UberEats, a subsidiary of Uber, one of the world’s most popular ride-sharing services. The popular food aggregator platform started their operations in Bangladesh in April 2019. According to an article by future startups, the food delivery industry in Bangladesh has been experiencing a rapid growth since the first wave of the pandemic hit, back in March, 2020. Yet, on May 19th, 2020, the company announced that they will be shutting down the operation of UberEats on June 2nd, 2020. Even though UberEats became quite popular among Bangladeshi’s. But, why did they close their operation in Bangladesh?
Uber eats is a subsidiary of Uber Technologies Inc. The food delivery service was launched in Santa Monica, California in 2014. It started operation as UberFRESH. In 2015, the name was changed to UberEats and Uber released a standalone app for the service, separating it from Uber. The company had 3% market share in the US in 2016, which is now at 27%. Whereas, a report from Fortune of May 2019 states that UberEats has 29% of the global online food delivery market. UberEats reported running operations in 6,000 cities across 45 countries. According to Statista, the company reported a revenue of 4.8 Billion USD in 2020.
Uber Eats Bangladesh
According to DataBD, 30% of all online delivery businesses are food delivery. A 60% is E-commerce and F-commerce and a 10% for self-delivery. Food delivery in Bangladesh started with Hungrynaki, a locally owned food aggregator started business in 2013. Six months later, Foodpanda, a German company launched its operation. Other food delivery services like Pathao Food, Shohoj Food, etc started their operation followed by these companies. Uber started its ride-sharing business in Bangladesh in 2016. While UberEats started its journey in Bangladesh in 2019.
In the beginning, Uber Eats started their operation in Dhaka with 150 popular restaurants like Sushi Samurai, Pizza Guy, Cheez, Tehari Avenue, Salam’s Kitchen, Sultan’s Dine, Madchef, and Chillox. Misha Ali, with 12 years of expertise in startups and e-commerce, was assigned as the head of operations.
Uber Eats was doing well in the competition against Foodpanda, Pathao Food, HungryNaki, Shohoz Food. One of the issues with local food delivery platforms was raising funds, as limited access to capital is a massive hindrance on their scaling up. Which was advantageous to a global player like UberEats, as the company had access to huge capital for its business development and expansion. Thus the company was able to provide various discounts, offers, alongside their international brand value, and attracted a good number of customer base. By March 2020, UberEats expanded their business in Chittagong by partnering up with 250 local restaurants.
At the height of the Coronavirus pandemic, the company even collaborated with grocery chains and SME’s to deliver daily necessities to the consumer. Regardless of all the progress the company made in Bangladesh, UberEats announced the closure of their business in Bangladesh, in May, 2020.
Reason to Leave Bangladesh
The dominance of Local Players
The target of app-based businesses is to get to the top and stay there for as long as possible. If the company is unable to achieve a satisfactory market share within a timeline, then it is not wise to burn more capital. Instead, companies redirect their capital to markets where they have a strong leadership position. Even with lucrative discount offers, Uber Eats could not supersede the success of Pathao Foods and Food Panda. According to a report in Dhaka Tribune of May 2019, Pathao Food was the market leader in Bangladesh’s on-demand food delivery services with a market share of 42%. Food Panda had the next biggest chunk at 32%, Hungry Naki at 8%, and Shohoj Food with another 8%. While UberEats and other market players had a 10% market share cumulatively. Although, the Bangladesh food delivery industry has seen major changes due to Food Panda’s aggressive promotional and marketing campaigns.
Uber Eats had a good start. But, the crown was never theirs to wear. While other delivery services were constantly making new partnerships with other businesses and expanding their reach, Uber Eats couldn’t really keep up with the pace.
Globally Uber Eats was doing very well in terms of revenue, which was constantly growing. However, the company’s profit margin was questionable. The global analysis shows that the profit margin is very low in ride-sharing and food delivery services. Since the company wasn’t able to attain a leadership position in Bangladesh, this market was a cash-burning concern for the company and thus UberEats announced their closure of service in Bangladesh. Previously, the company has also ceased their operation in Russia and China for the same reason.
Lack of Marketing & Promotion
When Uber first launched in Bangladesh, their promotional activities were on point. However, that wasn’t the case with Uber Eats. Uber Eats were lacking in terms of marketing and advertising in the media. On the other hand, FoodPanda, Pathao Food and Shohoz Food were all over the cities with their flashy advertising and marketing online. These companies were also onboarding new partners, and promoting their services through these restaurant partners. UberEats couldn’t catch up with these types of marketing strategies of the competitors.
Although, UberEats came out guns blazing with attractive offers, discounts. Discounts were up to 300 to 600 taka on from a single delivery. Which enabled them to attract a customer base very quickly. With this strategy, other food delivery companies also benefitted alongside UberEats. As stated by the chief-executive and co-founder of Hungry Naki, A.D. Ahmed, UberEats branding strategy contributed to the holistic development of Bangladesh Food Delivery Industry. They were luring in new customers who formerly would not trust the service. Yet, in the long run, this strategy did not work out for UberEats.
Other companies were using the same method. In addition, they also had adequate promotional activities like festivals and seasonal marketing campaigns. “Delivery is a hard job”, by Foodpanda and “JOKER” by Pathao Food were the exemplary campaigns that UberEats lacked. Consequently, they were falling further behind in the competition.
Uber’s positioning and value proposition was premium, credible and trustworthy when they introduced their ride-sharing services. As an international brand, they developed a customer base through distinctive customer care services. UberEats was not that distinguishable from their customers. There was nothing new or different from what people were already getting from other players. Thus, their activities failed to produce loyal customers who would switch from other companies. Consequently, UberEats couldn’t create a loyal customer base.
Divesting to Top Markets
Uber’s Ride Sharing was sinking in the recent pandemic. According to Uber, in 2020 their revenue from ride-sharing services in the USA is expected to fall 39.8% at 17.39 Billion Dollars, which was 28.88 Billion Dollars last year. Their main source of revenue was coming from Uber Eats which were dominating in their top markets. So, Uber decided to change their strategy for UberEats; they are now focusing their energy and resources on markets where they have a stronghold, in an effort to drum up revenue and cut their losses. UberEats had a good brand value, but due to high competition and lack of customer alliance, they have decided to close their business in many other small countries like Bangladesh.
Uber had to trim the span of their business by shredding employees due to the economic impact of the pandemic. They were struggling to maintain such a huge employee base and branches across the planet. They didn’t only close their operation in Bangladesh, with the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Ukraine, and Uruguay, they closed up in 8 different countries.
Khosrowshahi, CEO of Uber reported that in multiple countries, they have closed 45 offices and had to let go of nearly 3700 employees recently, which amounts to one-fourth of their entire force. According to him, Uber can reduce their fixed cost by nearly a billion dollars with the new strategy. Their ride-sharing operation will remain active in Bangladesh. Besides, in June Uber introduced “Uber Connect”, a package delivery service in Dhaka, to alter the abrupt closure of Uber Eats. Moreover, they came up with another service named “Uber Rentals” through the app this July. But, the two new services have received the usual ignorance in promotional activity.
Uber has their eyes locked on the prize position. Now, Uber Connect has to compete with Pathao, E-courier, Paperfly, Bidyut, Redx, and other worthy adversaries. With one losing sister concern, will they ever be able to climb to the top in the Bangladeshi Market? If they do, will Uber Eats then return to Bangladesh?