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Anonymous

{audio:0:00:00} Can you share some context to when you joined Uber, specifically to your role running Eats in London?

{audio:0:00:16} I joined Uber right at the start of 2016. Uber had been on an absolute tear in terms of its valuation, tripling its value every year type thing. We’d become pretty hot property. I used to be a banker and I was kind of tired of that banking thing and Uber seemed super sexy, so I got my application in, got my offer and then joined at the start of the year. I joined a group called the Rest of UK Launch & Expansion Function. In early Uber, the general manager runs a region and then the operations teams are under that general manager do the day-to-day. It was very localized. It wasn't run through central teams; it was run through the guys on the ground and I joined the function for launch and growing the business.

{audio:0:01:12} I joined as operations manager for Merseyside which was Liverpool and the surrounding area, working with the GM for Merseyside and the Yorkshire region and our job was to make it work. That meant answering customer complaints, talking to drivers, doing analysis of competitors, doing pricing reviews, doing system config; anything that needed to happen came through us. In that nine months I was in the role, we tripled the business and it was the amazing, early halcyon days of Uber where everything was super exciting and everything was very unformed, you could try loads new stuff and every few months they’d invent a new search or dispatch algorithm and you’d talk to engineers and you’d roll it out in your area. Things were changing all the time.

{audio:0:01:59} Then quite sensibly, they realized that the business needed to consolidate, so what was happening is all of the best ideas were being invented in silos and never really shared and deployed more globally. If I’m honest, there was competition between us guys on the ground to be the guy that invented the cool thing and shared it and less excitement to take someone else's great idea and implement it in our region.

{audio:0:02:26} They did a horizontal to vertical pivot and they took us from owning just a region to owning one topic for the whole country. I went from Merseyside ops manager to looking after UberPool for London, so rather than looking after a region I just focused very narrowly on that product. Unlike the core rides business which was pumping all the time and growing really aggressively, Pool had a really difficult life in the UK, mainly because it was competing with UberX which is a phenomenal product. We came to market UberPool and said hey, it’s UberX but a bit cheaper and you share your vehicle. The British aren't super gregarious by nature and it was a bit of a challenge getting them to share. There's also weather and darkness challenges, so if you tell people to wait for a vehicle to pick them up, it's a lot easier in a climate where it's not raining and where the street architecture is more simplistic.

{audio:0:03:25} It was a real tough challenge. I worked there for a year and I saw a lot of improvement in the product; I worked really closely with the engineering team in the US to get new features rolled out in the UK. We really improved efficiency; we didn't really grow the product very much but we definitely made it work better.

{audio:0:03:41} Then that the time that Uber Eats was getting going. We'd had those early trials in the US as part of Uber Everything and then it was coming to the UK as a food-based product only. It had been launched but it was still a very small region of the UK that was being covered, London and maybe Manchester. I went and had a chat with that team and said, are there any roles going? It was a hilarious conversation because there’d been a real push for the Eats team not to be poaching people from the rides function. They didn't want everybody to come piling across and try and take a new role, so there was this kind of unwritten rule that you could only talk to someone who’d approached you first.

{audio:0:04:24} I had a conversation with an old colleague from rides. He got me in front of the GM that afternoon and we had a conversation about what roles were available and then I had to reapply. It was exactly the same as applying to Uber from the outside. I went through the whole six or seven interviews, case study and everything, apart from the numeracy test, I did from scratch. Then I joined this territories team, a really small function, eight of us and our job was to be on the ground: know the city, get to know the restaurants, get a feel for the local market dynamics. What we were to compliment was these larger central functions: restaurant function, driver function, marketing function in which we were trying to run the business from a scalable, do everything once for the whole country perspective.

{audio:0:05:09} What we learned, quite interestingly, is if you go too far away from that original Uber V1 model of people on the ground, general manager on the ground and you go to full centralization, you lose a lot of what made that strong. You gain a lot of efficiency in sharing of best practice and quick deployment but you lose a lot of local focus, urgency and ownership.

{audio:0:05:30} So we had this really interesting challenge, as the territories team, to move from a small component to almost co-owners of the business with the central teams. Over the 18 months where I was responsible for London we went from just me looking after London to hiring up a team of 20 people which I became head of, P&L owner, responsible for the actual performance of the business and partnering with the central teams to deploy either best practice or depths of experience to help solve our problems. Also being brought into everything from regulatory problems through to working with top accounts, like McDonald’s, through to looking at local marketplace optimization, pricing plans. Everything that might need a local lens was owned within the team.

{audio:0:06:24} That long journey through Uber was from local to central and then to team in Uber Eats that sort of scaled up to try and find that balance between being on the ground and being able to do best practice at scale.

{audio:0:06:41} You walk into Uber Eats at the end of 2017. What does the market landscape look like in London?

