Uber Eats India Lessons

Jan 22, 2020

Uber has sold its food delivery business, Uber Eats, in India to local rival Zomato in an all-stock deal that gives Uber 9.99% ownership in Zomato. The move is aimed to help Uber cut losses and is expected to help Zomato to raise a mega-round to fight out its position in India’s already hyper-competitive food delivery space. With the exit of Uber Eats, the Indian food delivery market has effectively become a duopoly between Zomato and Swiggy, where Swiggy remains a leader with a significant advantage. 

Food delivery continues to be an expensive business across markets. In India, companies like Zomato and Swiggy burn in millions of dollars every month with a little sign of profitability in sight. The exit of Uber Eats means the food delivery market in India is likely to consolidate and offer some respite to the existing players. However, it does not guarantee profitability to any of the existing two players. 

While there is a lot to read into the Uber Eats exit from India, there are certain overarching trends that can give an insight into the fast-growing digital economy of the world.  

1. Local companies enjoy a competitive advantage across Asian markets: There is a prevailing presumption in many markets in Asia including India and Bangladesh that it will take many years for local players to effectively compete with global giants such as Uber and Amazon. This theory does not hold water anymore. Uber selling off its food business to Zomato proves that local digital tech companies enjoy certain advantages in many markets in Asia and can effectively beat global players. This view gets only stronger when you pay attention to the recent precedences in a few Asian markets from Singapore to Indonesia to China to India. In India, local players lead the market in almost all verticals. One common trait that defines all these markets, however, is that local companies can access capital relatively easily.  Thus it can safely be said that when access to capital is there, local players can effectively compete with global players. 

For example, Uber Eats launched in India in 2017 with a high expectation to to leverage Uber’s popularity to displace incumbents Zomato and Swiggy. The company spent millions on the promotion and deep discounts to no avail. It never bettered its position from number 3. Zomato and Swiggy both forged ahead, thanks to relatively easier access to capital in India, and Uber Eats never had a chance. 

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Ruhul Kader is a technology and business analyst based in Dhaka, Bangladesh. He is also the co-founder and CEO of Future Startup and author of Rethinking Failure: A short guide to living an entrepreneurial life. He writes about internet business, strategy, technology, technology policy, and society. He can be reached at ruhul@futurestartup.com

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