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In an attempt to consolidate market share and boost profitability, Uber has finally acquired the food delivery service Postmates. “Combination of platforms provides more choice and convenience for consumers, new demand and tailored technology offerings for restaurants, and increased income opportunities for delivery people,” the company wrote on its blog. While Postmates will retain its logo and app, it will merge its delivery network with Uber.
Uber and Postmates had announced the deal a few months into the pandemic, as Eats looked like the most secure leg of Ubers’ operation. Though Uber remains unprofitable, as Gizmodo reports, some analysts hope that the deal, which is entirely in stock, will change that.
The announcement comes after it won big on the past election, with the passage of Proposition 22, a legislative push to permanently classify its drivers as independent contractors instead of employees in California.
With Americans still sheltering at home nine months into the coronavirus pandemic, sales for meal delivery services grew 135% in October 2020.
Postmates is currently the fourth major meal delivery company in the U.S., and it earned 7% of the country’s meal delivery market in October. With Postmates’s customers, Uber Eats can pull ahead in Los Angeles. As of October 2020, Postmates is the top food delivery service in the city, according to data from Second Measure. Meanwhile, Uber Eats lags behind DoorDash and is on par with Grubhub.
And because of the pandemic, delivery services have scrambled to become go-to providers for all same-day needs. Uber, for example, began expanding to grocery delivery in some cities in July, and Postmates has begun partnering with retailers in advance of the holiday season.
As written by Gizmodo, “Postmates represents just one piece of Uber’s grand ambition for Amazon-scale domination.” A combined Uber-Postmates would claim 37% of food delivery market share in the U.S., according to payments-tracker Edison Trends. That would put them head-to-head with the current leader, DoorDash, which has a 44% market share.
And yet, as NBC News points out: “The acquisition is already questionable because arguably, neither company is in a healthy financial state.” Uber reported a $2.9 billion loss in the first quarter of 2020, and the food-delivery companies are similarly struggling to turn a profit.
Uber also announced it’ll begin running a “regional listening exercise” next year, wherein they’ll work with local restaurant associations and chambers of commerce to hear concerns from local business owners in their own communities.
However, as Fortune pointed out, some drivers for the companies aren’t too happy about the acquisition. Edan Alva, a driver who ultimately opted for Lyft over Uber called the deal “unethical” and “immoral” because it will amplify Uber’s ability to suppress worker pay.
Moreover, other drivers have criticized Uber for spending billions on Postmates while paying workers a pittance. A part-time driver for Lyft, Nicole Moore described Uber’s actions as hypocritical: “They don’t have the money to pay people basic labor standards, but they have the money to buy a whole new company?”
Peter Young, a courier for Postmates, said he sees no upside to the Uber-Postmates deal. “I don’t really see anything getting better for workers after this. I don’t expect pay to rise, or job security to improve, or anything,” he wrote in an email.
Wilfred Chan, a freelance writer who supplements his income by delivering meals for on-demand apps like Postmates, summed up his gig-worker peers’ anxieties, saying the move puts gig workers increasingly at the mercy of a few very powerful players.
“The problem is that it means less choice for workers. It means that these platforms are growing bigger and harder to fight,” Chan said. “As Uber’s hegemony grows, they’re going to have even more leverage against workers and be able to exploit us even more harshly.”