SAGE Business Cases

© Tanya Ahmed and Looksina Khan 2022.

Uber Eats: Playing It Safe in Bangladesh

Case

Author: Tanya Ahmed & Looksina Khan

Online Pub Date: January 03, 2022 | Original Pub. Date: 2022
Subject: Business & Management, Corporate Strategy, Emerging Markets
Level: | Type: Direct case | Length: 5380
Copyright: © Tanya Ahmed and Looksina Khan 2022.
Organization: UberEats | Organization size: Large
Region: Southern Asia | State:
Industry: Accommodation and food service activities| Food and beverage service activities
Publisher: SAGE Publications: SAGE Business Cases Originals
DOI: https://dx.doi.org/10.4135/9781529797664 | Online ISBN: 9781529797664

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Abstract
The introduction, growth, and ultimate downfall in Bangladesh of Uber Eats, an international
online food delivery service, is examined in this case study. Uber Eats had been in business for
approximately one year before it shut down due to fierce competition from other companies that
provide a superior customer experience and a more comprehensive range of offerings. Uber
Eats did not extend its presence to new cities as other online food delivery services did. These
findings indicate how Uber Eats failed to execute a viable approach for surviving in a competitive
market, and it encourages students to consider the efficacy of various market entry strategies.

Case

Introduction

Uber Eats, a subsidiary of the ride service company Uber, began its food delivery operations in Bangladesh
on April 30, 2019. But a year later, on May 19, 2020, Uber Eats announced through its website that it would
cease its food delivery operations in the Bangladeshi market. Uber continued to operate its ride service in
Bangladesh.

In the launching phase, Uber Eats primarily focused on delivering across key neighborhoods, namely
Gulshan, Banani, and Baridhara, with a registration of 150 restaurants (Muntasir, 2019).

According to Worldometer (2021), the average age of the population in Bangladesh is 27.6 years, 34% of
the Bangladeshi population is 15 years and younger, and 5% are 65 years and older. Hence, much of the
Bangladeshi population is young. With many young adults working, Bangladesh presents an excellent and
prosperous opportunity for quick and convenient on-demand food delivery services.

According to Population Stat (2021), Bangladesh is the 10th most densely populated country. Although many
Bangladeshis still reside in rural areas, the country is becoming more urbanized. The largest city, Dhaka, has
a population of more than 19.5 million people and a density of 23,234 persons per square kilometer, based on
CIA World Fact Book data (2016). Cities such as Dhaka and Chattogram have in recent decades witnessed
an increase in population as people move to these cities hoping for a better life and livelihood.

A World Bank (2021) database indicates that the labor force in Bangladesh is 30.6% female, meaning that a
convenient and time-saving service such as food delivery has tremendous potential for success. Much before
Uber Eats entered Bangladesh, a few strong and well-established food delivery service organizations had
made their mark, such as Hungrynaki and Foodpanda. Being a late mover posed difficulty for Uber Eats as
the general population thought nothing was new about their concept or service. Uber Eats joined over 150

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restaurants and cafes in Dhaka to serve the gourmet lovers, ranging in quality from premium restaurants to
budget-friendly ones (Uber Eats Launches in Bangladesh, 2019).

Company Overview

Uber Eats uses a food delivery application through which users can order meals from participating
restaurants, and couriers deliver the food. Uber Eats’ headquarters is in San Francisco, California. It is led by
CEO Dara Khosrowshahi and made USD 4.8 billion in revenue in 2020. As of March 2021, the corporation
accounted for around 22% of the food delivery market in the United States (Statista, 2021). Uber Eats’ main
competitors are DoorDash, GrubHub, and Postmates. As of August 2019, Uber Eats had 2.4 million followers
on Facebook and 55,900 followers on Twitter. Records for the year 2020 indicate that there are 66 million
Uber Eats users worldwide (Curry, 2021).

Uber Eats started its journey in April 2015 with the aim of serving fast and convenient delivery of their
customers’ preferred meal at their doorstep. The service was initially available only in Chicago, LA, and New
York City. It has operations in 35 countries (Table 1).

Table 1. Countries of Operation of Uber Eats

Argentina Costa Rica Italy Portugal United Kingdom

Australia Dominican Republic Japan Réunion United States

Belgium Ecuador Kenya South Africa Venezuela

Bolivia El Salvador Mexico Spain

Brazil France Netherlands Sri Lanka

Canada Guatemala New Zealand Sweden

Chile Hong Kong Panama Switzerland

Colombia Ireland Poland Taiwan (ROC)

Source: Uber Eats, n.d.