{audio:0:06:49} We’d been launched as long as anywhere else, but we'd come in probably against the backdrop of Deliveroo and Just Eat being really locked in a competition already, so we came in as a third party. Deliveroo had launched in the center of London. Their proposition was very much premium: better restaurants, better delivery times, nicer app. Just Eat was the traditional model of the restaurant that does its own delivery, but whatever they lost in terms of that premium, they made up for in terms of incredible selection, best price in the market and still a pretty good app and online experience.

{audio:0:07:35} So the two of them were kind of locked in this competition and Uber Eats came in and just went absolutely ballistic and started offering incredible guarantees. Our launch guarantees were like, if your meal is not there within 30 minutes you get a whole free meal again. We very quickly realized that wasn't sustainable. We had the 2006 mindset of throw money at the problem and we're going to solve it and we had to catch up very quickly with that 2018 mindset of the market actually wants to see that we’re growing in sophistication, rather than just chucking money at problems. We had to climb down really quickly from explosively large spend in a small area, to the much harder graft of we’ve got to start competing with Just Eat in terms of prices and selection and competing with Deliveroo in terms of quality of offering. That was against the backdrop of having to roll out across the whole of the UK, as well as just keep London ticking over.

{audio:0:08:34} Just Eat was mainly offering the marketplace or were they doing logistics as well in 2017, 2018?

{audio:0:08:42} At that point, if Just Eat were experimenting with that courier-led model, I'm not aware of it. I wouldn't want to give you the definitive answer but we certainly saw it as a clash of models back in the day. It was very much the more expensive, much quicker, much more controlled courier model versus the more freewheeling aggregator model. One had huge advantages for scalability, one had huge advantages for quality and it was before, I think, anybody had really recognized that both models had real strengths and that you were probably going to have to do different ones in different places. It was very much a world of each thinking their model’s best.

{audio:0:09:26} What was your strategy going in as Uber Eats in London?

{audio:0:09:30} The things that we wanted to bring to the table that were our unique advantages were on the courier side, we inherited this phenomenal technology from the core rides business. So we had the ability to give a driver app, dispatch to restaurants, have a great real time database, have all the tools to deal with things like bridges. Loads and loads of platforms get confused about geographical obstacles because you try dispatch a courier to a restaurant over a river and you can't as there's no bridge there. That sounds dumb but it's going to spoil half of London if you think about the massive river running through it. We had those tools and we had the experience, the analytical ability of all the people that were now in the team. That meant that, very quickly, we got to a super reliable liquid marketplace. That was one thing.

{audio:0:10:24} The second thing I think we brought to the table is global scale. We were able to come into the market and have conversations with the likes of McDonald’s, not as a little upstart but as a, ‘We are your global best partner. We're sophisticated. We operate in more markets than anybody else. If you partner with us in the US, you're also partnering with us in Australia and us in Europe and in Sub-Saharan Africa or wherever you want to be.’ I think that gave us a huge advantage versus the likes of Deliveroo and Just Eat because they couldn't have those kinds of conversations with Starbucks, KFC and McDonald’s. That isn't to say they weren’t a great local partner and they didn't speak to them locally, but our ability to go to a very high level at those organizations, internationally, was kind of unrivaled. That's what we brought to market day one: amazing partnerships and close to best in class technology.

{audio:0:11:17} In terms of scale, was it more important on the driver’s side that you had liquid drivers and riders that could switch from rides to Eats or was it harder to get the demand?

{audio:0:11:31} The thing about the food delivery space is it’s a three-sided marketplace, so you've got restaurants, you've got eaters and you've got delivery partners. The clichéd answer to that I'm sure you've heard in other marketplace businesses is it’s three sides of a triangle – you need all of them. The big challenge for this industry, more than any other marketplace industry, is that you can be incredibly strong where we're sitting and then you’re terrible two miles down the road. That's because restaurants don't move. I know it sounds dumb, but couriers, drivers and lots of other things do move and you can reposition them if you've got supply and demand imbalances, but restaurants don’t. If you want to launch Central London, you need to win a reasonable number of restaurants before you launch so that you've got something to launch with, you’ve got product. Then you need to launch with a bunch of couriers. You need to actually have someone that can do that delivery and then you need to drive demand. But that order of operations that I've given you has to happen before launch. You can't launch the business with no restaurants and you can't launch the business with no couriers. You have to do all that work and one of the things that I think Uber Eats has got incredibly good at is that scheduled launch. So it got to the point where what did take us a month maybe to launch Manchester ended up being 20 launches running in parallel, so that we could launch them all on the same day or run them slightly off sequence so we could run 10, then another 10, then another 10.

{audio:0:13:13} If you see the rate at which Uber Eats has expanded across the UK, we overtook Deliveroo phenomenally quickly. The thing that makes Just Eat such a strong competitor is that because of their completely different model, they don't have that same challenge because everywhere in the UK there are already restaurants that do delivery. So as soon as you sign up one restaurant in my small fishing village home town, congratulations, you’ve covered that area. Now you can't offer the quality of selection or the quality of delivery speed that the courier model can, but you are there and the courier model isn't and I think that's back to what I alluded to before. Launch is different, the strength of the models are different.

