In 2014, Uber’s CEO Travis Kalanick was reveling in his company’s rapid rise.
Uber had emerged as a challenger to — and potential destroyer of — the taxi industry with its network of cars available at the push of a button. But Kalanick was already looking well beyond the ride-hailing business.
“If we can get you a car in five minutes, we can get you anything in five minutes,” he told Vanity Fair.
By that time, Kalanick had already started selling investors and potential employees on his dream of Uber becoming more than an app-powered taxi company, but a logistics business that could one day rival the likes of FedEx, Amazon, JB Hunt, and Ryder. Uber planned to apply its special sauce to every industry that moved things around, whether it was courier services or catering orders, and upend those markets like it did the livery service.
The first big test of whether the company could deliver on Kalanick’s promise came in the form of a service it called UberRush. Designed to deliver goods to customers within minutes of being ordered, Rush relied on similar systems as Uber’s ride hailing service and many of the same drivers. To get Rush off the ground, Uber teamed up with national retail chains, popular providers of online checkout services for local business, and mum-and-pop stores.
But now, nearly a year-and-a-half since its launch, UberRush has shriveled as a business opportunity — and so has Uber’s grand ambition to become a logistics behemoth.
Uber hasn’t expanded Rush past its original three launch cities. Instead it’s pushed the service aside in favour of ventures like UberEats and Uber Freight, according to the more than a dozen former partners and employees Business Insider spoke to, many of whom spoke only on the condition of anonymity because of agreements signed with the company. Although Eats and Freight are part of Uber’s logistics vision, they don’t hold the same promise as UberRush did to transform the industry.
The idea of Uber becoming a logistics magnate played an important role in the company’s valuation swelling to $US69 billion and was an key component of Kalanick’s own vision for the company. But those who worked on Rush say it’s failed to live up to its promise of becoming the big business Uber needs.
“They were saying this is going to be huge. You can get anything delivered,” a former employee said.
This is the story of how that hasn’t come true.
Uber, but for everything
Uber’s attempt to turn itself into a player in the logistics industry began in April 2014 with a test of a new system for requesting bike couriers on-demand in New York City. The company teased the service by tweeting a photo of a bike courier on the streets of New York.
We're rolling out some big news on Tuesday… pic.twitter.com/1pDPy8oV2p
— Uber NYC (@Uber_NYC) April 5, 2014
That was the beginning of UberRush. The company was planning to build out a dispatch network for delivering goods that was similar to the one it built out for its taxi service.
In building Rush, Uber turned to the tried-and-true internet success formula of using existing resources to enter an entirely new market. Just as Amazon has used the backend servers and data centres that power its retail operations to build a separate cloud business, Uber planned to use its app, its dispatching system and, eventually, its network of drivers to disrupt the logistics market.
In the early days of UberRush in New York, anyone in the city could request a bike courier just like they would request a ride — with a push of button in Uber’s app. During the the New York City pilot, a Business Insider reporter had an UberRush driver retrieve a raincoat she’d forgotten at a meeting. It was dropped off within 20 minutes for $US11.
But Uber soon learned that most people don’t need bike messengers or a courier service in their everyday lives, forgotten raincoats or misplaced keys aside.
Instead the company realised that the much more promising business opportunity for UberRush was to offer it as a service for local retailers. The Rush team spent the next year working on pitching its vision for the future of delivery services to businesses ranging from clothing shops to chocolatiers to Mexican restaurants. It also worked to team up with the companies that helped those local businesses sell online.
If a flower shop needed a bouquet delivered down the street, it could summon an UberRush courier to deliver the flowers on its behalf instead of having to hire its own delivery workers. If a pizza shop that did have its own delivery drivers found that it didn’t have enough at a particular time, it could get a Rush driver to stop by, pick up a pie and ferry it to a customer.
Just as Uber’s taxi service transformed the way people moved around cities, the company hoped Rush would change how everything moved around cities.
Uber officially launched Rush in October 2015 in three cities — New York, Chicago and San Francisco. Rush’s debut marked the first time Uber had committed to a business outside of its main ride-hailing arm that was supposed to be meaningful to its bottom line.
“It’s no longer an experiment … It’s a business for us,” Jason Droege, the head of Uber Everything, said at its launch. “When it’s a business, you’re worried about the profit and loss.”
Uber declined to make Droege or other top executives available for an interview.
The problem with t-shirts on-demand
Initially, UberRush looked like it might live up to its promise.