Uber Eats primarily operates in the U.S. market. Table 2 shows the number of cities in which Uber Eats was
operating from 2016 to 2020. Note that the number of cities doubled between 2019 and 2020, which is a
100% increase.

Table 2. Number of Cities in Which Uber Eats Operates

Year Number of cities

2016 50

2017 120

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2018 200

2019 500

2020 1,000

2021 6,000

Source: Uber, n.d.

In a Business Insider report, Uber claims that it has an opportunity in its size, which allows it to deliver
prepared food quicker than its rivals. For an Uber Eats order, the organization claimed that the average lead
time was about 30 minutes during December 2019. As of 2020, Uber Eats functioned in more than 1,000
cities through a network of more than 600,000 restaurants (Curry, 2021). The organization also believes that
Uber Eats is the world’s largest food sourcing network outside of China.

However, not every launch has been a success. Table 3 lists countries in which Uber Eats ceased operations
after the second quarter of 2019. Uber has ended Uber Eats participation in a few countries due to heavy
competition.

Table 3. Countries in Which Uber Eats Ceased Operations

Austria South Korea, 2019

The Czech Republic Peru

Egypt Romania

Honduras United Arab Emirates, transferred to Uber subsidiary Careem, 2020

India, sold to Zomato in 2020 Ukraine

Saudi Arabia Uruguay

Source: Uber Investor (2020)

According to a report from the United States Securities and Exchange Commission (2020), the Uber Investor
CEO stated that “These decisions were made as part of Uber’s ongoing strategy to be in first or second
position in all Eats markets by leaning into investment in some countries while exiting others.” He further
added that “This continues our strategy of focusing our energy and resources on our top Eats markets around
the world.”

Target Market

Regardless of the specific business, the foremost step in planning a successful marketing campaign is
defining the appropriate target market. To identify the target market, an extensive inquiry must be undertaken
to identify those who have similar requirements or characteristics to those that a firm intends to serve. These
are often the end consumers who are most likely to be inclined to purchase a company’s goods or services.
Geographic, demographic, psychographic, and behavioral segmentation are the four layers of segmentation
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that can assist in defining a company’s core target group.

Uber Eats’ mission statement is “UberEats is the easy way to get the food you love delivered.” Considering
the mission, Uber Eats Bangladesh primarily targeted the Uber ride-sharing customer base since they already
had their data in the system. The well-established customer segment seeking this type of service is a common
target for all the players in this sector. The company also focused on that particular population that has been
on the lookout for a convenient way to order their desired meal.

The evolving demographic characteristics of the targeted customers have created the path for these online
food delivery platforms to flourish. According to Boston Consulting Group (BCG) Perspectives (2015), the
Bangladeshi population is broadly classified into five income groups. The target market for the online food
delivery industry is the established income segments (USD 401 to USD 650 per month) and affluent groups
(more than USD 650 per month). In Bangladesh, 7% of the population with purchasing power translates
into roughly 11 million people who are “middle and affluent consumers” (MAC)—these customers are seen
as optimistic, hoping for an increase in their incomes in the next few years. Bangladesh’s middle class
is transforming into high buying power that values luxury goods and leaps in the millions on the digital
bandwagon. This trend inevitably opens new possibilities for international businesses looking to cash in on
the shopping spree that Bangladeshi customers have begun.

Figure 1. Distribution of Consumers Based on Income in Bangladesh

Note: The highlighted cities are more commonly referred to as districts in Bangladesh. Key cities are those
that have MAC populations greater than 300,000.

Source: BCG Perspective (2015).

Overview of the Food Delivery Sector in Bangladesh

Competitor Analysis

Food delivery companies can be divided into two general types, or tiers. The first type is termed an

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aggregator. Aggregators create an e-commerce platform that collects and routes orders from customers to
restaurants, and the restaurants then handle the deliveries themselves. The second type of food delivery
tier includes the players that have a strong logistics network and who invest in both collecting orders from
customers and providing delivery services on behalf of the restaurants (IDLC Finance Limited, 2017). The
online food delivery scene in Bangladesh’s capital city started with a local first-mover known as HungryNaki,
which began operations in 2013. In the same year, the global giant Foodpanda also began to operate.
HungryNaki struggled with acquiring funds from financial institutions due to a lack of collateral and a cash-
based revenue model in the early stage. At the same time, Foodpanda had a dilemma regarding delivery
service provisions due to its role as an aggregator worldwide. Eventually, a focus by company management
on technology and machine learning resulted in data-driven decision-making and strategic placement of both
companies’ services and promotions (IDLC Finance Limited, 2017). From 2017 to 2020, the online food
delivery market became hyper-competitive with the emergence of aggressive local players Pathao, Shohoz,
and Evaly. This competition has presumably been possible as a result of the growing urban population,
particularly the prevalence of dual-income families. Lack of house help contributed to the increasing demand
for convenience in everyday life; online food delivery was a boon for such households (Muntasir, 2019).
Grocery delivery has become an integral part of the restaurant food delivery service of these companies.

