Uber Analytics, Marketing Products Deserve A Critical Look at Motives

The National Restaurant Association (NRA) hosts helpful webinars that are open to the public. On a fairly recent webinar the NRA invited Uber’s Head of Restaurants, Christopher Ager, to present.

If you missed the webinar don’t worry: NRA is hosting the webinar on-demand (it’s about 45 minutes long). You can also download a PDF of the presentation if you want an abridged version.

We’ll go through the deck and make commentary and then we’ll end with our “reading between the lines.”

A bit of this is rehashed from our analysis of Uber’s S-1, but UberEats is growing fast.

In our opinion UberEats is conflating a bit of the data when comparing restaurant sales to grocery sales. Grocery sales aren’t sinking so much as restaurant sales are rising faster than grocery sales. We’ve discussed this before and believe it’s because restaurants pass on the costs of $15 minimum wages to their customers as well as do a piss poor job of determining COGS. This slop results in higher costs to customers for the same underlying goods, and we really expected Uber to show traffic data instead of nominal dollar increases: are consumer visiting restaurants more than they are grocery stores or are restaurants just charging consumer more per visit?

We’re betting that the latter is more likely true.

This next point is just lazy. UberEats is letting restaurants determine if they’re getting incremental customers? Really? The 85% of restaurants that can’t calculate their own COGS? The restaurants that thought Groupon was a Godsend? The restaurants that think “Free POS” is actually free?

Uh yea, we wouldn’t trust these people to tell us which direction the sun would rise. We flat out don’t trust this anecdotal number of incremental sales to be statistically valid. If merchants appended credit card data then sure, we’d buy their figures, but they don’t.

That said, we think there’s no reason why delivery orders won’t increasingly emanate from digital channels. People have phones in their pockets, websites are getting much better at showcasing their items and upselling like Amazon (well, websites not run by the merchants, at least), and human interaction is a turn off for many people using their phones for ordering.

UberEats lists a bunch of topics merchants should consider so their delivery doesn’t disappoint:

• Only list items that travel well
• Select packaging that protects the order
• Increase prices to cover delivery costs (implied but not explicit)
• Make sure you don’t overwhelm the kitchen (why we believe POS companies should build rate throttling into their systems)

Lastly we get to the most fascinating part of the article (in our opinion): what Uber is doing with the data it’s collecting.

These efforts fall into three buckets.

1. Ghost kitchens

Uber is calling these virtual kitchens. We’d be surprised if Uber doesn’t open their own kitchen eventually for all the math we’ve gone through previously. At this time, however, UberEats appears to be showing restaurants how they can change their offerings and pricing to take advantage of market gaps.

2. Operating tools

Uber has noticed that most POS companies – particularly the legacy variety – have been slow to invest in improving lives for their own customers if they’ve even bothered to invest anything at all. By the way, payments companies owning POS companies will only make this worse, we suspect. So Uber is rehashing data to make something useful. Here’s Uber’s engineering site where you can access all the public updates Uber is working on for their restaurant clients. Uber is offering some very good prescriptive tools with their data set – below is a screenshot where Uber is telling a restaurant that they should change their business hours based upon search volume.

Very clever. Compare this with NCR’s Insights tool for Aloha which, in our opinion, looks a bit like an abortion of a 1980’s software product.

3. Marketing tools

We’ve said it before and we’ll say it again, merchants spend 10x the amount of money on marketing that they spend on operations. Uber isn’t stupid and they know this. That’s why they’re rolling out additional marketing solutions for restaurants so they can grab even more of the marketing pie. Now merchants can run advertising through Uber, just like how suppliers can run advertising through Amazon (which has become a > $10B revenue stream for Amazon, slotting them third only behind Google and Facebook in adtech prowess).

We’d wager that Uber understands once it becomes known as the marketing solution for merchants it will be really hard for any other party to unseat them on the throne. You don’t use Apple Maps for directions, you don’t use Google + for connecting with your friends, and you don’t use Yellow Pages for reviews. Once you’ve created a brand foothold it’s really hard to unseat it, even if alternative products are superior.

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We think UberEats is highly disruptive to the existing brick and mortar tech ecosystem. As they integrate to POS systems they’re going to be extracting even more transactional data. With that data they’ll build more useful products, and they’ll do it faster than POS companies can even contemplate (especially those POS companies owned by payments companies).

UberEats is not exactly short on merchant relationships either. It’s only a matter of time before they, or someone like them, replace the brick and mortar ecosystem (marketing, analytics, inventory, scheduling, POS, etc.) and then the eventual merchant.

UberEats will disrupt itself if it’s to succeed, and they have the scale to use data to do it.

Wake. The. Fuck. Up.