{"id":38702,"date":"2016-03-16T17:55:52","date_gmt":"2016-03-16T22:55:52","guid":{"rendered":"http:\/\/news.medill.northwestern.edu\/chicago\/?p=38702"},"modified":"2016-03-16T17:55:52","modified_gmt":"2016-03-16T22:55:52","slug":"amazon-and-uber-threatening-grubhubs-delivery-success-story","status":"publish","type":"post","link":"https:\/\/news.medill.northwestern.edu\/chicago\/amazon-and-uber-threatening-grubhubs-delivery-success-story\/","title":{"rendered":"Amazon and Uber Threatening GrubHub\u2019s \u201cDelivery Success Story\u201d"},"content":{"rendered":"

By Xuanyan Ouyang<\/strong><\/p>\n

GrubHub Inc.\u2019s stock\u00a0has lost\u00a0more than\u00a05 percent\u00a0since UberEats was launched\u00a0this week, amid a time when the online food delivery industry is getting increasingly crowded with new entrants.<\/p>\n

Uber Technologies Inc. on Tuesday announced UberEats, its first standalone app offering food ordering and delivery services. The on-demand transportation giant\u2019s expansion into the food delivery market upset GrubHub\u2019s investors.\u00a0The stock slid 3.8 percent the day of the announcement, and another 1.2 percent Wednesday,\u00a0at a time when the Chicago-based leading online and mobile ordering company had\u00a0already witnessed its stock decline by more than 50 percent since its high in 2015.<\/p>\n

In early February Oppenheimer downgraded GrubHub\u2019s shares to \u201cperform\u201d from \u201coutperform\u201d because of \u201ccompetition concerns\u201d.<\/p>\n

\u201cAs Amazon and Uber aggressively pursue food delivery, we believe GRUB will see margin compression on reduced order rates, more expensive customer acquisition costs and lower commission rates,\u201d Oppenheimer wrote in its note. \u201cAMZN already has a higher user base than GRUB\u2019s 6.7 M active diners, and Uber is growing rapidly.\u201d<\/p>\n

<\/p>\n

Previously, Amazon, the biggest online retailer in the U.S., launched Prime Now as a supplement to its Prime membership services. Prime Now is benefiting from Amazon\u2019s huge customer base and data collected through its online shopping platform.<\/p>\n

According to Consumer Intelligence Research Partners, a market research company, Amazon Prime membership jumped by 35 percent last year to 54 million, and about half of U.S. households are in that program.<\/p>\n

Uber, too, has the advantage of\u00a0its existing users plus its\u00a0drivers data pool, with abundant locations and credit card statistics recorded in its system.<\/p>\n

On the other hand, GrubHub has\u00a0partnerships with about 30,000 takeout restaurants in more than 800 cities in the U.S. and London, and it is more sophisticated in the food delivery service than the other two.<\/p>\n

GrubHub investors\u00a0can still find comfort in the company’s solid fourth quarter results reported on Feb. 4. Its revenues grew 36.3 percent to $100.0 million from $73.3 million compared with the year-earlier quarter, and full-year revenues increased 42.5 percent to $361.8 million from $253.9 million.<\/p>\n

Fourth-quarter\u00a0income rose 4.6 percent to $11.3 million from $10.8 million, while earnings per share were flat, and whole-year profits jumped 56.8 percent to $38.1 million, or 44 cents per share, from $24.3 million, or 30 cents per share, in 2014.<\/p>\n

\u201cWe continued to believe GrubHub is well positioned to take share of the $77bn US takeout and delivery market as it derives penetration in new and existing markets,\u201d said Goldman Sachs in its report,\u00a0rating the stock\u00a0a \u201cbuy\u201d. \u201cVC backed competitive pressures ease, and consumers increasingly move to ordering online,” the firm stated.<\/p>\n

Barclays, rating the stock “equal weight”, stated, \u201cWhile we don\u2019t think competitive pressures are behind GRUB-especially with Amazon and Uber in the mix- they may soon start to subside . . . As some private delivery services overly reliant on discounting and marketing run out of cash.\u201d<\/p>\n

Another concern with GrubHub is the two giant rivals\u2019\u00a0advertised delivery\u00a0speed. Amazon said in mid-February that delivery time for Prime Now is 39 minutes on average. And UberEats promises 30 to 45 minutes.<\/p>\n

Additionally, while GrubHub is still requiring delivery fees, Prime Now is free to Amazon Prime members and UberEats was launched with free delivery though it will shift to $4.99 per delivery later.<\/p>\n

\n

Photo at top: GrubHub’s stock slid after Uber launched UberEats on Tuesday.(Xuanyan Ouyang\/MEDILL)<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

By Xuanyan Ouyang GrubHub Inc.\u2019s stock\u00a0has lost\u00a0more than\u00a05 percent\u00a0since UberEats was launched\u00a0this week, amid a time when the online food delivery industry is getting increasingly crowded with new entrants. Uber Technologies Inc. on Tuesday announced UberEats, its first standalone app offering food ordering and delivery services. The on-demand transportation giant\u2019s expansion into the food delivery […]<\/p>\n","protected":false},"author":202,"featured_media":38900,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[585],"tags":[],"class_list":["post-38702","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-winter-2016"],"yoast_head":"\nAmazon and Uber Threatening GrubHub\u2019s \u201cDelivery Success Story\u201d - Medill Reports Chicago<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/news.medill.northwestern.edu\/chicago\/amazon-and-uber-threatening-grubhubs-delivery-success-story\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Amazon and Uber Threatening GrubHub\u2019s \u201cDelivery Success Story\u201d - Medill Reports Chicago\" \/>\n<meta property=\"og:description\" content=\"By Xuanyan Ouyang GrubHub Inc.\u2019s stock\u00a0has lost\u00a0more than\u00a05 percent\u00a0since UberEats was launched\u00a0this week, amid a time when the online food delivery industry is getting increasingly crowded with new entrants. 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