Uber Eats, the food delivery arm of global e-hailing company, Uber has announced that it is expanding its services to include delivery of alcohol, drugs and house supplies in Kenya. This is part of the food vertical’s efforts to remain competitive in the Kenyan market, meet changing consumer demands, and weather the storm of stringent regulatory policies.
The General Manager of Uber Eats in Kenya, Wangui Mbugua made the announcement, claiming that the diversification of service delivery was “inevitable.” She pointed out the importance of businesses to explore other sectors in their bid to diversify revenue streams.
“That’s why Uber Eats has partnered with a wide range of merchants to make it possible to have diverse non-food items delivered through the app.” Interestingly, she clarified that the ride-hailing brand’s switch to other segments was due to customers’ needs and not due to increased rivalry with other brands. However, there seems to be more to the story.
Wangui Mbugua
Kenya has witnessed a boom in food delivery with the pandemic playing a key role. As millions of citizens stayed indoors to prevent the spread of the virus, food delivery services saw a gap and soon filled it. Statista forecasts that the East African country’s meal delivery segment will generate $306.70 million in 2023.
But with these opportunities came rivals, and Uber Eats has had plenty to deal with recently. It now competes with the likes of Bolt Food, Jumia Food, and Glovo are all fighting for available market share in the food delivery sector.
Furthermore, Uber’s mobility segment also faces serious heat from new entrants – Showfa and Yego. Showfa debuted in January this year with a unique value proposition. Instead of paying commissions per ride, Showfa drivers just need to pay a one-off subscription fee per day. Meanwhile, Yego offers medical and accident insurance to drivers.
Bolt and Uber Kenya have had their fair share of driver protests with the primary issue being high commissions extracted by the e-hailing companies. This isn’t an isolated issue as some drivers belonging to Bolt Nigeria bemoaned the company’s rash decision to raise its commission from 20% to 25%.
Last year, Ghana-based Bolt and Uber drivers organized a 2-day strike due to “welfare concerns.” This year, they criticized a new digital transport tax which they claimed would take a large chunk from their earnings.
The emergence of Covid-19 didn’t just expose the poor state of Africa’s healthcare infrastructure, but it forced the economies of many countries to experience recession. This, in turn, has raised inflation in many African nations. The cost of petrol, food, and other essentials has risen. The drivers’ earnings, unfortunately, have not. Despite these harsh realities, ride-hailing operators have not revised their policies to cushion the effects of an economic downtown on drivers.
A new regulatory policy reduced Uber’s profits and gave drivers respite
Last year, the Kenyan government introduced a new regulatory framework that would guide the ride-share space. The Digital Taxi Hailing Regulation slashed the commission that drivers paid Bolt and Uber per trip by 2% and 7% respectively. Instead of paying 20% (Bolt) and 25% (Uber), the law mandated that drivers pay a flat rate of 18% per trip.
This decision has been faulted by Uber and Bolt who – in a jointly-signed letter to the Ministry of Transport, Infrastructure, Housing, and Urban Development – claimed the new commission would be “discriminatory to the digital hailing sub-sector as no other transport sub-sector has price controls.”
To keep the National Transport and Safety Authority from implementing this new rule, Uber appealed to a Kenyan court to have the proposed policy repealed. In response, Bolt and Uber’s drivers embarked on a go-slow protest to have the policy adopted. This, of course, means they get to pay less per ride and make more money from the job daily. Both companies eventually gave in and now charge a commission of 18% per trip.
Bottom line on Uber Eats delivery expansion
Uber Eats’ decision to include alcohol and medicine in its delivery package for Kenya isn’t a first from the company. In the heat of Covid-19, the food delivery service joined the likes of Bolt and Netflorist to fulfill the medicine and grocery needs of South Africans. This just points to the fact that competition in Kenya is getting heated, and branching into other segments is fast becoming a price to pay for vital market share.
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