Uber CEO Dara Khosrowshahi recently announced the company’s plan to expand its service for grocery shoppers in the U.S. “Eating is something you do three times a day, so these are habits that go very, very deep. Someone needs to be the orchestration layer for people moving around cities, and I think that can be us,” stated Khosrowshahi.
However, Uber has already been partnered with grocery stores in Australia for some time, with supermarket chain Coles undergoing a trial with the service last year. Shay Narsey, owner of The Bondi Grocer in Sydney, has been partnered with Uber for six months, and his brand has grown rapidly as a result – indicating that Uber’s grocery initiative could have legs in the US.
The Bondi Grocer partnered with Uber to extend its reach. “Firstly, it was brand marketing so people could see the name every day when they search for food,” said Narsey. “Secondly, it was to capture people outside of our normal catchment of customers.” The strategy worked, with The Bondi Grocer now consistently over one hundred Uber orders per week.
Among the key items the store moves with Uber are ice cream, milk, eggs, Powerade, mixer drinks, and chocolate bars, indicating customers are using the service when they don’t feel like driving. However, the store also sells a high amount of cereals and fruit and vegetables.
The Bondi Grocer has grown its customer base instead of having existing customers adopt the delivery option. “We don’t believe many of our in-store customers have moved across simply because they don’t want to pay the delivery fee when they are so close already.”
Narsey believes grocery stores will eventually have to provide a delivery option, whether via Uber or another company, as it adds a revenue stream and builds brand awareness. However, there’s room for improvement on Uber’s end. “As this space becomes more prominent, Uber needs to take into perspective grocery store margins versus fast food,” he said. “Grocery stores need to be charged a smaller service fee.” At the moment, The Bondi Grocer’s average Uber order is $25 – less than many Uber Eats orders.
Grocery delivery trials with large grocery retailers like Coles in Australia and Walmart in the US have not gone well, with reasons behind the failures remaining unexplained. Stores who partner with Uber are seeking the online market, where users famously spend much more than they would in the real world. However, the grocery market is different. Although e-commerce is growing, the percentage of online sales varies markedly by industry: it’s around two percent for grocery versus 20 percent for apparel.
Small business owners are better-positioned to fulfil same-day orders in their area, so an Uber grocery service might be best suited to businesses like The Bondi Grocer – not Coles.