For quite a while, Uber’s been Jonesing for a nice, juicy company to devour, and now they’ve managed to get one to come to the table and merge with them.
In an effort to diversify and gobble up a goodly share of the delivery industry, Uber has acquired Postmates for $2.6 billion in stock. The rideshare business, which has been Uber’s mainstay for most of its existence, has suffered greatly from the effects of the COVID-19 pandemic.
Uber Eats, which is Uber’s delivery arm, has become the fastest growing U.S. meal delivery service. Still, with other companies to compete with, including DoorDash and Grubhub (the latter of which Uber also tried to purchase), the delivery business wasn’t making Uber profitable enough.
COVID-19 has changed the landscape of delivery—mostly for the better. People working from home depend on these companies to get their meals and groceries delivered, and increasingly, for getting other items brought to their doors.
Even though COVID-19 restrictions will (we hope) be lifted one day, market analysts expect the newly developed delivery culture to remain as robust as it is now. Customers have become used to getting things brought to them, and they will likely hold on to this habit, even when they can shop freely once again without fear of infection.
Now that Uber has satisfied its urge to merge by acquiring Postmates, what will happen next? Will drivers be affected? You bet we will. Here are the issues we’ll cover in this post that are of particular interest for drivers:
- The details of the deal
- The good that can come of it
- The challenges that could arise
- What we still don’t know
- How you can keep multiplying your earnings
The details of the deal
Uber has been hankering for a bite of the delivery market for some time now. After losing its bid to acquire Grubhub, it hit the bull’s-eye by acquiring Postmates. Not only will it now have a bigger share of the food delivery business; Postmates will also allow Uber to extend its reach into delivering other items, including alcohol and groceries.
In a July 6, 2020 press release announcing the merger, Postmates co-founder and CEO
Bastian Lehmann stated: “Over the past eight years we have been focused on a single mission: enable anyone to have anything delivered to them on-demand…”
This sounds like a good way for Uber to extend its reach, and capitalize on the growing market for delivery of all kinds of goods. Postmates will also contribute a lot of expertise to the arrangement—as well as its large network of restaurants and retailers throughout the United States..
No one knows for sure exactly what the new, combined delivery arm of Uber will look like, but preliminary details have emerged. First of all, although the deal is made, it’s not “done” quite yet. Regulatory approval needs to be attained, and according to a message sent to Postmates Fleet members by the company (and sent out via email):
“…we wanted you to know that there will be no immediate effect on your ability to accept deliveries on Postmates. The transaction is subject to regulatory approval and other customary closing conditions and is expected to close in Q1 2021, at which point we will share more on our integration efforts.”
This tells us that Postmates will remain separate from Uber Eats, and the apps won’t be merged, at least right away. The management end of things will be handled in a similar way, according to a July 5, 2020 Bloomberg article:
“Uber Eats head Pierre-Dimitri Gore-Coty is expected to continue to run Uber’s combined delivery business, according to a person who asked not to be identified discussing a private deal. Under their agreement, Postmates Chief Executive Officer Bastian Lehmann and his team will stay on to manage Postmates as a separate service, another person said.”
This dual mode of operation for the two entities may or may not change when the deal is finalized. For the moment, it seems that Uber, Uber Eats, and other Uber delivery services will remain separate from Postmates.
For now, anyway.
If the regulatory approval goes through, these two companies WILL merge, and there will inevitably be some elimination of duplicate efforts. Without doubt, this will create shifts and changes in both companies—and the people who work for them.
We speak to the details of this deal more in our Youtube video on the subject that you can watch below.
The positive aspects
Now let’s look at what might change for the better if and when the merger goes through.
Both companies will still be in business.
Considering the drop in rideshare business since COVID-19 ravaged what we once considered normal, drivers need to look for other opportunities to earn. So, it should ease drivers’ minds to know that Uber has a better chance of staying in business by acquiring Postmates, and expanding its interest in the business of delivery. It’s also encouraging that Postmates’ survival is more assured because of the Uber deal.
For the time being, it’s a relief to know both companies can continue to offer drivers opportunities to earn.
