Uber Eats Case

study
Draft version
Agenda ​Question 1: Supply Reliability

​Question 2: Restaurant Marketplace Analytics

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Context and executive summary
​Context
​It is our mission to be “as
reliable as running water”
​Reliability of supply in our
market has been suboptimal,
with a high number of
undelivered orders due to
limited courier supply
​Executive summary
A ​The majority of orders are placed during peak hours which implies reliability issues,
20 % of the orders are undelivered during peak hours
​Non-peak hours are also affected by reliability issues leading to 11% undelivered
orders during non-peak hours
B ​To achieve 98% and 94% orders reliability rate respectively for non-peak and peak
hours we will work on 4 levers
 Optimize the efficiency of the deliveries
 Increase the number of couriers available overall and during peak hours
 Change the demand archetype
 Ensure restaurants meet preparation deadline
C These levers are expected to deliver a 1.1x ROI over the first year
D 5 initiatives should be prioritized out of the 11 initiatives coming from the 4 levers
E Next steps should focus on refining current analyses and launching the 5
prioritized initiatives
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A: The majority of the orders are placed during peak hours

Number of orders received per week, k

​Share of total
~40% ~60%
orders, %
​3/7/20

​3/7/20

​3/7/20

​3/7/20 ​3/7/20 ​3/7/20

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A: This causes reliability issues affecting particularly peak hours,
though 11% of orders are not delivered during non-peak hours

Number of orders received per week, k

​% of
11% 20% 16%
undelivered
orders ​3/7/20
​3/7/20 ​3/7/20 ​3/7/20

​3/7/20

​ /7/20
3 ​3/7/20 ​3/7/20

​3/7/20

​3/7/20 ​3/7/20 ​3/7/20

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Deep-dives next

​Optimize the efficiency of the deliveries

B: Our strategy to
achieve 98% and
​Increase the number of couriers available overall and
94% orders during peak hours
reliability rate
respectively for non-
​Change the demand archetype
peak and peak hours
is based on 4 main
levers ​Ensure restaurants meet preparation deadline

McKinsey & Company 6

B: We will optimize efficiency of the deliveries by increasing the
speed of riders as well as the quantity transported during each ride

​Initiative ​In practice

​Increase the ​Increase the share of riders ​Set target for the recruiters of riders
average speed of that have faster transport
​Leverage data analytics to identify potential riders with motorcycle or electric bikes to target
the riders modes (electric bike,
motorcycle) ​Emphasize in the recruitment process that the faster the ride, the more money you have

​Co-finance a bike ​Negotiate discounted price with a supplier

electrification program for
​Finance 20% of the cost of the electrification (500-1000€)
current riders
​Promote the program to the drivers, highlighting benefits (e.g., green, higher revenues)

​Increase the ​Increase the size of the Uber
numbers of orders Eats transport box
transported during
one ride
​Select and sell to restaurants
more ergonomic and smaller
packages for food
​Develop with the manufacturer and some voluntary riders new backpacks with bigger capacity
​Keep existing backpacks for current riders but sell only newly-developed backpacks to new
riders
​Collaborate with the main restaurants1 to select food packages that would fit the different food
contents but would be more ergonomic and smaller
​Choose a provider that would deliver the new packages to the restaurants at a negotiated price
​Make the use of those boxes compulsory as part of the contracts together with a clear
communication to the restaurants on the benefits (e.g. faster delivery time, low prices)

1. In terms of number of orders

McKinsey & Company 7

B: We will increase the number of couriers available overall and
incentive them to connect during peak hours

​Initiative ​In practice

​Hire additional ​Hire ~90 additional riders to ​Distribute flyers at the main universities
riders meet at least non-peak hours ​Leverage social media adds
demand
 Currently 800 riders ​Encourage referrals within existing
riders (e.g., 100€ bonus if you refer one
 Share of undelivered orders of riders and he stays at least 6 months)
11% during non-peak hours
​Leverage rider ambassadors (e.g., free
coupons for a promotional video)

​Implement an ​Propose dynamic bonus to ​Leverage data analytics to apply

incentive scheme riders ranging from 15% to 35% optimal bonus (i.e., from 15 to 35%) at
during peak increase in earnings per ride the right time
during peak hours ​Inform riders about bonus scheme
hours
 Average increase in average through push-up notifications Ride with us tonight and earn 25% more for each
earnings per rider from 12€ to ride between 7 pm and 9 pm !

15€/hour1
 100€ monthly additional
earnings2
1. Assuming average bonus of 25% 2 Assuming an average of 8 hours work during peak hours per week with average bonus of 25%

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B: We will work on spreading the demand outside of peak hours

​Initiative ​In practice

​Implement ​Make eaters pay an additional ​Communicate clearly to customers the additional
fee when they order from a fee before they start their order
surge pricing
restaurant during times of ​Adapt the busy fee dynamically depending on the
high demand offer and demand

​Offer a service ​Allow eaters to order on Uber ​Get the agreements from the ​Le trajet le plus court pour une
without delivery Eats and to pick up their restaurant partners livraison a été de 170m
order themselves ​Advertise this option to the ​Paris Match Belgique1
customers through the app

​Develop special ​Provide discounts to eaters ​Leverage data analytics to determine

offers outside of when they order outside of when and to which customers
peak hours peak hours ​Inform customers through push-up
notifications and e-mails Get
Getaa5€5€reduction
reductionon
onyour
yourorder
orderififyou
you
​% place
placeititbefore
before77pm
pmtoday!
today!

