Former Global Head of Pricing and Strategic Initiatives at Uber
Kapil joined Uber as the Global Head of Pricing & Strategic Initiatives in 2015 when the business was rapidly growing across developed but also emerging markets. He was responsible for formalising pricing structures across both UberX, UberPOOL and UberEats globally. Kapil left Uber after two years and joined Poshmark, the fast growing social commerce marketplace, as VP of Finance and Corporate Development where he has helped quadruple revenue at the business. Kapil has led $90m of capital raising for growth equity companies and has deep experience scaling marketplace businesses. Read moreView Profile Page
Moving onto Uber Eats and the food delivery business, how is the price setting different for the Eats business, versus the ride business, at Uber?
The Eats business is very different from the ride-sharing business, in certain ways. One is, it’s a three-player marketplace, rather than a two-player marketplace. Because of that, it becomes a little more complex. The good thing about the Eats business was, there are already some publicly-listed comparables available. For example, Grubhub in the US and some of the marketplaces in the UK, as well. If Grubhub’s take rate was 15% for the marketplace product and a lot of other players, for example DoorDash, which also used to exist, before Uber Eats locked on, their take rate was 25% to 30% on the restaurant side.
The take rate, on the restaurant side, was a bit higher than the ride-sharing’s pure take rate on the driver’s side, for two reasons. Firstly, because this platform is a bit more expensive because you have to pay drivers money and, on the restaurant side, their gross margins are around 60% to 70%. So there is pressure to pay 25% to 30% take rate to these players. The take rate on the restaurant side was a little bit more of an easier task because most of the restaurants would charge 25% to 30% take rate. If it was a large strategic partner, you could negotiate those deals. But, in general, the take rate on the restaurant side is 25% to 30%.
Then there are a few other criteria that need to be taken into account on the platforms. How much you need to pay to the drivers? You need to pay the drivers at a similar rate, so they are making the same amount of money as on the X platform, otherwise it will be very hard for them to move from X platform to Eats platform. One interesting thing about the ride-sharing and Eats platform, is that they are complementary to each other, from the supply side. Why is this? The ride-sharing platform has a lot more demand, during the commuter hours of the morning and the early evening. The Eats platform has more demand over the lunch and dinner periods. Because of that, you have the advantage that the same supply could be used on the different platforms, but you still want to make sure that the drivers are making enough money on both platforms. That’s how you think about how much you need to pay to the driver.
How much you will charge the eater is usually between $2 and $5 and you continue to experiment with that behavior. Also, you could introduce surge on that side of pricing. Those are the three different components – the take rate will be 25% to 30% on the restaurant side; the drivers will be paid similar to what they are earning on the ride-sharing platform; then you charge the eater somewhere between $2 and $5.
There are a couple of things that will finally determine the profitability of this platform. Not only those three dynamics but, also, how frequently eaters are paying a tip on the platform. You don’t take that into account, directly, but it will still dictate the choice of the driver to drive on the ride-sharing platform or the Eats platform. The second thing is, how many trips you are able to complete within an hour. The more trips that a driver can complete in an hour, Uber could, potentially, pay less per trip and, even though they pay less per trip, the drivers can make enough money on the platform.