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Uber Adds 2 New Services to the Mix

By Evan Niu, CFA – Apr 21, 2020 at 9:00AM

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The ridesharing leader wants to facilitate local deliveries of physical items for businesses and consumers alike.

Last week, Lyft (LYFT 4.73%) announced that it was expanding beyond its core ridesharing service in order to help deliver essential items amid the COVID-19 pandemic. That came after years of resisting calls to do so. Meanwhile, larger rival Uber (UBER 2.53%) has offered other services like food delivery for years. As contract drivers struggle due to the wholesale evaporation of ride-hailing demand, Uber this week announced a similar program to deliver essential items like groceries and discretionary items like retail packages.

Here's what ridesharing investors need to know.

Uber app icons displayed on a smartphone

Image source: Uber.

Connecting directly

Uber unveiled two new services, Uber Direct and Uber Connect, that cater to businesses and consumers, respectively. Uber Direct allows local businesses to have products delivered to customers without any physical contact for safety reasons. As part of the initial pilot program, Uber is offering deliveries for medication in New York City and a few other specific retailers in select international markets.

While e-commerce companies like Amazon and Shopify are seeing a surge in online orders and traffic, neither of them specializes in local retail deliveries outside of groceries. Amazon Fresh offers local grocery delivery, and earlier this month Uber expanded Uber Eats to include groceries in certain markets.

Uber Connect is more of a way for consumers to send packages locally via same-day delivery to friends and family. The company points to some examples like delivering care packages or essential items to loved ones within the same city. With the United States Postal Service reportedly at risk of shutting down as early as this summer due to its dire financial condition, Uber Connect could fill an important gap as people try to stay connected while remaining physically apart.

Lyft's programs are a bit different, but both dominant ridesharing tech platforms are trying to create more work for drivers while fulfilling evolving needs of local communities that are struggling in the face of COVID-19. On a conference call with investors last month, CEO Dara Khosrowshahi was receptive when an analyst suggested a product idea of delivering essential items to vulnerable populations like senior citizens.

People aren't really moving around much during the coronavirus outbreak, but physical things still need transportation.

Weathering the crisis

Khosrowshahi previously said that Uber has the financial resources to "weather this crisis and emerge even stronger," pointing to the company's highly variable cost structure and $10 billion in unrestricted cash it had on the balance sheet at the end of February. Under a worst-case scenario -- where the core ridesharing business declines by 80% -- Uber would still finish the year with around $4 billion in unrestricted cash plus access to a $2 billion revolver, according to the chief executive.

Hopefully, conditions don't get that dire. But in the meantime, Uber is doing its best to make sure drivers have work to do.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Amazon and Shopify. The Motley Fool owns shares of and recommends Amazon and Shopify. The Motley Fool recommends Uber Technologies and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Uber Technologies, Inc. Stock Quote
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