A war of discounts has broken out among the competing companies recently. Although the leading local
Pathao started the trend of steep discounts in 2019, Foodpanda is now leading the discount war with its
continuous focus on strategic regional expansion within the country (Kader, 2020). Pathao and Shohoz
have started their food delivery services as an offshoot from their ride-hailing core services, which means
they already had a decent user base before venturing into the food delivery scene, unlike Foodpanda and
HungryNaki. Uber Eats, when it entered the market in the middle of 2019, had the same advantage since its
mother brand Uber had been dominating the ride-sharing sector of Bangladesh since 2016. Home chefs have
also entered the market with the concept of home-made hygienic food by exploiting the opportunity provided
by different online platforms such as Facebook and e-commerce sites. One good example is the prominent
player Cookups, which formed a strategic partnership with Chaldal.com to achieve its targeted profitability by
utilizing the backward market linkage to grocery supplies since Chaldal.com is already an established name
in the online grocery delivery scene (“Changing the scene,” 2019).

Four companies control 90% of the market share in the food tech sector of Bangladesh, according to data
analyzed and published by Dhaka Tribune in 2019 (Muntasir, 2019). Among the four leaders, Pathao is
dominating the market with a market share of 42%, followed by Foodpanda, which holds 32% of the market
share. HungryNaki and Shohoz each hold an 8% market share each, whereas other start-ups hold the
remaining 10%. Real-time sales volume data show an average of 25,000 online food orders per day for all
of Bangladesh and depict a market size of USD 10 million as of 2020, which is estimated to grow to USD
5 billion by 2025 (Muntasir, 2019). Even though it can be observed that the online food delivery sector has
been quite promising in terms of popularity and discounted pricing, the growth remains considerably sluggish
(Kader, 2020).

Partnering With Restaurants

The attitude of the restaurant partners influences the overall eco-system of the online food delivery system
of Bangladesh to a great extent. Although it does not seem like a new concept, restaurants have not been
comfortable and quick to accept the food delivery companies’ commission-based business model. Although
delivery time, service quality, price, and condition of food are the factors directly affecting the success of
online food delivery services, a secondary and indirect role is played by the variety and number of restaurants,
menus, delivery tracking services, and attitudes of the delivery person (Saad, 2020). Worldwide consumers
typically pay for the food and delivery service, but restaurants assume a financial hit in this business model
in the form of commission to the food delivery partner. As much as it increases business, it does put financial
pressure on the restaurant partners. For restaurants, these online food delivery companies have become a
necessary evil. The relationship with these companies helps the restaurants increase their sales, but at the
cost of losing walk-in customers. Other problems include delayed delivery during peak hours, poor packaging,
change of food taste due to long-distance delivery, and customers becoming loyal to the food delivery apps
rather than the restaurant (Das & Ghose, 2019). Although COVID-19 showed the importance of the online

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food and grocery delivery system, the pandemic affected the start-up eco-system of Bangladesh quite hard.
According to a COVID-19 survey by LightCastle (2020), the only sectors in Bangladesh that experienced a
positive business climate during the pandemic were fintech, logistics, and grocery.

Uber Eats’ Business Model

Uber Eats follows a three-sided marketplace model for providing its service to the consumers. The three
parties involved in this model are restaurants, delivery partners, and eaters (customers). Uber Eats is the
platform that connects all three parties via its online platform from 8 a.m. to 12 a.m. (midnight). A customer
places the order from a restaurant of his or her choice from the options listed on the Uber Eats app or its
website. Then a freelance or third-party rider collects the food from the restaurant and delivers it to the eaters.
Restaurants pay commission on the orders to Uber Eats, and consumers pay for the food and add a standard
delivery fee, which is often termed as a convenience fee. The restaurant pays a certain amount of commission
per order to Uber Eats, set at 15 to 17% per order in the Bangladeshi market. Every restaurant is provided
with a free tablet by Uber Eats to access the portal through which they directly receive the consumer’s order.
After the order is placed, the restaurant prepares the food item within a time period, typically 15 to 20 minutes.
By the time the food is ready, the rider has reached the restaurant and picked it up for delivery. The riders or
delivery partners are usually freelance bicycle or motorcycle owners outsourced by Uber Eats. The industry
standard for food delivery time is 45 minutes, which Uber Eats managed to reduce to 38 minutes for its users.

