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Uber Eats Case

study
Draft version
Agenda ​Question 1: Supply Reliability

​Question 2: Restaurant Marketplace Analytics

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Context and executive summary

​Context ​Executive summary


​It is our mission to be “as A ​The majority of orders are placed during peak hours which implies reliability issues,
reliable as running water” 20 % of the orders are undelivered during peak hours
​Reliability of supply in our ​Non-peak hours are also affected by reliability issues leading to 11% undelivered
market has been suboptimal, orders during non-peak hours
with a high number of
B ​To achieve 98% and 94% orders reliability rate respectively for non-peak and peak
undelivered orders due to
hours we will work on 4 levers
limited courier supply
 Optimize the efficiency of the deliveries
 Increase the number of couriers available overall and during peak hours
 Change the demand archetype
 Ensure restaurants meet preparation deadline
C These levers are expected to deliver a 1.1x ROI over the first year
D 5 initiatives should be prioritized out of the 11 initiatives coming from the 4 levers
E Next steps should focus on refining current analyses and launching the 5
prioritized initiatives

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A: The majority of the orders are placed during peak hours

Number of orders received per week, k


​Share of total
~40% ~60%
orders, %
​3/7/20

​3/7/20

​3/7/20

​3/7/20 ​3/7/20 ​3/7/20

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A: This causes reliability issues affecting particularly peak hours,
though 11% of orders are not delivered during non-peak hours

Number of orders received per week, k


​% of
11% 20% 16%
undelivered
orders ​3/7/20
​3/7/20 ​3/7/20 ​3/7/20

​3/7/20

​ /7/20
3 ​3/7/20 ​3/7/20

​3/7/20

​3/7/20 ​3/7/20 ​3/7/20

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Deep-dives next

​Optimize the efficiency of the deliveries


B: Our strategy to
achieve 98% and
​Increase the number of couriers available overall and
94% orders during peak hours
reliability rate
respectively for non-
​Change the demand archetype
peak and peak hours
is based on 4 main
levers ​Ensure restaurants meet preparation deadline

McKinsey & Company 6


B: We will optimize efficiency of the deliveries by increasing the
speed of riders as well as the quantity transported during each ride

​Initiative ​In practice


​Increase the ​Increase the share of riders ​Set target for the recruiters of riders
average speed of that have faster transport
​Leverage data analytics to identify potential riders with motorcycle or electric bikes to target
the riders modes (electric bike,
motorcycle) ​Emphasize in the recruitment process that the faster the ride, the more money you have

​Co-finance a bike ​Negotiate discounted price with a supplier


electrification program for
​Finance 20% of the cost of the electrification (500-1000€)
current riders
​Promote the program to the drivers, highlighting benefits (e.g., green, higher revenues)

​Increase the ​Increase the size of the Uber ​Develop with the manufacturer and some voluntary riders new backpacks with bigger capacity
numbers of orders Eats transport box
​Keep existing backpacks for current riders but sell only newly-developed backpacks to new
transported during
riders
one ride
​Select and sell to restaurants ​Collaborate with the main restaurants1 to select food packages that would fit the different food
more ergonomic and smaller contents but would be more ergonomic and smaller
packages for food
​Choose a provider that would deliver the new packages to the restaurants at a negotiated price
​Make the use of those boxes compulsory as part of the contracts together with a clear
communication to the restaurants on the benefits (e.g. faster delivery time, low prices)

1. In terms of number of orders

McKinsey & Company 7


B: We will increase the number of couriers available overall and
incentive them to connect during peak hours

​Initiative ​In practice


​Hire additional ​Hire ~90 additional riders to ​Distribute flyers at the main universities
riders meet at least non-peak hours ​Leverage social media adds
demand
 Currently 800 riders ​Encourage referrals within existing
riders (e.g., 100€ bonus if you refer one
 Share of undelivered orders of riders and he stays at least 6 months)
11% during non-peak hours
​Leverage rider ambassadors (e.g., free
coupons for a promotional video)

​Implement an ​Propose dynamic bonus to ​Leverage data analytics to apply


incentive scheme riders ranging from 15% to 35% optimal bonus (i.e., from 15 to 35%) at
during peak increase in earnings per ride the right time
during peak hours ​Inform riders about bonus scheme
hours
 Average increase in average through push-up notifications Ride with us tonight and earn 25% more for each
earnings per rider from 12€ to ride between 7 pm and 9 pm !

15€/hour1
 100€ monthly additional
earnings2
1. Assuming average bonus of 25% 2 Assuming an average of 8 hours work during peak hours per week with average bonus of 25%

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B: We will work on spreading the demand outside of peak hours

​Initiative ​In practice


​Implement ​Make eaters pay an additional ​Communicate clearly to customers the additional
fee when they order from a fee before they start their order
surge pricing
restaurant during times of ​Adapt the busy fee dynamically depending on the
high demand offer and demand

​Offer a service ​Allow eaters to order on Uber ​Get the agreements from the ​Le trajet le plus court pour une
without delivery Eats and to pick up their restaurant partners livraison a été de 170m
order themselves ​Advertise this option to the ​Paris Match Belgique1
customers through the app

​Develop special ​Provide discounts to eaters ​Leverage data analytics to determine


offers outside of when they order outside of when and to which customers
peak hours peak hours ​Inform customers through push-up
notifications and e-mails Get
Getaa5€5€reduction
reductionon
onyour
yourorder
orderififyou
you
​% place
placeititbefore
before77pm
pmtoday!
today!