{audio:0:13:53} What can Uber offer in those suburbs to compete with Just Eat?

{audio:0:13:59} I think if I differentiate slightly between core of cities, suburbs and rural areas, I think in core of cities it’s really difficult for a Just Eat type model to play well. If you go on the apps for example, completely public information, go on the app and look at who's got the most restaurants and who's got the restaurants that you, as a consumer, would be most interested in, the answer is that the guys who are working with couriers are by far the better selection. If you go somewhere very rural, in small villages the courier guys won’t have a look in. There's nothing like enough restaurants and demand to give you a liquid marketplace for couriers. I grew up in a town of 5,000 people and I'd make the prediction that the courier model is pretty much never going to work there.

{audio:0:14:56} The suburbs are interesting because the suburbs are where you've got the situation where both models bring something to the table and they have major weaknesses and so I think the suburbs is the big battlefield of these platforms. I don't think Just Eat is going to win in the core. I think a purely courier model is never going to win in small towns and villages and in the suburbs which is where a huge number of the mid-affluent people in the UK live, you've got a real difference of approach and a different set of skills that they can bring to the table.

{audio:0:15:28} What do you think is going to define the winner in the suburbs?

{audio:0:15:34} I think it’s actually going to be who is able to do both well, the quickest. If I think about some of the strategies that I think a Just Eat would deploy, it would be going to all of their existing partners and offering the ability to do the courier-led model when those partners want. For example, if you’re an independently owned Chinese restaurant, you’re probably banging on a Friday night and you might want to bring a few couriers in then and supplement what you can already do. Alternatively, you might be looking at a really quiet Tuesday afternoon and you don't want to have a driver on because you’re only going to get one or two orders, so you might want to request a courier.

{audio:0:16:24} Then the flip side is, if you’re Deliveroo or Uber Eats, you might want to then go and offer them that same aggregation service, knowing that you actually probably can do the courier service on top. Or can somebody be clever and say, we can add your driver into the courier pool so that if it is a quiet Tuesday afternoon, that driver that you've got on can go and do a couple of extra jobs and earn you some income and then do your own deliveries for you, so there's some sort of hybridization available. Or maybe you do a model where a driver working for one restaurant can be pooled with another restaurant down the road and pick something up en route. To the best of my knowledge, nobody has got anything like that live, but you can kind of see a world where if you can do both models in the marketplace well, you could start to think of hybrid approaches.

{audio:0:17:20} Then I think, come back to the core truth of the food delivery market which is that it always comes down to selection. You’ll always win if you've got the best selection which means that there's a second war going on which is all the business development teams of these companies going to the big enterprise chains and trying to win them over to be their exclusive partner, you want to ally that to a really strong, scaled sales team – someone that can do phone sales, field sales and whatever else – with the local insight to know who to win. You marry that up with some targeted marketing: promo codes and flyers targeting local social media and you bring a beneficial cycle together, where you start to win the best restaurants which brings you the most demand which starts to bring you more restaurants on board and that speeds up that flywheel effect. But everyone's trying for the same thing, so everyone's trying to pull those best restaurants away, everybody's trying to get over the top of somebody else with the marketing, promo codes and re-engagement campaigns. I think it really is going to come down to either, who does the mixed model best or who just wins on a pure war of attrition.

{audio:0:18:34} It seems like exclusivity for restaurants is crucial in the game?

{audio:0:18:40} Yes. I don't think you need any inside knowledge to know that, if you open the app in Central London and you see certain restaurants there, that brings you back. You know that a brand name burger restaurant is likely to convert much better and retain much better than a completely independent burger chain that no one's ever heard of. So if you were to magically create an app that had every top 100 restaurant chain in the UK on it and nobody else had any of them, you'd be in real trouble to fight against that.

{audio:0:19:15} Why would they do that? Why would I go on one platform if I was a top ten restaurant?

{audio:0:19:21} That’s exactly it, why would you only go on one? What you have, at the moment, is the chains who are sophisticated negotiators, talking to sophisticated business development people inside the large players, trying to trade off the value they would get from incremental business versus the value they would get from higher margin business and trying to leverage their brand or position as much as possible. You've got the platforms competing with each other, to play a game of chicken, on how low will you go to get various brands on versus which ones are actually best positioned. Then at a layer below that, you have the local favorites which is a huge focus and very, very difficult to do, but everyone knows in their local area what the best burger joint, best Indian and best Chinese restaurant is. If you think about like every postcode, within every one mile squared in the UK, you have that same local knowledge and again, you can't just have the top 50 chains. You've got to also have the next 50 best local favorites; those are your two layers of competition. You've got the biz dev, the chains and then you've got the local knowledge, the local relationship building, the incredibly localized market performance which will feed into which chain does best where and then their own optimization of that individual owner between growth versus profitability. I think selection is fought on several levels and the skills to win each are different.

