Was UberRush in a rush to ‘car’pe diem?
Uber has potentially conquered the taxi industry, making rides available at the click of a button. But Uber had bigger ambitions, looking beyond the taxi business.
“If we can get you a cab in 5 minutes, we can get you anything in 5 minutes.”, said Uber CEO Travis Kalinick in 2014. And this led to the conception of UberRush. The Uber dream was to make Uber a logistics business that could one day compete against FedEx and DHL.
And this resulted in UberRush, designed to deliver goods to customers within minutes of being ordered. And to start with, some of the stakeholders involved were national retail chains, providers of online checkout services for local businesses and mom-and-pop stores.
But a year after the launch of UberRush by 2015, it wasn’t headed anywhere big and didn’t seem like a business opportunity any longer.
In order to implement UberRush, Uber used existing resources to enter an entirely new market. Uber planned to use its app, dispatching system and network of drivers to disrupt the logistics market.
When UberRush was launched, anyone could request a bike courier, just like they could request a ride. During the pilot experiment, one of the first customers had a driver retrieve her raincoat. It was dropped off in 20 minutes of US$ 11.
But Uber soon learnt that most people don’t need bike messengers or courier services in their everyday life. Forgotten jackets and keys are a one-off occurrence. But Uber realized that a bigger business opportunity was to offer this service for local retailers. Thus its vision revolved around delivery services for businesses such as clothes and confectioneries. So, a flourist could now deliver a bouquet to a customer and pizza shops didn’t have to worry about lack of delivery agents during peak hours. This transition, which saw short-term success also would go on to spell doom for Rush, because Rush was now transforming into the B2B segment from a B2C business.
The problems with UberRush can be pinpointed into a few specific reasons:
Lack of a sizable market segment
Now, since the use-case of UberRush was to move around small things in a vehicle no larger than a Toyota Prius, this meant Uber was looking at a niche market segment. Consumers who forgot their belongings had a negligible market share. Having to cater on the higher side in the B2B segment meant Uber had to look at businesses such as flowers and dry-cleaning. Anything larger than that such as furniture could not be accommodated in a Prius. Trying to out-perform local couriers wasn’t a feasible objective. Uber already had tasted a fair amount of success with UberFreight, which larger businesses preferred using. The only good thing was that Uber did not build a standalone app for UberRush. Uber says that they didn’t even prototype an app for Rush.
Cannibalization by UberEats
Possibly, the major use case for instant delivery of an item was in the eatables segment, something where UberEats already had presence. With Rush, Uber could only count the delivery fees as revenue, because customers were placing the orders through another company’s app. But with Eats, all orders go through the app. If a customer ordered $25 worth of food and agreed to a $5 delivery charge, Uber could only count the $5 as its revenue. But if the customer placed the same order through Eats, Uber was able to bring a greater portion of that $30 into its bottom line.
Incompatibility between Business Models of Smaller Firms and UberRush
The USP of UberRush was the “Rush” to deliver things right away. But its target audience to which it was pitching the idea, i.e. smaller firms didn’t really need to move at such a lightning fast speed. And the firms that needed to move at such a fast pace needed more than just a Bike courier or a Prius to deliver.
High Opportunity cost of an Uber Driver/Courier
UberRush unlike Uber ride-sharing (the core competency) and UberEats. When an order is placed through UberEats, partner restaurants pay approximately 30% of the order value for marketing their food. However UberRush was a delivery-only product for on-demand package and parcel transportation. It didn’t fit under Ride sharing and Uber didn’t make any money for marketing a product. So, when Uber was using a driver/biker to run a delivery for UberRush instead of transporting people for ride-share or food for UberEats, this was a very high opportunity cost. Once that labor asset was tied to a UberRush delivery, he or she could not service a higher value product during that time such as classic Uber or UberEats.
High contract turnover due to unpredictable work
One of the most important parts of keeping labour available is to have good predictions of when labour is needed. Classic Uber due to high consumer adoption has lots of data to determine when drivers are required. UberEats is fairly obvious, people order food when they are hungry, which is typically during lunch and dinner. However, UberRush had irregular use by various types of clients. Thus the customer persona was very diverse, from consumers sending across items to same-day delivery by businesses. This stochastic demand is very random and hard to predict. It is even harder to match supply to demand. If couriers and drivers realize they have unpredictable jobs, they would stop signing in to the app and find work elsewhere. Uber would then have to spend money on a recruitment platform to replace the labour.
UberRush was expensive for the customers. Period.
This is probably the main reason UberRush failed. Customers flocked to Uber’s cab booking service because it was less expensive than taking a cab. But Rush was more expensive than existing competition after factoring in same-day delivery charges. If customers needed something right away, they would just go to the nearest store. The cost of ordering on Rush was much more than the cost of commuting to the nearest store.
Same-day delivery (even at a premium) doesn’t turn many heads
Presently, the demand for same-day delivery in retail is highly elastic. Consumers are discovering same-day delivery at the end of the purchase journey after they’ve already mentally accepted a 2–5 day delivery period. So, they aren’t going to pay an extra $7-$15 to get it on the same day. Same-day delivery happens with serendipity, at least that is the status-quo. It just so happens that when the user orders a product, it is the start of the day, and the product inventory is in the same city as the user. So, it becomes more of a fun option like, “Yay, I can get this today!”, not “I need this today.”. Thus in this outset, same-day delivery doesn’t really seem like the best USP to go with.
Conclusion
If a last-mile courier doesn’t start in the food/grocery vertical, he eventually ends up there. This is because of consistent and predictable demand (everyone eats 2–3 times a day). And UberRush started off on the wrong foot. UberRUSH aimed at providing high-speed deliveries for merchants looking to compete with the likes of Amazon’s same-day shipping. The only real use-case that UberRush had was in the food delivery vertical. So, perhaps an optimist could say that UberRush didn’t really fail, it was an experiment that converged in to UberEats.
Sources:
https://www.businessinsider.in/the-rise-and-decline-of-uberrush-the-inside-story-of-how-ubers-tried-and-failed-to-build-a-rival-to-fedex-and-amazon/articleshow/59504123.cms
https://medium.com/@adampricenyc/the-real-reason-uberrush-shut-down-fcb67f166b66
https://medium.com/@mattrbahr/uberrush-was-set-up-to-fail-9148c27e2396