The merger can ease the transition from only rideshare or delivery to a “hybrid” gig for drivers.
With a rise in volume of 100% year-over-year due to COVID-19, it’s become clear that delivery is The Thing that Uber drivers will increasingly be doing. The acquisition of Postmates, which has agreements with a huge number of restaurants and retailers, will increase opportunities for drivers.
For Postmates drivers, the merger with Uber could open opportunities to drive rideshare as well as doing deliveries. They will also benefit from Uber’s more stable position in the marketplace.
Cost-cutting won’t be focused on drivers.
Both rideshare and delivery are businesses that struggle to attain profitability. They’re under constant strain to improve their fiscal performance, and they vigilantly seek to cut their operating expenses.
As Uber and Postmates merge, they may be able to consolidate resources and make their operations more cost-effective. If they eliminate, for example, extra (and high-priced) engineers and analysts, they won’t be as focused on increasing their take rate and reducing driver income.
There will be a bigger demand for drivers.
As both companies work together to expand their delivery business, it’s likely they will have a greater demand for experienced drivers. This could possibly affect the way they incentivize drivers, as well.
More than a few issues could arise from a merger of this magnitude. Here are some that might make drivers wish the regulators would stop it from going through.
More difficulty for drivers to diversify their businesses.
With fewer companies out there, you might find it more difficult to go from one to the other in your effort to build a solid and lucrative business.
More drivers = more competition for rides and deliveries.
As the companies combine forces, and their fleets of drivers, competition could get stiffer. It’s possible that drivers who were happily delivering for Uber Eats could be competing with Postmates drivers for the same delivery calls.
Postmates drivers, meanwhile, may have to share the pool of calls they would potentially get with Uber Eats workers. No one knows what the app will eventually look like if and when the merger is finalized, but it could result in a situation of too many drivers and not enough business.
Fewer (and larger) companies could lead to more oppressive policies toward drivers and their working conditions.
Drivers have a lot of issues with the ways companies treat them now. As the companies grow larger and fewer in number, drivers may lose leverage with the companies. One driver who works for both Uber and Postmates expressed his concern about this in a July 5, 2020 tweet, saying: “fewer and bigger players means even less worker leverage against platform capitalists.”
Uber and Postmates’ collective ability to lobby legislators and launch ballot measures could grow as their resources amass, leaving drivers in an even weaker negotiating position.
What we still don’t know
As mentioned earlier, this deal isn’t an actual merger until after the regulatory commission grants its full approval. So the reality is, we don’t even know if the merger will actually go through. If it does, here are some issues that will likely need to be addressed.
One or two platforms?
There could be a merger of the apps and their respective brands, or they could remain separate. Right now, the companies are keeping both apps and separate branding, but are planning to share merchants.
Can drivers cross over?
It will be interesting to see if Postmates fleet members retain priority in terms of getting calls for deliveries that are more lucrative than the calls typically offered by Uber Eats. Also, because Uber’s background check and age restrictions are more stringent than those Postmates has set up, Postmates drivers may have to go through a second vetting.
What do you want to know about this merger? Leave a comment below and spark a lively conversation with your fellow drivers and the entire Gridwise community.
How to keep multiplying your earnings
Whether or not this merger actually happens, your success with either of these companies (or others you might work for) depends on your ability to stay focused on making money. In a world where you almost have to do more than one kind of gig, keeping your earnings, mileage, and deductions organized can be overwhelming.
Gridwise, the ultimate rideshare and delivery assistant, can make all your worries evaporate. Download the app, and you can track your earnings and mileage on every platform you use. You’ll also get updates on airport traffic and events, and even useful heads-up action on the weather!
Our blog keeps you up to date with what’s happening for drivers. We also go that extra mile for you, like we did in this post, to provide insight into the business of driving. When you understand the big picture, you can plan your own driving strategy in a way that’s most productive for you. You’ll find all this – plus cool driver discounts and easy access to J and Brandon’s high-impact video podcast, on the Perks tab.
Be safe out there. And stick with Gridwise, because no matter where your driving gig takes you, we’ve got your back.