Uber Eats delivers profit for the first time ever in Q4 results
- Until Q4 of 2021, Uber’s Delivery segment has never made a profit.
- Low margins and payments to drivers and restaurants led to challenges in cracking the code to profitability.
- Uber says higher demand, reduced incentive spend and improved network efficiencies led to profit for the delivery segment.
Despite countless competitors saturating the food delivery market around the world especially during the pandemic, only few have cracked the code to deliver slight profitability… until now.
Uber Eats pioneered the food delivery market back in 2014 and has since reported losses well into the hundreds of millions until the fourth quarter of FY21 where it finally announced an adjusted EBITDA profitability of US$25m for its Delivery (formerly called Eats) segment of the business, up US$170 million YoY.
Cracking the code to profitability for food delivery took Uber 8 years to achieve due to challenges faced with low margins on the orders, paying drivers to deliver and paying their restaurant partners for the orders. The hyperlocal business model that customers around the world love, have made it a challenge to turn a profit.
The model Uber Delivery runs for its business transactions involves Business-2-Business through the restaurant orders, Business-2-Partner through the payment to drivers for delivering, and Business-2-Consumer through the customers orders on the system.
With low margins involved, Uber makes money through charging a 30% commission on each item ordered from a restaurant on the app. Uber Delivery also makes money through charging a service fee for delivery and like its parent company, Uber, it often charges surge prices at high times of demand.
Uber Delivery’s first ever profit was the result of higher volumes, reduced incentive spend, and improved network efficiencies according to the company’s Q4 report. In the first quarter of FY22, Uber is expecting gross bookings to remain flat and adjusted EBITDA to increase to between US$100m – US$130m.
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