Chart: It costs Uber Eats $43.5 to deliver a $40 food order

Many people assess the attractiveness of a business by looking at the value it creates for consumers. In reality, those two are unrelated.

Food delivery, for instance, solves a major pain for consumers, yet, the highly competitive landscape (typically 2-3 delivery services in each market) and low switching costs make it an unattractive industry to be in.

For instance, Uber spends ~$43.5 to deliver an average $40 order (estimated cost breakdown provided below) which explains why the delivery provider decided to exit eight markets earlier this week.

The on-demand economy (ecommerce, food delivery, fuel delivery, etc.) has been a blessing for us all, especially in these times. Yet, most players in these industries struggle to make money – I’ve discussed ecommerce unit economics in more detail here.

Imad El Fay

Imad El Fay

Head of Ventures at HB Investments
Head of Ventures at HB Investments, a newly established Dubai-based venture capital fund focused on building and scaling digitally-enabled consumer brands. He can be reached on LinkedIn.
Imad El Fay
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