The delivery industry as a whole is beginning to consolidate, but how could this consolidation impact drivers? In most cases, consolidation leads to fewer choices – for drivers and consumers – and fewer opportunities to demand higher earnings.
The acquisition is still subject to regulatory approvals but is expected to be a ‘done deal’ by the first quarter of 2021.
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We’ll break down how this will affect drivers below. Think about it: if Uber is the only delivery game in town, why in the world would they pay you $20 an hour (average Postmates driver earnings) when they could pay you $10?
There’s no incentive for them to offer bonuses of any kind if they’re your only delivery option.
Watch our video analysis below or here: Uber Buys Postmates for $2.65 Billion!
“Postmates posted a loss of just $32.2 million in Q2, compared to a loss of $73 million in Q1, nearly cutting its cash burning in half. That compares to Uber Eats’ results, which showed a loss of $286 million in the first quarter of 2020 and a loss of $232 million in the second quarter — an improvement of roughly 20%, according to Uber’s most recent financial reports.
Altogether, Postmates lost $105.2 million in the first half of 2020, compared to a loss of $239 million in the same period of 2019.”
What This All Means for Delivery Drivers
A lot of the news reporting going on right now is focused on how consolidation will hurt ‘Mom and Pop’ restaurants. This is a valid argument – Harry has covered outrageous delivery fees over at the RSG Twitter account here.
However, lost in the news about this potential acquisition is what this all means for drivers. We’ll break down two potential scenarios, depending on whether or not you want to be optimistic or pessimistic about this scenario:
Uber and Postmates consolidation could be really good for drivers. It may make it easier for drivers to sign up to drive for delivery through Uber, only have to go through one application process, and get on the road a lot faster.
Uber’s delivery operations are fairly smooth and having it all (rideshare and delivery driving) in one app is very handy, and makes tracking your income easier too (helpful when it’s time to file your rideshare taxes).
If you’re not currently a delivery driver, this is certainly a very good sign that delivery is not only going away – it’s actually getting bigger. Uber would not likely invest in something it imagines is a failure – Uber needs all the revenue it can bring in right now, and clearly delivery is part of that.
In fact, this deal was brokered in part to compete with Uber’s biggest rival, DoorDash.
If you’ve been on the fence about driving for delivery, now is absolutely the best time to sign up for food delivery driving, and Postmates in particular. In many cities, Postmates is offering substantial bonuses, but only for a short amount of time – so sign up now!
Another bright side: prices could go up for customers (less competition means less incentive to offer free delivery or other deals), but that increase in costs to customers could translate into higher earnings for drivers.
Quite simply: as Uber acquires more delivery companies, there is less incentive to pay you anything over minimum wage.
If driving for Uber (or one of its delivery subsidiaries) is your only option, there’s little chance any complaints you have will be acknowledged. Say goodbye to sign up bonuses, incentives to drive during slower hours, long distance bonuses, etc.
With more choice, you can pick and choose among the best earnings for you and have a better chance at keeping companies accountable. Fewer choices, fewer options to play the apps against each other to boost your own courier earnings.
Why would Uber need to offer this when there is always another driver around the corner waiting to accept any ride?
Yes, you’ll always be able to follow various strategies to drive smarter, including refusing to drive during the slow times, and signing up for other gig app jobs like Instacart. But consolidation of the delivery industry inevitably will lead to lower earnings for all delivery drivers across the board.
What Are Couriers Saying About This Deal?
RSG contributor and delivery driver Elijah acknowledged in the above video that having everything on one app for couriers would make it easier for drivers. One app means less logging in and out, and makes it easier to track earnings.
However, many courier drivers see this as bad news overall for their earnings. Having fewer companies mean fewer opportunities for bonuses, earnings, etc. Many former drivers who had switched to delivery driving were upset about this news, too, as they were beginning to earn more money with delivery and now fear this will lead to a decrease in earnings.
It looks like Uber has also acquired some of the less desirable features of the Postmates app as well. According to Elijah, Uber is looking to implement a ‘3 batch pick up’ feature, which basically is stacked deliveries from the same restaurant to up to 3 different customers.
Some drivers love stacking, but others don’t – primarily because they don’t want to drive to three different places and lose the flexibility to log off the app when they want.
What’s Going On? Delivery Industry Consolidation and Uber’s Recent News Regarding Postmates
All of this points to a bigger trend in the gig economy space: consolidation. We’re seeing this in several other delivery companies: DoorDash acquiring Caviar in 2019 and Just Eat Takeaway recently acquiring Grubhub (which Uber initially sought to acquire).
The New York Times recently announced Uber made the takeover offer to buy Postmates as “the on-demand food delivery market consolidates and Uber looks for new ways to make money.”
This deal is significantly cheaper than what Grubhub was eventually purchased for – $7.3 billion by Just Eats in June. Although Uber couldn’t capitalize on that deal, they quickly went searching for another opportunity and found Postmates.
Interesting to note in all of this: Lyft remains silent on any potential acquisitions of delivery companies. This isn’t too surprising given Lyft doesn’t have a delivery arm of their company, but does make you wonder if Lyft is going to double down on rideshare or branch out into other ways to earn more as rideshare demand remains low compared to previous years.
The overarching trend for this is more consolidation and lower earnings for couriers. As we’ve seen, couriers already earn less on average compared to rideshare driving, so this will only continue to depress overall earnings.
Why would Uber want to acquire Postmates when they already have Uber Eats? It comes down to one major issue: money.
Uber Eats is still unprofitable, despite being the second-biggest player in American markets, according to the New York Post. Acquiring Postmates could give Uber a boost as Uber continues to be battered on the rideshare side of the business.
Postmates is valued by investors at $2.4 billion, and while it’s considered a ‘small player’ in a competitive market, Uber Eats + Postmates would become a much larger player.
Interested in learning more about Uber stock and the stock market? Check out our article on How to Make Money with Free Stock Trades.
You tell us: do you think Uber’s potential acquisition of Postmates will help or hurt driver earnings?
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-Melissa @ RSG with additional reporting from Elijah Bilel