{audio:0:20:58} How do you think a restaurant looks at it? Let's say I’m a suburban restaurant on Just Eat and then Uber or Deliveroo comes in and says, I can offer you this aggregation lead gen demand service plus you can be the courier or we can do logistics if you wish.

{audio:0:21:16} I think there's three points to the triangle of what they think about. One is growth, one is profitability and one is operational complexity. You wouldn't believe the amount of time that restaurants will talk to you about things like printers. I want three receipts printed out because I want to give one to the customer, one to the record book and one to the kitchen and which platform makes that easy? It sounds like something silly and you wouldn't get it from an MBA case study, think about it from first principles, but a lot of the time the independents say my kitchen is harder to use now that I have got extra tablets and extra bits of paper and I have to press print three times. So that's one thing.

{audio:0:21:57} The second is growth and there’s very different mindsets, particularly within the independent sector. You will get some young chains, which might be one restaurant that believes they're going to be a chain, and they're very focused on growth. So they're very focused on growing orders but they're also very focused on can you help me, as a platform, pick where my next site should be? Can you tell me, for example, that in this particular part of North West London, there is a lot of searches for Greek food that are going unconverted and therefore tell me that's probably a good place to open my second group chain. By the way, do you have a partner that would allow me to open a dark kitchen there where I can check this out and test that it works?

{audio:0:22:43} So there are some people whom the growth pitch is really powerful and you can say come exclusive with us and you may get slightly less demand in the short term, but we will partner with you on co-branded marketing and we will help you find a new site to expand into and we'll do a bunch of other stuff. I actually think that Deliveroo is probably best in class at that because of the work they've done with things like their own dark kitchens and a lot of local presence on the ground, a lot of individual meetings and face-to-name type relationships.

{audio:0:23:18} Then that other point of the triangle which is profitability, a lot of these guys, if they're not as profitability focused then exclusivity might be more attractive to them because they’re going to get that better rate. How do you convince them to come multi-platform if they're in that mood or how do you convince them to stay single platform? Sometimes it comes down to moving on the price and sometimes you want to talk to them about, actually, a certain amount of growth will offset your marginal losses because you will be at this high utilization and you can try and talk to restaurants about what their fixed costs are versus the variable costs and you can have that conversation.

{audio:0:23:59} Maybe you can convince them but the thing to do early is understand where on that triangle that particular owner is, because there are some people running lifestyle businesses, there are some people who are set in their ways. There are some people who believe that their product is, honestly, the best in the market and it's only a short matter of time until they’re a dominant brand and your proposition is kind of different depending on where that person is.

{audio:0:24:22} Do you think restaurants in suburban London and the city center will be, in the long run, on all vendors?

{audio:0:24:32} I really don't know is the honest answer. I think there is a simplistic view which is that everyone will go multi-platform and then, consequently, every platform will harmonize their prices because the discounts are being done for exclusivities, preferences or co-promotion

{audio:0:24:47} And it’s commoditized pretty much.

{audio:0:24:49} You end up at a point where the platforms will either break even or you'll come down to which one has the best fixed cost structure that allows them to price more aggressively or less dispatch. My actual experience of restaurant partners is most of them don't want to be multi-platform. It’s economically optimal for them to be getting as much demand as possible, being in as many places as possible, but the operational complexity is a lot greater. Having three tablets in your kitchen, having different printouts and different styles and having different order code variants and different allergens coming into the restaurant in different ways, and the couriers having a different app to show which one they're picking up, or having people picking up two orders from different firms at the same time and it going to the customer and it not being as good an experience. A lot of them would rather just have that completely streamlined. There are some people that will put up with operational difficulties or they'll invent their own schemes to deal with the operational complexities for the purposes of greater demand; but there are other restaurants that won't want to bear the operational costs.

{audio:0:26:01} Then there are still other restaurants that are at near capacity and the most important thing for them is the margin. I could triple your number of orders, they wouldn’t be able to handle it, but they can add 10% more at off-peak times, that’s fantastic, but then they really want to get the most margin possible. I don't think it's going to be as simple as, most restaurants will multi-platform inevitably. I think you see that with stuff like McDonald's choosing to go to Just Eat as well as Uber Eats, but not going onto Deliveroo, at least in the short term because I think they recognize that there is some negotiating leverage that comes from using their exclusivity or their preferential partnership arrangement, to drive a good bargain with the platforms. I don't think it's clear that they will. There's definitely pressures in that direction but there are pressures away from it as well.

{audio:0:26:54} Back to the suburbs and Uber and Deliveroo moving into the suburbs, competing with Just Eat to own those traditional takeaways. How do you look at the density or scale required for these two players to really compete?