1. https://parismatch.be/lifestyle/food/346041/quelques-chiffres-surprenants-et-insolites-sur-uber-eats-en-belgique

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B: We will incentivize restaurants to meet preparation deadline to
make sure drivers do not loose time in the restaurants

​Initiative ​In practice


​Reward the ​Invite the top 10 chefs of the ​Launch the contest at the beginning
restaurants if year in term of food of the year
they meet food preparation timeliness for a ​ ublish the pictures of the event to
P
dinner in a good restaurant inspire restaurants and highlight the
preparation
deadline importance of timeliness

​Set customized monthly ​Leverage data analytics to set


targets in term of food reasonable but ambitious monthly
preparation timeliness for targets for each restaurant (e.g., 90
each restaurant and reward % of the orders on time)
them with Uber Eeats
reduction coupons (for them
or to distribute)

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C: The initiatives are excepted to deliver impact with a 1.1 x ROI
after 1 year
Preliminary

x Delivery optimization x Increase in number of riders x Demand archetype x Restaurants timeliness

​Initiative ​Investment, k€ ​Rationale


Positive
ROI overROI,
a 1 Share of high-speed vehicles 1-3 Recruitment campaign
over
year one year 1.1 x
2 Bike electrification ~20 120€1 financing for 160 riders2

​Investment, 3 Bigger delivery bags 3-5 New design cost


k€ over a year
4 Ergonomic food packages 2-3 New design cost, cost of finding a partner
​~175
5 Additional riders 1-3 Recruitment campaign

6 Incentives scheme for riders 0 Financed by surge pricing

​Incremental ​98% and 94% reliability 7 Surge pricing 0 Financing surge pricing
​~3/7/20
net profit1, rate respectively for
8 Pick-up option 0-2 Financing surge pricing
k€ over a year non-peak and peak
hours
9 Offers outside of peak hours 90 5€ coupons for ~17 k orders 3 over a year
​25% service fee
10 Top 10 chefs regarding timeliness 2 Good restaurant for ~10 persons
​20€ average basket
size 11 Timeliness targets and rewards 50 20€ coupons for 2504 restaurants each month
(total over a year)
1 Assuming delivery fee is directly financed by the eater, on top of the average basket size 2 20% of 600€ 3 20% of the 800 riders 4 Assuming we target
5% of the 364 k orders (7 k orders happening during peak hours per week and 52 weeks) 5 Assuming 500 restaurants and half are meeting their target

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D: Out of the 11 initiatives, 5 quick-win initiatives should be
prioritized based on their estimated impact and feasibility
Preliminary

x Delivery optimization x Increase in number of riders x Demand archetype x Restaurants timeliness

Initiatives to prioritize 1 Share of high-speed vehicles


High
7 5 6 2 Bike electrification

3 Bigger delivery bags


2 1 9 11
4 Ergonomic food packages
3
5 Additional riders
Impact

Med 4 8
6 Incentives scheme for riders
10
7 Surge pricing

8 Pick-up option

9 Offers outside of peak hours


Low
10 Top 10 chefs regarding timeliness
Low Med High
Feasibility 11 Timeliness targets and rewards

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E: Proposed next steps and risks

​Refine the business case Risks


​Negative reaction of
customers to surge pricing
​Test the initiatives with focus groups ​Restaurants not willing to
comply with new food
​Launch priority initiatives packages
 Launch campaigns to recruit new riders and increase ​Focus of restaurants on
share of high speed vehicles timeliness with negative
 Set-up incentives scheme for riders during peak hours impact on food quality
 Launch promotional campaign to incentivize eaters to
order outside of peak hours
 Define targets and reward mechanisms regarding
timeliness for the restaurants

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Agenda ​Question 1: Supply Reliability

​Question 2: Restaurant Marketplace Analytics

14
Context and executive summary

​Context ​Executive summary


​ e are in the process of
W A ​ criteria are key to assess the value of a restaurant:
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reviewing our restaurant  Size or the restaurant in terms of number orders and eaters
partner base to determine:  Financial value in terms of revenue and profit
 Which is the most valuable  Growth potential
restaurant
 If we should make any B ​Restaurant 3 is the most valuable partner because
changes to the current  It represents the biggest pool of customers and orders allowing network effects and ensuring we
service fees in order to meet the needs of a significant share of our customers
maximize ROI  It generates the highest revenue and have a positive net profit (despite not being the highest)
 Its total net profit is expected to grow by 152% over the next year, almost 2x faster than the two other
restaurants

C ​To maximize ROI, service fee


 Should increase for restaurant 1 as elasticity effect is important and current service fee low
 Could increase for restaurant 2, despite of lower elasticity effect, given its slight dependence on us
 Should stay at 27% for restaurant 3 as it would be too risky to loose our most valuable restaurant

