Just days after President Donald Trump announced earlier this month that all travel from Europe to the United States would be temporarily suspended due the coronavirus pandemic, a Dallas-based rideshare startup called Alto started seeing a steep drop in demand for rides.
Will Coleman, Alto’s founder and CEO, said business was suddenly hurting, and badly, as “people were starting to heed the warnings here in Dallas.” Ride volume had fallen by about 75% within a matter of days.
The one-and-half year old company didn’t waste much time before reacting. Last week, it pivoted its focus to delivering food and goods to peoples’ homes, while still servicing the occasional ride. The startup overhauled its website, notified drivers, and began striking up partnerships with local businesses to help service delivery needs ranging from garden supplies to groceries.
Alto’s rideshare drivers aren’t the only ones who have found themselves becoming accidental delivery workers. As the coronavirus pandemic has forced people to travel less and slashed requests for rides, it has also boosted demand for home deliveries of groceries, meals and other goods. The abrupt shift in consumer behavior caused by the pandemic is upending the on-demand industry, where the biggest companies were built first and foremost around ride-hailing services rather than food deliveries.
The City of New York said it would hire licensed TLC drivers to deliver food to New Yorkers in need.
Meanwhile,Lyft (LYFT), which has not historically offered delivery services, announced last week that it is piloting meal delivery services in the Bay Area in partnership with government agencies and local nonprofits to help those in need. It said it will work to expand the services throughout the country. But Thursday, Lyft (LYFT) sent an email to drivers suggesting they could find work at Amazon as one way of earning additional income, according to a copy of the email provided by Lyft (LYFT). Last week, Amazon announced plans to hire 100,000 new distribution workers as people increasingly turn to the e-commerce giant to purchase household items during the pandemic.
Uber (UBER), which is behind meal delivery service Uber (UBER) Eats, said it has been encouraging drivers to toggle between its Driver and Delivery services via in-app notifications with instructions. The company said that in the US and Canada, the number of people signing up to deliver meals doubled last week from the week prior.
For Alto, the shift meant the startup had to essentially “start from scratch again,” said Coleman. But the silver lining was that many of the selling points of its rideshare business, which employs its drivers and is focused on safety and cleanliness, were transferable to delivery during this unprecedented health crisis.
Moving to food delivery may help some companies weather the crisis, but it could come at a cost. Daniel Ives, an analyst with Wedbush, notes that Uber’s meal delivery business has been a “money-losing” venture that has weighed on the stock. Ives said the margins on delivery are lower than ride-hailing, as is how much the company takes on an order. “Ride sharing remains the bread and butter for Uber and Lyft with some dark days ahead as lockdowns remain around the world,” he said.
In a blog post this week, Pierre-Dimitri Gore-Coty, head of Uber’s food delivery platform Eats, wrote that “while it’s too early to say what impact the coronavirus crisis will have on food delivery overall, we’re seeing signals that people are relying on delivery services more.”
“Cities like Seattle and San Francisco have seen an uptick in food delivery requests on Uber Eats recently,” he added. (Both locations are under stay-at-home orders.)
For some companies, the trend has led to rapid expansion. Instacart, the grocery delivery startup, said this week that it plans to bring on 300,000 additional workers in North America over the next three months to help meet its surging demand.
Erica Mighetto, a rideshare driver for Uber and Lyft, is one of the many now considering picking up orders for Instacart. She said demand for rides has plummeted so much that continuing to drive for the platforms has not even been worth the price of gas for her car recently. She also has a heart condition and wants to stay home to protect her health, but she has a car loan payment due.
“My plan for the next few days is to try Uber Eats,” she said, adding that she applied to work for Instacart last week but has yet to start taking orders. She’s still nervous about “setting foot in a grocery store where there’s more people.”