{audio:0:27:18} I don't think we have a perfect answer. Both platforms have been expanding to smaller and smaller places, over the last several years, and it's easier in the bigger places you go. But I don’t think Uber Eats or Deliveroo have yet reached a place where they've gone, you know what, this is just too small. I think that’s partially because their sophistication has increased and they're able to do more intelligent dispatch and more intelligent onboarding and do more stuff remotely than they were before; partially because they've won these national chains, so even when you go to a small town it might have a Starbucks, Pret, Costa, McDonald’s, KFC or Subway and so you start to have a small little hub you can build a brand; and partly because they haven't tried to launch in places that are super low density. When I was in Merseyside, we had the Wirral, which was quite an affluent area, but it was 300,000 people spread out over 50 odd little towns and villages which was very difficult versus 200,000 people in a continuous conurbation. I don't think Uber Eats or Deliveroo have yet taken on the challenge of an area like that. I think we can cover most of the UK's population in continuous conurbations and maybe you get to 60% of the population, but there’s probably going to be that 40% of the population that is not really going to be serviceable on the on the courier based model.

{audio:0:28:56} Does the restaurant even want to do delivery? Let's say I'm a restaurant on Just Eat. They come to me and offer the courier service, then Deliveroo and Uber come to me. Obviously, I have a decision to make between those three variables, but do I even want to do delivery? Wouldn’t I just want to outsource that, to a certain extent, to these guys?

{audio:0:29:28} It comes right back to what I said before that restaurants are more different than you may imagine.  I've called up some restaurants, I've been involved in the sales calls and it will be just like the local Turkish, Indian or Chinese in a small town. The sales pitch is, basically, would you like more business? I've heard people pick up the phone and say no, I've got enough thanks. I sit here with my capitalist hat on and I think no, nobody ever says no to the question, would you like more money? They just never do. But in reality, they actually do. People are like, I have quite a comfortable business, I'm quite happy with how it works; I don't want any more demand and this is my lifestyle business, it’s fine.

{audio:0:30:16} You've got other people who are like yes, I’d love more business but, actually, the courier model doesn't excite me at all. You get little family run places where one brother cooks, one brother drives the car and they don't need or want to courier. They've got their own little thing worked out.

{audio:0:30:33} We’ve tried this; sometimes you say hey, why don't you trial this model where we're not going to stop you doing your own deliveries but you can have a courier sometimes as well, try that out. Some people are like, this is amazing. It’s so much easier. It's like magic. I start making the order, I'm doing it and then a courier walks in and takes it and it's done, I never think about it. They’re like, it’s amazing, I want to switch straight away. Some people are absolutely against it until they try it. How do you know? The process for these restaurants has to be personalization and customization at scale, which means it has to be remote and it has to be with agents who are pretty motivated and pretty switched on and able to talk to restaurants in a different way.

{audio:0:31:22} Some restaurants just don't want to do it, they're quite happy with where they’re at and some restaurants love it but they’re wedded to their old model; and some people are super up for experimentation. You don't know until you ask and it could be restaurants of similar size, in a similar sized city, with a similar cuisine type and just the person behind it is the difference.

{audio:0:31:39} It seems like Just Eat have such a strong position in the suburbs and rural UK because they own that customer relationship, that it's a real challenge for the logistics players to go in and try and win that customer.

{audio:0:31:55} I think that's right. I think Just Eat has done a phenomenal job in lots of the country, in building a sort of go-to mentality: you want something, you go to Just Eat. Then their biggest competitor is, actually, just being disintermediated by the small number of takeaways that are locally available. They’re less worried about Deliveroo and Uber Eats, more worried about the fact that, in this small town, there is only four restaurants and each of those four restaurants will be known to the individual consumer and they'll all put a flyer that says call me directly and next time get 10% off. So that's Just Eat’s biggest problem.

{audio:0:32:32} Now, when Uber Eats and Deliveroo get really switched on, in terms of their own aggregator model, there is an ability to go to those restaurants and say hey, would you like just to be on our platform as well? It's free to sign up and we’re going to be cheaper than Just Eat and if you get no demand, it's no skin off your teeth.

{audio:0:32:57} Then you hope one tactic might be, if we signed up those four local restaurants and we're going to undercut Just Eat on price, maybe they push you ahead of Just Eat, maybe you get to a scale that's big enough in the suburbs and the core, where it actually makes sense to do national sponsorships or national TV advertising which has that trickle over effect into rural areas. Maybe you can do very localized promo campaigns and you say, we're going to launch in the EH42 postcode, to the east of Edinburgh, which is 200,000 people in small towns and villages but we're going to bombard that postcode with promo codes and maybe the platforms will try and unpick Just Eat piece by piece. At the same time, Just Eat’s more than capable of coming into the core and doing that exact strategy of partnering very cheaply with people like Greggs and KFC and offering promo codes and flyers to raise awareness. Those tactics cut both ways.

