What Comes in the Wake of the Uber Eats-Postmates Deal?

We wanted to share a few more thoughts on this week’s Uber Eats/Postmates deal now that reactions are coming in from rivals, investors, pundits, as well as the people delivering food on these platforms. 

In a Fortune piece about the deal, some gig workers shared their views on the transaction. Many of the men and women who actually do the work on the much-discussed “last mile” expressed concern that Uber could further its alleged “immoral” and “unethical” practices of suppressing workers’ pay.

Said one of the front line workers interviewed by Forbes, “It’s like if a large-scale embezzler were allowed to buy a bank.” While this may be an extreme take, it is revealing that those with the ultimate responsibility for delivering food to shut-in families are so anxious about the consequences of a consolidating market. 

Other last-mile workers told the magazine they’ve seen a continual decline in their compensation. They describe a vice-like process of the platform companies squeezing restaurants for more commissions on the one hand and cutting gig workers’ pay on the other hand. All in the race for profitability.

And, of course, there are plenty who mock the business logic of the deal. As GatherUp’s Mike Blumenthal points out sardonically on Twitter (quoting Jon Gruber of Daring Fireball), “If you take one money-losing company in a low-margin business and combine it with another money-losing company in a low-margin business, it’s like multiplying two negative numbers. You get a big positive number.”

Yet there are others quoted in the Forbes report who like the deal. One is Michael Gumora, a former driver who runs a blog about the ride-sharing business called Rideshare Report. He believes the bargaining power of the last mile workers will increase with consolidation. 

Too Small to Fail?

Over in the podcasting world, Pivot hosts Kara Swisher and Scott Galloway offered another perspective on the deal. They speculated that the real reason behind Uber and Grubhub’s recent failed courtship may not have been price as widely reported, but rather the fear of antitrust scrutiny.

“Was it price? Or did [Uber] get signals back from their lawyers in D.C. that this would never go through?” Galloway mused on a recent episode of the podcast. His co-host Swisher chimed in that, “I think it was the second of the two.”

Uber CEO Dara Khosrowshahi, speaking recently on a different podcast hosted by Swisher (a lot of podcasts out there), downplayed the antitrust issue. He argued that the food delivery space is vast and shouldn’t be narrowly defined by meal delivery.

“This market is much bigger than some present it to be,” he said. To make his case, he defines a broader food delivery category that includes meals and groceries. He also noted that companies like Dominos that deliver their own product should be considered when sizing the market.

“This market just got a lot bigger. I do not see any one or two players having a 90% share of this market.”

Uber Eats and Postmates combined have a roughly 31% share of the narrowly defined U.S. meal delivery. DoorDash sits at about 44%. Uber Eats and Grubhub together would have clocked in at about 46%, which may have been too much for the DOJ to ignore. We may never know. And it is not foregone at this point that the Postmates deal will escape scrutiny.

Your Move Lyft, DoorDash, etc.

Another interesting thread raised by the Pivot hosts, and logically by anyone looking at this space, is what moves can we expect in the wake of this deal?

Even though it remains the leader in meal delivery, DoorDash must be looking at all this consolidation and wondering if it can afford to stand pat. What move should it make? Is it hunter, or prey?

Amazon and Walmart have a stake in the last mile, to put it mildly. What will they do? Either could buy up the entire meal delivery space over breakfast. If only the feds would let them. What moves can they make without poking the antitrust bear?

And finally, Uber’s ride-sharing rival Lyft must be feeling very small right now. As Galloway put it on Pivot, Lyft should be calling its bankers and demanding ideas. Otherwise, in the war of the worlds, “they will be downgraded from a planet to a lunar object.”

Charles Laughlin contributed to this post. 

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