Despite the surge in demand for food delivery, Uber (UBER 1.95%) struggled to offset the massive decline in its mobility business during the coronavirus pandemic with its Uber Eats service. But as the pandemic abates, businesses reopen, and people start moving more, the mobility segment is coming into focus again. And Uber's well positioned to use the success of the delivery business in 2020 to propel the return of its mobility segment in 2021.
Building a super app
Uber's building a super app that can get people or things from point A to point B as quickly as possible. Whether that's a person, a meal, groceries, alcohol, prescription drugs, a package, or something else, Uber will get it where it needs to go. In an interview with Greylock earlier this month, CEO Dara Khosrowshahi said, "The way I think about the new Uber is this: if Amazon owns 'next day,' we want to own 'next hour.'"
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To that end, Uber made the decision to integrate the Uber Eats service into the main Uber app, with the idea being the more problems Uber can solve with one app, the more frequently its users will use it.
As Uber continues to roll out the singularly integrated app offering both rides and Eats, the super app now contributes more than 10% of first-time Uber Eats orders.
The exciting opportunity in 2021 is for that process to work in reverse. That is, Uber Eats customers choose Uber for a ride to their local bar or to the airport because the app is already on their phone. Considering Uber's delivery business helped stem monthly active customer losses to 16% year over year in the fourth quarter, it's well positioned to bring back customers quickly. By comparison, Lyft's (LYFT +0.75%) customer base was down 45% in the fourth quarter.
That factor's important on the driver side of the network as well. Since drivers have had a lot of opportunities to do delivery work for Uber during the pandemic, the app is already on their phone waiting for them to convert to being rideshare drivers as well. That'll ensure more rides available on Uber than Lyft as the mobility business ramps up again.
Bouncing back without losing Eats customers
It should also give investors confidence that Uber hasn't seen much slowdown in the growth of its delivery business in recent months, even in markets that are well ahead of the U.S. and Europe in reopening.
At an investor conference earlier this month, CFO Nelson Chai said mobility gross bookings in Taiwan were up 45% year over year in February, and delivery gross bookings growth only decelerated slightly from January. In the U.S., he pointed to Miami as a market that could represent consumer behavior throughout the rest of the country later this year: mobility was down about 25% while delivery was up triple digits.
Once people try the service and get a feel for the convenience, they want to keep using it.
That bodes well for the business to increase its gross bookings per customer substantially as mobility bounces back. That continued growth of delivery should enable the super app strategy to keep producing benefits for the overall business.
Repeat the playbook in new areas
Remember, it's not just restaurant meals and passengers that Uber's interested in. It's now in the business of delivering groceries, prescriptions, alcohol, and anything else that might fit in the passenger seat of a car. And Khosrowshahi is confident that each new vertical can build on the next.
"We have proven with our mobility business being able to drive consumers to our delivery app, basically for free, the ability to move consumers and audience across this platform because they trust Uber," he said during the company's fourth-quarter earnings call. "I think we can do the same with grocery because we've essentially already proven out the unit economics," the CEO said, referring to the work previously done by Cornershop and Postmates pre-acquisition.
Expanding into new verticals also gives users more reasons to use the Uber app, creating an even stronger ability to drive customers to other services.
Not only is Uber in a position for its mobility business to recover in 2021, it's going to come back more quickly and stronger as it expands the utility of its super app.