Riders are usually paid according to a formula generated by Uber Eats. The formula is: Base (Pick up
and drop off fees) + Quest (order-based incentives) + Boost (zone-based incentives). Uber Eats added the
Quest component as motivation for riders to maximize the number of order deliveries they complete per
time period. For example, if they receive BDT 100 for three orders, they can earn an additional BDT 150 for
four additional orders. Uber Eats believes that Quest is an incentive for riders to work additional hours. The
riders are incentivized in the same way for different zones as well. Uber Eats followed the same model for
its grocery delivery service. They managed to onboard local retailers of grocery items and followed the same
commission-based model for them.

Uber Eats’ Revenue Model

According to Uber Bangladesh, the only earning source for Uber Eats was the commission per order from the
restaurant partners. Even though they have different subscription packages in different countries, they were
operating based on a commission-based revenue stream in the Bangladeshi market.

Uber Eats executed an internal model called co-funding with restaurant partners to attract more consumers
to sustain the higher percentage of discounts without burning too much cash. This co-funding model helped
gain a volume of sales for the restaurant partners. This model requires the restaurant partners to pay higher
commission rates; for example, a commission of BDT 30 instead of 20 per order to Uber Eats and an
additional BDT 10 would be added by Uber Eats itself, and together they were able to offer around 20–25%
discount on food items for the users. According to Uber Eats Bangladesh, it turned out to be a more efficient
model than burning cash to penetrate the market.

Factors Impacting the Rise of the Online Food Delivery Industry

Increased Number of Internet Users

In May 2021, the Bangladesh Telecommunication Regulatory Commission (BTRC) announced a total number
of Internet subscribers of 117.31 million people in Bangladesh who use Internet services on their mobile
phones. They further stated that, in the past five years, the nation has had more than double the number
of Internet users. When it comes to buying patterns that mainstream grocery stores and malls have long
dominated, there is also a revolution in customer tastes. Another fascinating trend is that more and more
people use the Internet to purchase and sell goods, paving the way for e-commerce companies to monetize.
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“Plastic” (debit/credit cards) is gaining momentum into the buying and selling of consumer goods in
metropolitan centers (Hashim, 2015). The mass population in Bangladesh now has the access to smartphone
technology and the affordability to use it.

Favorable Demographic Changes

Bangladesh’s demographic transition is currently at its third level. The accomplishments of social policy action
have lowered infant mortality and high fertility rates, and raised living standards, and have led Bangladesh to
a quick transition in demographic structure (Gaur, 2019).

The rise in females’ participation in the workforce has created an enormous wave in the societal concept and
allows them to make impactful decisions in all spheres of life. According to the World Bank (2021), the female
labor force participation rate was 30.5% for 2019 in Bangladesh. It is evident that more women are driven to
join the workforce, and in a span of 10 years (2009–2019), the rate has increased by 5%. According to a report
by Raihan and Bidisha (2018), there seems to be no debate that women’s participation has been a must
for every economy on the grounds of equality and efficiency. It is now commonly recognized that women’s
inclusion in the labor market strengthens their relative economic status and stimulates the economy’s
productivity and growth capacity from a broader perspective. Consequently, the socially established role of
women in Bangladesh has been changing in the household, specifically that of a homemaker which typically
obliges them to take care of meal preparation for the whole family. This results in the demand for more
convenience in terms of ready-made meals and their availability among the target customers.

Positive Economic Growth

Growth in gross domestic product is defined as the final value of the goods and services produced within
the geographic boundaries of a country during a specified period, usually a year. It is a crucial indicator of
how well a particular economy is performing. According to the World Bank (n.d.), the GDP per capita growth
rate for the year of 2019 was 7.04% in Bangladesh. Within the span of the last 10 years, the GDP value has
grown from USD 702.26 in the year 2009 to USD 1,855.74 in 2019. It is evident that Bangladesh has seen a
substantial annual GDP growth rate and a rise in per capita income as a developing economy. This upward
trend has contributed to the massive growth of online shops catering to individuals who are struggling to cope
regularly with a busy and hectic life. Buyers are likely to use the Internet to indulge convenience in the comfort
of their own homes and the enjoyment of their own time.

The growing pace of urbanization has also contributed to the increasing demand for convenience and
contemporary services. According to new research by Knoema (2021b), 38.2% of the Bangladeshi population
resided in the urban areas of Bangladesh as of the year 2020. The urban population of Bangladesh has
increased from 7.9% in 1971 and is growing at an average annual rate of 3.29%. There is a massive shift of
people from the rural areas to the major cities of Bangladesh. Urban dwellers prefer efficiently utilizing their
valuable time while enjoying ready-to-deliver meals in a single click.

