Uber and Google Team Up on Same-Day Delivery, Shaking Up the Last Mile Landscape
Uber has announced that it will provide drivers for Google Express, which has managed its own delivery operations until now. Google will maintain the pricing, the storefront, and the merchant partnerships while Uber provides the drivers through their UberRUSH offering. If this partnership comes to full fruition, it will be a big shift in the last mile logistics / same-day delivery landscape, with huge implications for competitors.
For Uber this is pure upside, as it accelerates its long-anticipated entry into package delivery. The volume that Uber gains by serving Google is hard-won volume, as matching up supply (orders) and demand (drivers) is expensive and operationally challenging, especially in the early days. But this is offset by the fact that Google essentially took on the cost of creating the market, then handed off the resulting upside (volume) to Uber. And Google will continue to generate even more volume for Uber as long as Google Express keeps working with merchants. Most importantly, Google’s retreat eliminates them as a competitor to Uber for last-mile delivery. Wow, well done Uber.
For Google, the partnership represents a significant retreat—although it’s clearly not a case of giving up, since Google’s venture arm has invested over $200 million in Uber– and may be an early signal of its changing aspirations in e-commerce. As I said in a post last year, Google Express is an important element in Google’s battle for relevance in e-commerce, and to date it has had an economically unsustainable model. It’s true that by outsourcing to Uber, Google Express is more focused and economically viable. But now that it’s without a proprietary delivery mechanism, will retailers continue to want to sign on with Google Express?
If I was a retailer, in the long run I’d prefer to work directly with Uber, as that would mean I could potentially serve all of my buyers with last mile delivery—not just the portion buying through Google Express. As UberRUSH expands and Google no longer has a unique (and subsidized) last mile offering, Google may find that interest from merchants wanes. With respect to e-commerce, they could be left on the outside looking in.
Let’s take a quick look at what this news means for some other winners and losers:
Postmates – Clearly, Uber’s assault on Postmates is under way. Postmates may struggle to raise its rumored financing at anything other than a down round.
Deliv – Like Postmates, and even with a recent round of funding that included UPS, Deliv doesn’t have the capital to compete with Uber for drivers and retailers. As a retailer, would you rather spend time integrating Uber or Deliv into your shopping cart?
UPS and FedEx – Neither have made much of a move into on-demand, but Uber’s creation of a non-union driver force and diversification of its delivery options makes a collision down the road more likely. (And this potential collision is undoubtedly what drove UPS to make its investment in Deliv.)
Consumers – Uber will be pouring billions into subsidizing package delivery and raising delivery service levels for consumers the same way they did for passenger delivery. We all may benefit from the lower costs and better service.
Drivers – Although it’s hard to combine passenger and package delivery, independent contract drivers now have new volume—and thus more ways to make money—flowing through their apps.
There is a long and challenging road ahead for Uber, as I discussed last year, but they look like a hands-down winner in their partnership with Google. Meanwhile, most everyone else now faces a more challenging landscape.