1. https://parismatch.be/lifestyle/food/346041/quelques-chiffres-surprenants-et-insolites-sur-uber-eats-en-belgique

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B: We will incentivize restaurants to meet preparation deadline to
make sure drivers do not loose time in the restaurants

​Initiative ​In practice

​Reward the ​Invite the top 10 chefs of the ​Launch the contest at the beginning
restaurants if year in term of food of the year
they meet food preparation timeliness for a ​ ublish the pictures of the event to
P
dinner in a good restaurant inspire restaurants and highlight the
preparation
deadline importance of timeliness

​Set customized monthly ​Leverage data analytics to set

targets in term of food reasonable but ambitious monthly
preparation timeliness for targets for each restaurant (e.g., 90
each restaurant and reward % of the orders on time)
them with Uber Eeats
reduction coupons (for them
or to distribute)

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C: The initiatives are excepted to deliver impact with a 1.1 x ROI
after 1 year
Preliminary

x Delivery optimization x Increase in number of riders x Demand archetype x Restaurants timeliness

​Initiative ​Investment, k€ ​Rationale

Positive
ROI overROI,
a 1 Share of high-speed vehicles 1-3 Recruitment campaign
over
year one year 1.1 x
2 Bike electrification ~20 120€1 financing for 160 riders2

​Investment, 3 Bigger delivery bags 3-5 New design cost

k€ over a year
4 Ergonomic food packages 2-3 New design cost, cost of finding a partner
​~175
5 Additional riders 1-3 Recruitment campaign

6 Incentives scheme for riders 0 Financed by surge pricing

​Incremental ​98% and 94% reliability 7 Surge pricing 0 Financing surge pricing
​~3/7/20
net profit1, rate respectively for
8 Pick-up option 0-2 Financing surge pricing
k€ over a year non-peak and peak
hours
9 Offers outside of peak hours 90 5€ coupons for ~17 k orders 3 over a year
​25% service fee
10 Top 10 chefs regarding timeliness 2 Good restaurant for ~10 persons
​20€ average basket
size 11 Timeliness targets and rewards 50 20€ coupons for 2504 restaurants each month
(total over a year)
1 Assuming delivery fee is directly financed by the eater, on top of the average basket size 2 20% of 600€ 3 20% of the 800 riders 4 Assuming we target
5% of the 364 k orders (7 k orders happening during peak hours per week and 52 weeks) 5 Assuming 500 restaurants and half are meeting their target

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D: Out of the 11 initiatives, 5 quick-win initiatives should be
prioritized based on their estimated impact and feasibility
Preliminary

x Delivery optimization x Increase in number of riders x Demand archetype x Restaurants timeliness

Initiatives to prioritize 1 Share of high-speed vehicles

High
7 5 6 2 Bike electrification

3 Bigger delivery bags

2 1 9 11
4 Ergonomic food packages
3
5 Additional riders
Impact

Med 4 8
6 Incentives scheme for riders
10
7 Surge pricing

8 Pick-up option

9 Offers outside of peak hours

Low
10 Top 10 chefs regarding timeliness
Low Med High
Feasibility 11 Timeliness targets and rewards

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E: Proposed next steps and risks

​Refine the business case Risks

​Negative reaction of
customers to surge pricing
​Test the initiatives with focus groups ​Restaurants not willing to
comply with new food
​Launch priority initiatives packages
 Launch campaigns to recruit new riders and increase ​Focus of restaurants on
share of high speed vehicles timeliness with negative
 Set-up incentives scheme for riders during peak hours impact on food quality
 Launch promotional campaign to incentivize eaters to
order outside of peak hours
 Define targets and reward mechanisms regarding
timeliness for the restaurants

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Agenda ​Question 1: Supply Reliability

​Question 2: Restaurant Marketplace Analytics

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Context and executive summary
​Context
​ e are in the process of
W A
reviewing our restaurant
partner base to determine:
 Which is the most valuable
restaurant
 If we should make any
changes to the current
service fees in order to
maximize ROI
​Executive summary
​ criteria are key to assess the value of a restaurant:
3
 Size or the restaurant in terms of number orders and eaters
 Financial value in terms of revenue and profit
 Growth potential
B ​Restaurant 3 is the most valuable partner because
 It represents the biggest pool of customers and orders allowing network effects and ensuring we
meet the needs of a significant share of our customers
 It generates the highest revenue and have a positive net profit (despite not being the highest)
 Its total net profit is expected to grow by 152% over the next year, almost 2x faster than the two other
restaurants
C ​To maximize ROI, service fee
 Should increase for restaurant 1 as elasticity effect is important and current service fee low
 Could increase for restaurant 2, despite of lower elasticity effect, given its slight dependence on us
 Should stay at 27% for restaurant 3 as it would be too risky to loose our most valuable restaurant
D Next steps would be to build a CRM database and re-negotiate service fees with restaurant 1 and 2
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A: Three criteria are key to assess the value of the restaurants