{audio:0:34:02} Even if a portion of the restaurants in the suburbs do decide, actually I’ll take the marketplace offering from Deliveroo or from Uber, especially if it’s cheaper than the takeaway that Just Eat’s charging, that’s going to be a pressure on Just Eat.

{audio:0:34:22} Just Eat’s under enormous pressure. Back to your question what was it like when I came into the market, Just Eat was running at a 35% to 40% margin. There were some really nice comments made by the CMO about how they never use promo codes because it's basically paying customers to use you and it’s the bad way to do business. They were getting written up by analysts as being incredibly nice, secure, high margin cash flow and they were going to get their position in the FTSE100 confirmed.

{audio:0:34:50} Then you have these two super aggressive loss-making tech companies come in and blow them out of the water, in the most affluent parts of the country, put huge downward pressure on margin, spend a ton of promo money, get the advertising, sponsor Love Island, cover buses in Deliveroo’s logo; they’ve come in and hit it hard. I think you've seen that, with Just Eat getting involved in these big consolidation moves in Europe and in America. You've seen it with their loss of margin. You've seen it with relationships with Greggs, KFC where, I assume, they've given them a very competitive marketplace fee to come exclusively or preferentially with their platform.

{audio:0:35:35} I think they've woken up to the fact that they're in a pretty serious fight for their life. In the two, three years that I've been following it they've gone from probably a bit complacent to really deploying as much capital and innovation as they can, to stay relevant.

{audio:0:35:36} Uber’s position in the suburbs seems to be pretty strong because if they go in, they've got a marketplace and all the rides users plus the Eats users, where there’s obviously overlap. Plus, let's say the restaurant only wants the marketplace offering to begin with, if it's a lower price that's going to be a great deal for the restaurant. If they do get demand to scale, Uber can then eventually move in with the courier model, as well, if they get that density. It seems because of the scale of both the brand equity on the demand side but also that liquidity from riders and drivers on the supply side, it does seem like they're in a pretty interesting scenario to really compete with Just Eat and Deliveroo.

{audio:0:36:39} Yes. I'm super proud of the job that we did at Uber Eats, to come from kind of nowhere to be very much one of the players. It depends what data source you look at and it's obviously hard to know, but Uber Eats and Deliveroo seem to be pretty close in terms of market share. The Financial Times has written that up a few times. That’s a phenomenal achievement by the by the Uber Eats business in the UK.

{audio:0:37:05}. That being said, Deliveroo has come from a complete standing start. They didn't enter the market with a ton of money and a ton of brand equity and a ton of ops people that had already had years of experience. They came from zero, so what they've scaled up in the UK is also really impressive and they have an amazing position with lots of the best restaurants in the country that Uber has only just begun to unpick. At the same time, they've been coming down market and onboarding more of the pizza businesses and chicken shops and local Chinese restaurants that they didn't really want to play with before. They've bulked out their position pretty well.

{audio:0:37:45} Then Just Eat has woken up and they've got this embedded customer base across the country. They are, again, by most public estimates, bigger than Deliveroo and Uber Eats put together because of that very wide, thin presence they've got in lots of rural areas.

{audio:0:38:05} So it's an amazingly interesting market because each of these three players is so different. It's not like my banking days where you’d have three or four big banks and they would all be able to do the same things and have roughly the same presence. You've got three companies that have a completely different set of strengths and models, all converging into a similar hybrid approach, that we just don't know who's going to do better yet and who's going to have the best starting position.

{audio:0:38:36} Before we go into Central London, who do you think is going to win in the suburbs? What factors are you looking at to determine who’s going to take the most market share?

{audio:0:38:46} I’m still an Uber shareholder, so my answer is going to be hugely biased by the fact that I’ve got a big financial stake in their success.

{audio:0:38:54} Maybe the better question is, why would it not be Uber? What are you worried about?

{audio:0:39:05} I think there comes a point where it really does just become a question of who executes best and spends the most. If you were to turn around to Deliveroo and give them half a billion pounds a year, it becomes very difficult to unpick them because they're just paying restaurants and customers to use them; very cheap subscriptions, huge number of promo codes, massive discounts to marketplace fee. You can't unpick that by executing better. At some point, the economic reality wins out. One thing that worries me is Deliveroo and Amazon tie up and Amazon comes along and, basically, just gives Deliveroo carte blanche to lose tons of money. That's one scenario. Or they get tied up really closely with Prime for example, so every Prime customer gets a discount on Deliveroo and that would probably lose them a ton of money, but Amazon has a ton of money. They could, if they wanted to, take a super predatory, potentially anti-competitive approach and just buy the market. That's one thing. That's not to discount the fact that Deliveroo has done a really great job of winning loads of the best restaurants and they have this organic position that’s really strong.