Nahar (2020) reports that millions of people from rural areas are relocating to divisional cities to take
advantage of income-generating possibilities. The heaviness of migration is driven by urban industrialization
and the continuing rise of the informal sector. Besides this, better education facilities also encourage rural
people to migrate to urban areas.

According to The Daily Star (Alam, 2019), urban dwellers are exposed to regular heavy road traffic and work
exhaustion, which pushes them to seek alternative means to save their time and energy. One good way to do
that is enjoying the time at home after work with ready-made meals instead of spending the evening in the
kitchen.

In addition to this, development in telecommunications infrastructure coupled with the increasing purchasing
power of the urban population has facilitated technological innovations in the business sector (Knoema,
2021a). This has accelerated the growth of different online service platforms but most importantly the online

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food delivery service.

Obstacles Faced by Uber Eats

The dominance of the local and existing players in Bangladesh, such as Pathao foods, Food Panda, Shohoz
Foods, and Hungrynaki, put Uber Eats at a competitive disadvantage. Although Uber Eats did not confront
any issues regarding access to capital, its local counterparts experienced a lack of funds (Why Uber Eats
Left, 2021). While other online food delivery companies were expanding their reach and presence to other
cities in Bangladesh, Uber Eats was slow in the race. Additionally, they did not partner with other restaurants,
thus offering limited choices to the gourmet lover. A similar situation took place in countries like China and
Russia, where local establishments were winning the race.

According to Uber Eats Bangladesh, the company on average would receive 3,000 orders per day with an
average order value of USD 5, which guaranteed commission worth USD 2,250–USD 2,550 daily. Despite
securing a high value of orders, Uber Eats realized that the model was not the most appropriate for developing
countries. Additionally, an organization requires a minimum of two to three years to measure their profitability,
but Uber Eats’ quick decision to leave the market made it rather difficult to assess their profitability.

Uber Eats Bangladesh, as a foreign company, had to maintain some strict rules regarding partnering
with restaurants. There were legal barriers which set boundaries for Uber Eats to partner only with those
restaurants that met the specific criteria set by the mother company. Hence, it could not get onboard with a
number of restaurants and cafes.

Uber did an excellent job with ride-sharing promotions, but not so much with Uber Eats. Pathao Food and
Shohoj Food, on the other hand, were proving to be recognized. Uber Eats was lagging well behind the
competitors in terms of performance and recognition. Nonetheless, Uber Eats came back strong with enticing
deals and discounts. Discounts ranged from USD 3.5 to USD 7 on a single delivery. As a result of their
aggressive strategy, they pushed the Internet meal delivery business to new heights. They were appealing
to new consumers who might not have previously trusted the service. However, in the long term, Uber Eats’
plan did not work out (Why Uber Eats Left, 2021) Meanwhile, the competitors had appropriate promotional
activities such as festivals and seasonal marketing campaigns. “Delivery is a Hard Job” by Foodpanda and
“JOKER” by Pathao Food were two excellent campaigns that Uber Eats overlooked (Why Uber Eats Left,
2021). Competitors understood Bangladeshi consumers’ sentiments; hence they adopted local culture to
formulate campaign strategies: for example, cultural and religious festival discounts, and special offers during
the holy month of Ramadan (Islamic rituals).

Shifting Techniques for Optimizing Positioning

Uber changed their approach for Uber Eats, moving their attention and resources to bigger markets where
they would be ensured of maintaining the rank of first or second, primarily in terms of high market share.
Uber Eats had a strong brand value, but due to heavy competition and a lack of consumer alliance, they
chose to cease their operations in several other countries with the lowest potential, including Bangladesh. In
a report by TechCrunch (2020), an Uber representative mentioned that the adjustments were not associated
with the coronavirus outbreak, but rather with the company’s continuous “strategy of record” to retain top or
second position in all Eats markets—which implies it is expanding in certain countries while quitting others.
The spokesman further added that it was in accordance with their stated strategy, and that they would aim to
reinvest these savings in priority areas where they expect a higher return on investment.

In the year 2020, Uber Eats exited eight markets where it proved to be unprofitable and unsustainable
to a large extent (Uber Closes Eats Operations, 2020). It closed down 45 offices through its operations
and reduced its workforce by 3,700 employees. According to the CEO, Mr. Khosrowshahi, this reduction
represents one-fourth of the total employees. These steps have saved Uber Eats a massive USD 1 billion
(Feiner, 2020).

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