Acquiring Grubhub won’t solve Uber’s problems, says GlobalData

Following the news that Uber is in talks to buy meal delivery company Grubhub;

Ella Benson Easton, Thematic Analyst at GlobalData, a leading data and analytics company, offers her view:

“Uber’s interest in buying Grubhub, a competitor of Uber Eats in the US, makes sense from a revenue perspective but does not address the root causes of the company’s problems.

“COVID-19 has negatively affected Uber’s core ride hailing business, with bookings down 80% in April. The company scored just a 2 out of 5 for its ability to weather COVID-19 in GlobalData’s latest ecommerce scorecard. Its weakness in this area will negatively affect the performance of the company in the short term, and will make it harder for it to bounce back in the long-term.

“Reports of talks with Grubhub show that Uber wants to capitalise on the surge in demand for food delivery. A deal may alleviate some of the pressure on the company, as food delivery is an industry that has benefitted from COVID-19. With restaurants in the US not expected to operate at full capacity for several months, demand for food delivery will remain high. This may entrench food deliveries even more in people’s everyday lives once COVID-19 passes.

“The COVID-19 hit to Uber’s core business, however, will likely prove too severe to be rescued by such a deal. The company will have to seriously consider the viability of its ride-hailing operations, especially with the threat of legislation against the gig economy in the EU and US states such as California. Controlling a greater share of the food delivery market could help Uber survive the COVID-19 pandemic, but is unlikely to ensure the company’s long-term success.”

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