{audio:0:40:26} Now part of how Uber has entered the market is also – surprise, surprise – Uber’s a massively loss-making, massive multinational company with huge amounts of investor capital. If Uber wakes up one morning and Dara thinks, you know what, this COVID situation's been terrible for profitability, they're going to have to cut tons of stuff. Uber’s losing billions a year. A lot of that is in loss-making markets and they've divested India and a lot of it is in driverless car research and all the rest. But it's also investing in growing the business and signing up new customers. If Uber says, we need to break even in six months, that's also a real brake on growth. You can't go into the market and make a healthy profit when another incumbent is losing a ton of money.

{audio:0:41:14} Finally, Just Eat has a has a phenomenal amount of brand awareness. So Uber is super well known amongst me and my cohort of mates who've lived in London and used Uber rides forever, but most of the country doesn't have a strong Uber rides business to leverage. Most of the country knows Just Eat and most of the country likes paying cash, which Uber Eats doesn't accept and most of the country is a little bit sketchy about big American tech companies.

{audio:0:41:49} So there's a world in which Just Eat consolidates US and Europe really well, cuts their fixed cost base and is able to reinvest a ton of that money back into strategic markets like the UK, and then again, that war of attrition comes back into play. It really is who's got the best operational ability to execute but that's only a multiplier on the money spent. If Uber Eats is twice as good as Deliveroo – which I wouldn't say it was – but Deliveroo outspent Uber Eats threefold, then I still would expect Deliveroo to win.

{audio:0:42:21} Maybe it's a situation where it can be Just Eat for the rural areas and, potentially, most of the suburbs and then you have Deliveroo/Amazon versus Uber in the cities and parts of the suburbs?

{audio:0:42:36} Yes. I think it's also just a question of what your time horizon is, because who's going to win in the long term? Is your long term three years or 15? I'm a huge believer in Uber, as a company, because we know what's going to happen with driverless cars, aviation, micro mobility and freight at some point and Uber owns the most important customer relationship across all of those verticals.

{audio:0:43:07} If you have a belief that, in 15 years, Uber will be the one that's dispatching your flying taxi and your driverless car and your electric hover scooter, then their ability to just subsidize food delivery in strategic markets, semi-indefinitely, is incredible. Similarly with Amazon, they’re a behemoth. If want to win something, they cannot be beaten because they have infinite money. They may come around to the idea that it's not a great investment, they don’t want to do it or they may get broken up by the US regulators. We just don’t know.

{audio:0:43:44} Similarly with Just Eat, they're basically consolidating with Takeaway.com and with Grubhub in the US. This is consolidating every food delivery company that's not a major tech company. Do they have the legs to go the distance? Will they find investor finance? Maybe the short-term equilibrium is that suburbs versus core kind of thing. What’s the 10-year equilibrium? If there's driverless cars going around in King’s Lynn, then maybe that's a really easy base for Uber to also be doing couriering. Maybe it's a base for them to cross-sell. I think it's one of these interesting markets that will remain kind of unstable for quite a long time to come.

{audio:0:44:28} In terms of the economics, typically, for the market in Central London, what is the average ticket size, take and driver cost? How do you look at that?

{audio:0:44:42} With the caveat that some of that information is proprietary and I can't talk about exact numbers, but most of it you can take from public sources. For example we probably know that the average consumer spends between £10 and £20 on their own order, which is going to be depending on whether they have a single pizza or a larger meal and as you add every extra person you don't quite add as much as that, because there's more propensity to share meals. You can kind of see that the range for pricing is somewhere from a single person at £10, up to several people at £50 and there's a declining deviation.

{audio:0:45:25} I think the average ticket size in London is £20 to £25 roughly.

{audio:0:45:29} It’s more interesting to think about it as distribution, frankly. It's not fully normally distributed. There's obviously a long tail of very big orders and so what's quite interesting from an operational perspective isn't just, what's the average order and how do you deal with it, but also if there's only a few percent of people to order 25 pizzas, that's an operational challenge. You can lose a lot of money on the long tail as well, as I'm sure you can imagine If you order 25 pizzas and they don't turn up and you refund the customer, that's a massive loss to the platform.

{audio:0:46:01} So yes, there's a little bit of a clustering around that one to two people order which you'd expect that you can get some public data about the exact price, but there's also a distribution element, that won't surprise anybody, that you need to think about.

{audio:0:46:17} What's the average density required to make the business work in London? Take Deliveroo, Uber, Just Eat. If you want to do courier servicing, what is the number of orders you need per hour, typically, to actually make it work?

{audio:0:46:32} I have no idea. There was nowhere in the Greater London area, where density was too low to work.

{audio:0:46:45} So it’s just so dense that it works?

{audio:0:46:47} Yes, and it’s apparent. It’s not proprietary. If you go to Woking and Orpington or something and you open the app, you’re going to see restaurants and have a reasonably good experience. I think part of the interesting thing about Britain and the greenbelts is that you don't really have this long taper away to very low density. You tend to have reasonable density up until the point where you basically stop having many houses.