D Next steps would be to build a CRM database and re-negotiate service fees with restaurant 1 and 2

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A: Three criteria are key to assess the value of the restaurants

Factors Rationale
​Size of the restaurant in Restaurants representing a significant share of orders and eaters are key
terms of number orders to have
and eaters  A certain volume of orders to occupy riders and generate network
effects
 A flagship restaurant that meets the needs of a significant share of
clients

​Financial value in terms ​As Uber Eats is not an NGO, it is key that the partner generates
of revenue and profit  Revenue
 Positive net profit

​Growth potential ​When evaluating a partner, it is important to look at its value at an instant
T but also to understand what is the growth potential of this partner,
esp. in the case of Uber Eats which has ambitious growth targets

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A: According to those criteria, restaurant 3 is the most valuable
Deep-dives next

Factors Restaurant 3…
​Size of the restaurant in ​…represents the biggest pool of customers and orders
terms of number orders  2 k weekly eaters vs. 1 k and 1.3 k respectively for restaurants 1 and 2
and eaters  1.3 weekly orders per eater vs. 1 and 1.1 for restaurants 1 and 2

​Financial value in terms ​…generates biggest revenue and have a positive net profit (despite not
of revenue and profit being the biggest)
• 8.4 k weekly revenue from service fees vs. 6.4 k and 4.8 k for
restaurants 1 and 2
• 0.6 k weekly net profit

​Growth potential ​…is expected to generate in one year a net profit which is 2.5 x the net
profit of today – growth 2x faster than restaurant 1 and 2

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B: Restaurant 3 has the biggest base in term of orders and eaters

Average number of orders per week and weekly eaters, k


​Weekly orders 1 1.1 1.3
per Eater
​3/7/20
​3/7/20
​3/7/20
​3/7/20

​3/7/20
​3/7/20
​3/7/20 ​3/7/20

​3/7/20 ​3/7/20 ​3/7/20

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B: Restaurant 3 generates the biggest revenue and positive profit

Revenue, delivery costs and net profit per week, k€


Restaurant 1 Restaurant 2 Restaurant 3
​3/7/20

​3/7/20

​3/7/20
​3/7/20 ​3/7/20

​3/7/20
​3/7/20

​3/7/20 ​3/7/20

​3/7/20 ​3/7/20 ​3/7/20 ​3/7/20 ​3/7/20 ​3/7/20 ​3/7/20 ​3/7/20 ​3/7/20

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B: The net profit coming from restaurant 3 is expected to grow 2x
faster than the net profit from other restaurants

Net profit per week, k€

​3/7/20 p.a.

​3/7/20
​3/7/20
​3/7/20
​3/7/20 p.a.
​3/7/20 p.a. ​3/7/20
​3/7/20 ​3/7/20
​3/7/20
​3/7/20

​3/7/20 ​3/7/20 ​3/7/20

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C: There is potential to increase the service fee for restaurant 1 and
potentially for restaurant 2
Conclusion on the potential to increase service fee Positive Neutral Negative

​Description ​Restaurant 1 ​Restaurant 2 ​Restaurant 3


​Elasticity ​Sensitivity of the net profit to the ​If service fee increases by ​If service fee increases by ​If service fee increases by
change in service fee (i.e., how big 10% to 24.2%, net profit 10% to 27.5%, net profit 10% to 29.7%, net profit
is the impact on profit if we change increases by 58% increases by 30% increases by 135%
the service fee)

​Power ​Is the restaurant dependent on us ​Well-know restaurant (i.e., ​Leverage us for its notoriety ​Correct notoriety (10,000
or are we dependent on the 40,000 twitter followers) (5,000 twitter followers) twitter followers )
restaurant? (i.e., do we risk loosing
​Least valuable partner1 ​Second most valuable ​Most valuable partner1
the restaurant if we increase the
partner1
service fee and how bad it is if it
happens?)

​Current ​What is the current service fee ​Service fee in the low range ​Service fee in the medium ​Service fee in the high
level level? (i.e., can we increase it or are (i.e., 22 % service fee out of range (i.e., 25 % service fee range (i.e., 27 % service fee
we close to maximum service level?) 20-30% range) out of 20-30% range) out of 20-30% range)

​Conclusion ​Overall high potential of increasing ​Increase service fee as ​Consider increasing service ​Do not change service fee
service fee to improve ROI as elasticity is 5.8 and current fee as partner seems to be despite high elasticity (13.5)
elasticity is >1 but decision should service fee in the low range dependent on us as service fee is already
be taken carefully taking into high and as this is the most
​Not a priority as elasticity is
account restaurant characteristics to valuable partner
lower (2.8)
avoid loosing important partners

1. Leveraging analysis of the first part of question 2

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D: Proposed next steps and risks

​Build a CRM tool classifying the restaurants according to Risks


their value for Uber Eats
​Loosing partners when increasing
service fees
​Negotiate with restaurant 1 and 2 an increase of the
service fees
 Build an argumentation justifying the service increase
 Collect information about the service fees applied by
competitors

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Any questions?

Any questions?

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