Food Delivery, Freight And Logistics: How Uber Aims To Move Things Around The World

Uber, the ride-hailing pioneer, is set to go public on Friday with a valuation of around $86 billion, in the most highly-valued stock introduction in years. But Uber says its real strength isn't in being a taxi alternative. Instead, it is its ability to apply its vast data trove and routing software to rewrite how goods and people move from one place to another, using computer algorithms to remove what tech sees as inefficiencies in the world..Uber's biggest competitor isn't rival ride-hailing service Lyft, analysts say, but Amazon, which moves goods all over the world. It has budding businesses such as freight forwarding, food delivery and even package delivery. And that's why it could be worth more than twice as much as Ford Motor Company, or nearly four times as much as Fiat Chrysler, on Uber's first day of trading. Uber said late Thursday that it plans to list its shares on the New York Stock Exchange at $45 per share, giving the company a valuation at the low end of its anticipated $80 to $90 billion range..But there are questions about whether Uber can execute on its vision. For one thing, it hasn't yet been able to solve the problem of food arriving cold upon delivery..Uber uses data gathered from Uber Eats, its food delivery service, to help predict food preparation time for its routes and provide food and restaurant recommendations for customers, the company has said. But the business has run into a litany of real-world issues -- food not being ready on time for pickup, a lack of parking for drivers who run in to pick up orders, often resulting in parking tickets, and food that arrives to the customer late or cold.."We are still barely scratching the surface when it comes to huge industries like food and logistics, and how the future of urban mobility will reshape cities for the better," Uber CEO Dara Khosrowshahi wrote in a letter that is part of the company's filing to go public. Like many tech companies, Uber frequently refers to itself as a "platform," to convey the idea of a foundation upon which other things are built.."They're thinking about moving things around more broadly -- including humans," said Gene Munster, founder of venture capital firm Loup Ventures. Beyond Eats, which took in $1.46 billion in revenue last year, Munster pointed to shipping under Uber Freight, which lines truckers up with loads to ship to destinations around the country.."Just how well they can maximize the routes is critical," he said..Just as critical will be Uber's ability to spin large new businesses out of its data and routing savvy. UberEats, for instance, only accounted for 13 per cent of Uber's revenue last year. Now the company is weighing a revamp of the division as part of a broader effort called Eats 2020, according to a document reviewed by The Washington Post. In Uber's vision, regular customers, who today average 1 1/2 orders per week on Uber Eats, could be compelled to order 19 1/2 meals weekly, suggesting nearly every meal would be prepared and delivered to them..Uber declined to comment, citing a mandated quiet period before its IPO..Some of the most successful Silicon Valley companies have had ambitions that far surpassed what they were trading in day-to-day. Facebook, more than a social network, is a database of personal information on more than 2 billion people. Before it trained its technology on facilitating the movement of goods throughout the world, Amazon was a small online bookseller run out of a garage. (Amazon CEO Jeff Bezos owns The Washington Post.).Uber is "solving some of the most difficult problems at the intersection of the physical and digital worlds," Mr Khosrowshahi wrote..It has turned from a black car service into a ride-hailing juggernaut that collected $11.3 billion in revenue last year, with its eyes on trillions of dollars worth of potential business. Its paperwork made clear last month it sees a global market for its services worth up to $12.3 trillion, the amount of revenue potential in all the fields it wants to tackle. Among its ambitions are convincing consumers to stop buying cars altogether in favor of Uber as their chauffeur, not to mention eliminating infrastructure like urban parking garages and multilane byways that service people's autos. It wants to use scooters and electric bikes to fill smaller mobility gaps..Uber "views itself as the Amazon of transportation," said Daniel Ives, an analyst at Wedbush Securities..It also loses billions of dollars, and there's no guarantee that it can achieve its goal of overhauling transportation with software. It lost $3 billion last year on its operations and $4.1 billion in 2017 and has indicated it could unprofitable indefinitely. By comparison, Amazon lost $3 billion combined in its first 8 years of operations and has been profitable in nearly every year since it first went into the black in 2003, including $10 billion in profits in 2018..Lyft, which operates more narrowly in ride-hailing, with some side interests in scooters and bikes, has seen its shares tumble about 25 per cent since its stock market listing less than two months ago. That company is currently valued at about $15 billion. It is pursuing a plan to develop autonomous vehicles in order to reduce its dependency on human drivers-a technology Uber is also chasing..From the moment Uber launched as a black car service in San Francisco in 2010, its algorithms have been using data gathered from passenger trips to give it a computer-assisted advantage over competitors, Uber said. UberPOOL paired customers going in the same direction, aiming to fill as many seats as possible along the way. Later, Uber launched Express Pool, which minimized turns and detours, offering even cheaper rides -- with prices competitive with public transit -- if riders were willing to walk a block or two..In touting its company to investors, Uber points to its advantages: demand prediction algorithms know where and when drivers in a given city are needed, and what incentives are required to lure them. Pricing algorithms weigh supply and demand and tweak fares to ensure the lowest wait times. And routing algorithms increasingly take into consideration timing of red lights, traffic density, weather and other factors to minimize delays, the company said..Uber's data also helps it root out what it sees as inefficiencies in the world around it. It has lobbied in cities from Washington, D.C., to its San Francisco hometown for devoted pick-up and drop-off zones; in others it is partnering with them to augment the public transit system with its cars..However, with high costs to pay its millions of contracted drivers, Uber loses money on each ride. Uber subsidizes fares with massive infusions of investor cash, but such cash burn will draw more scrutiny when it is a publicly-traded company. That marks the biggest contrast with Amazon, which has plowed much of its cash back into new products and services that have tangible value themselves, like the Alexa voice service, Kindle reading devices and a massive network of warehouses..But Uber saw a way to spin its algorithms into new businesses with different cost structures..It launched Uber Eats in 2014 and Uber Freight three years later. They are expected to help underwrite losses in the core people-moving division as they more quickly move towards profitability. Yet some of its ventures outside of ride-hailing have failed: Uber Rush, which promised same-day delivery of everyday goods and was seen as a viable competitor to UPS and Amazon when it debuted in 2015, was shuttered more than a year ago after failing to catch on..The data gathered from Uber Eats is helping Uber predict food preparation time for its routes and provide food and restaurant recommendations for customers, the company said. And Uber has used customer ordering patterns to color menu selection too, advising restaurants to start making, say, hamburgers in neighborhoods without any nearby burger joints..The Eats prepared-food-delivery service faces fierce competitors at home and abroad, like venture capital-backed DoorDash and Rappi. And many drivers dislike food delivery because of the complexities of coordinating with sometimes slow-moving restaurants, parking and even hard-to-enter apartment complexes, among other complaints. To address their concerns, Eats drivers would be paid extra fees for unexpected delays such as backed-up restaurants or traffic, according to the Eats 2020 document..Restaurants, in Uber's view, have too many people servicing customers who dine in, which slows the delivery operation. That's why it hopes to install ordering kiosks in the front of restaurants so that staff can remain in the back to service Eats orders, the Eats 2020 document indicates.

Food Delivery, Freight And Logistics: How Uber Aims To Move Things Around The World

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