Factors Rationale
​Size of the restaurant in Restaurants representing a significant share of orders and eaters are key
terms of number orders to have
and eaters  A certain volume of orders to occupy riders and generate network
effects
 A flagship restaurant that meets the needs of a significant share of
clients

​Financial value in terms ​As Uber Eats is not an NGO, it is key that the partner generates
of revenue and profit  Revenue
 Positive net profit

​Growth potential ​When evaluating a partner, it is important to look at its value at an instant
T but also to understand what is the growth potential of this partner,
esp. in the case of Uber Eats which has ambitious growth targets

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A: According to those criteria, restaurant 3 is the most valuable
Deep-dives next

Factors Restaurant 3…
​Size of the restaurant in ​…represents the biggest pool of customers and orders
terms of number orders  2 k weekly eaters vs. 1 k and 1.3 k respectively for restaurants 1 and 2
and eaters  1.3 weekly orders per eater vs. 1 and 1.1 for restaurants 1 and 2

​Financial value in terms ​…generates biggest revenue and have a positive net profit (despite not
of revenue and profit being the biggest)
• 8.4 k weekly revenue from service fees vs. 6.4 k and 4.8 k for
restaurants 1 and 2
• 0.6 k weekly net profit

​Growth potential ​…is expected to generate in one year a net profit which is 2.5 x the net
profit of today – growth 2x faster than restaurant 1 and 2

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B: Restaurant 3 has the biggest base in term of orders and eaters

Average number of orders per week and weekly eaters, k

​Weekly orders 1 1.1 1.3
per Eater
​3/7/20
​3/7/20
​3/7/20
​3/7/20

​3/7/20
​3/7/20
​3/7/20 ​3/7/20

​3/7/20 ​3/7/20 ​3/7/20

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B: Restaurant 3 generates the biggest revenue and positive profit

Revenue, delivery costs and net profit per week, k€

Restaurant 1 Restaurant 2 Restaurant 3
​3/7/20

​3/7/20

​3/7/20
​3/7/20 ​3/7/20

​3/7/20
​3/7/20

​3/7/20 ​3/7/20

​3/7/20 ​3/7/20 ​3/7/20 ​3/7/20 ​3/7/20 ​3/7/20 ​3/7/20 ​3/7/20 ​3/7/20

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B: The net profit coming from restaurant 3 is expected to grow 2x
faster than the net profit from other restaurants

Net profit per week, k€

​3/7/20 p.a.

​3/7/20
​3/7/20
​3/7/20
​3/7/20 p.a.
​3/7/20 p.a. ​3/7/20
​3/7/20 ​3/7/20
​3/7/20
​3/7/20

​3/7/20 ​3/7/20 ​3/7/20

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C: There is potential to increase the service fee for restaurant 1 and
potentially for restaurant 2
​Description
​Elasticity ​Sensitivity of the net profit to the
change in service fee (i.e., how big
is the impact on profit if we change
the service fee)
​Power ​Is the restaurant dependent on us
or are we dependent on the
restaurant? (i.e., do we risk loosing
the restaurant if we increase the
service fee and how bad it is if it
happens?)
​Current ​What is the current service fee
level level? (i.e., can we increase it or are
we close to maximum service level?)
​Conclusion ​Overall high potential of increasing
service fee to improve ROI as
elasticity is >1 but decision should
be taken carefully taking into
account restaurant characteristics to
avoid loosing important partners
1. Leveraging analysis of the first part of question 2
Conclusion on the potential to increase service fee
​Restaurant 1
​If service fee increases by
10% to 24.2%, net profit
increases by 58%
​Well-know restaurant (i.e.,
40,000 twitter followers)
​Least valuable partner1
​Service fee in the low range
(i.e., 22 % service fee out of
20-30% range)
​Increase service fee as
elasticity is 5.8 and current
service fee in the low range
​Restaurant 2
​If service fee increases by
10% to 27.5%, net profit
increases by 30%
​Leverage us for its notoriety
(5,000 twitter followers)
​Second most valuable
partner1
​Service fee in the medium
range (i.e., 25 % service fee
out of 20-30% range)
​Consider increasing service
fee as partner seems to be
dependent on us
​Not a priority as elasticity is
lower (2.8)
Positive Neutral Negative
​Restaurant 3
​If service fee increases by
10% to 29.7%, net profit
increases by 135%
​Correct notoriety (10,000
twitter followers )
​Most valuable partner1
​Service fee in the high
range (i.e., 27 % service fee
out of 20-30% range)
​Do not change service fee
despite high elasticity (13.5)
as service fee is already
high and as this is the most
valuable partner
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D: Proposed next steps and risks

​Build a CRM tool classifying the restaurants according to Risks

their value for Uber Eats
​Loosing partners when increasing
service fees
​Negotiate with restaurant 1 and 2 an increase of the
service fees
 Build an argumentation justifying the service increase
 Collect information about the service fees applied by
competitors

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 Any questions?

Any questions?

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