not only in India, Uber’s food-ordering business globally, too, took a knock as margins for the San-Francisco headquartered cab aggregator dropped because of higher discounts to customers along with incentives to drivers and restaurants, as stated above.

“It’s (Uber Eats in India) growing very, very quickly. There are two competitors that are very aggressive. We are doing well in holding our own, but it is a market in which we are funding the eater, the courier as well as the restaurant,” Chai added.

However, earlier this month, Uber has halved its annual cash allocation to its food-delivery business in India to $90-120 million, as reported by ET.

Uber had reported recently that its revenue rose 20% in the quarter ended March 31, 2019, to $3.1 billion, while its losses swelled to $1 billion.

On the other hand, it had been reported earlier that Uber had tried to sell its Eats business to rival Swiggy in India ahead of its IPO, but the merger deal fell through at the last moment.

Furthermore, Uber Eats rival Ola, too, had pulled its focus away from its food-delivery business, Foodpanda, and will instead sell private brands on its own platform and externally as well.