{audio:0:47:18} Can you get two or three orders per hour, at scale, in the suburbs if it’s one or two players?

{audio:0:47:27} The range on it is so huge. To give you an example, a big chain restaurant versus a small local independent restaurant, even in the same part of town, could be orders of magnitude different and also could be multiples different on the average basket size. Part of what you want to do with the platform, like Uber Eats and Deliveroo, is offer selection and choice. So what you tend to see is higher volume, low cost things and lower volume, high cost things and from the court to the periphery it varies much more by restaurant type and by cuisine type, than it does by area density.

{audio:0:48:12} What do you think is key to winning in big cities like London?

{audio:0:48:16} Selection. It’s always selection. Having the restaurants that people want is always the key and we spoke a lot about what restaurants think and advertising budgets.

{audio:0:48:26} How is the way restaurants think different in London versus suburbs?

{audio:0:48:32} In Central London I think you tend to have more commercially minded businesses and fewer lifestyle businesses. If you go to my hometown, there are five restaurants that are, basically, run by the Indian family and the Turkish family and the Chinese family and it's super rural. The people who immigrated there set up restaurants and that's what they do and that's the family business. Whereas in Central London, you have a lot more people who are entrepreneurial who want to set up a restaurant and make it work and they're pivoting cuisine types and they're getting customer feedback and looking for new sites. I think again, it won't surprise you, walk around Central London, look at the restaurants that are available, you could say the difference is sophistication but I think it’s probably truer to say commercial intent.

{audio:0:49:20} So you think that the key for these businesses is actually onboarding potentially exclusive relationships with the restaurants in the cities, to driving user demand?

{audio:0:49:33} That’s your cycle. So your cycle is, better selection drives more demand which drives better selection because the restaurants are more likely to stay with you if they're getting more custom from you. Trying to keep that wheel spinning in the face of competitors who are trying to pull you back on those bits with promos targeting your customers and exclusivity offers targeting your best restaurants, that's the fight.

{audio:0:49:55} If you take a Wagamama, if they’re commercially minded, they might look at Deliveroo, you’ve got your set of customers and demand, so has Uber. I’m going to play you both.

{audio:0:50:07} Absolutely. That's why I said there’s that competition for professional negotiators on both sides. Wagamama is a phenomenal brand, so Wagamama has real leverage over both platforms which is, give me a great price or I'll go exclusive with your competitor. But the challenge is not to overplay their hand, because if they say I want price X and both platforms go. I can't really tolerate that and then they have to come back to the platform and go okay then, we'll take a higher price, it shows a huge amount of weakness that they weren't able to get the price they asked for from your competitor and they're going to lose out.

{audio:0:50:45} So that's a fight of negotiation and a fight to properly understand the differentiation of your brand. If you’re a Wagamama or a Nando’s or someone and you're part of the parlance, people talk about having a cheeky Nando’s and stuff, go to Waggas, you’ve got real strong brand differentiation, you're able to go and negotiate. If you came as a mid-tier Italian restaurant, of which there are loads, and you go and ask for this same aggressive price point, you’re much more likely to get told no which is much more likely to result in a bad outcome for your negotiation. I think on that one it's really, unlike the local favorites’ layer, it's the layer of who has the best biz dev team and is able to do that work well.

{audio:0:51:36} How effective is it to switch demand from rides to Eats? Is that tricky?

{audio:0:51:50} It’s not a no-brainer. It’s not the sense that every single person who has ever used rides uses Eats. But obviously, it’s also a huge advantage to Uber to have that multi-product and so I guess the answer is, how long is a piece of string? It’s great but it’s not a silver bullet. It doesn’t solve the problem.

{audio:0:52:11} It’s not a real competitive advantage then, to have both the Eats and rides drivers?

{audio:0:52:17} I think it's a huge competitive advantage and I think every analyst will tell you that, if you launch in a city where you've got a million email addresses already, because you do the rides business there and you can email a million people and be like, hey, we launched, that's unbelievable. That's something that no other platform is going to have any chance of doing. But, as I say, that doesn't win by itself. Uber didn't launch in Manchester, email all the riders in Manchester and then suddenly win because, however much people are aware of you, you still have to have good selection.

{audio:0:52:50} So actually the exclusivity of that is probably one of the most crucial things in the big cities?

Former Head of Uber Eats, London 

Scaling Uber EATS in London

How Uber entered the UK food delivery market versus Deliveroo and Just Eat

The process of entering a market; onboarding restaurants, drivers, then demand

How cities, suburbs, and rural areas of the UK have a different competitive landscape

How to analyze selection between the major online food vendors

How Uber and Deliveroo could compete with Just Eat in the suburbs and rural areas

Why selection and access to capital are deciding factors in defining food delivery winners