By the time it launched, it had already signed on Shopify, Clover, ChowNow, and Delivery.com — companies that provide online checkout services for local retailers and restaurants. Early in 2016 Rush’s team signed high-profile deals with luxury brands Nordstrom’s and Cole Haan. Grocery store Harris Teeter started using UberRush for deliveries at a few locations in Virginia. Immediately following the end of that year’s Super Bowl, Dick’s Sporting Goods used Rush couriers in New York and Chicago to deliver commemorative t-shirts.
Behind the scenes though, Uber struggled to find a way to make its delivery network work for a wide range of businesses and to design it so they’d use it for regularly, instead of just for one-off promotions.
The Rush group cycled through 30 different experiments, testing out delivering products for businesses ranging from clothing shops to florists to see which might be good fits for its service, one former exec said. But the company was finding that the service it offered — a delivery network consisting of bike messengers and people with personal vehicles — wasn’t a good match for the delivery needs many businesses had.
“If you want to move stuff in a city, you’re basically talking about flowers and dry cleaning,” the former employee said. Anything larger than that — like food catering orders or furniture — “isn’t really possible with a Toyota Prius,” the former employee added.
At one point, the Rush team toyed with the idea of building a standalone retail app, like it would eventually do for food with UberEats, according to multiple people familiar with the app idea. The app would have shown and allowed consumers to place orders from stores that used Rush and could deliver later that day. UberRush’s sales team pitched retailers on the app for a few months to get them to sign up for Rush, but later abandoned the idea.
An Uber spokesperson said the company’s engineers never worked on even a prototype for the app.
The rise of Eats
While striking out generally, Rush did get a hit in one particular area: delivering food. In Chicago, the majority of businesses using Rush were restaurants, one former employee said.
Many restaurants signed up to use Rush either as their primary delivery service or as a back-up when they needed it. Some used Rush instead of hiring their own teams of delivery drivers. Others, though, signed up for Rush to be able to use Uber’s on-demand drivers in a pinch, such as when one of their own drivers called in sick.
But Rush focused only on the last step in delivering food. The more Uber got involved in the business, the more it wanted to control the whole process — and the money and branding that came with it. So Uber started focusing more closely on the food delivery.
As part of its broader efforts to build a logistics business, Uber had already started to experiment with different kinds of food delivery as early as 2014. As part of those experiments, it launched a new test with a separate service called UberEats in Toronto in December 2015.
In the beginning, Eats only offered a selection of a few meals from local restaurants for lunch. The initial plan was to have drivers ride around with heating bags to keep the food fresh so they could dole out a burrito or a sandwich in only a few minutes after a customer placed an order.
Eventually, the company began offering full menus from restaurants. Inside Uber, the sales team would open up competitors’ apps and go through their lists of restaurants and start calling those businesses around the clock to try to convince them to sign up with Eats. Other Uber employees reached out to the couriers who worked for rivals like Caviar, to try to lure them over to Eats and Rush.
Unlike Rush’s abandoned retail app, Uber built a standalone app for its Eats service. It marked the first time Uber had ever launched a separate app for one of its products.
Uber officially launched Eats in Los Angeles early in 2016, with a national rollout already planned. By the end of 2016, Eats was available in its 56 cities. By contrast, Rush was still relegated to its first three.
The rise of Eats would slowly begin to encroach on Rush’s potential and become the breakout star of Uber’s logistics efforts. But you couldn’t tell right away.
The Rush team continued to add name-brand partners, including Walmart which used Rush in a grocery delivery test. In June, Uber tried to juice up Rush by releasing an API, or software code, that would allow other businesses to easily sign up for the delivery service and offer it through their websites without having to go through a laborious sales process. In San Francisco, a local pizza business used this process to tap Rush as needed to deliver orders rather than hiring more delivery drivers of its own.
But Rush’s promise of turning Uber into a logistics giant was starting to falter. When Jose Cordero started delivering for Rush in New York early in 2016, it was a crazily lucrative gig, thanks to all the incentives Uber was offering. Even after the company stopped those initial promotions, the work was still steady, and the pay was good.
But by the end of the summer, the deliveries Rush was sending his way started to slip “substantially,” Cordero told Business Insider. It became harder and harder to work with Rush. Cordero eventually quit the service to be a courier for PostMates, one of Rush’s rivals.
“I’m disappointed in how untrue it all is,” Cordero said, referring to Rush.
Internally, the Rush team was trying to grow the service into a big business with flashy deals, but struggled with building a product whose customers were businesses rather than consumers.
Part of the problem it faced was having to change both business and consumer behaviour. Businesses had to build same-day delivery into their systems and find a way to market the service to customers. And getting customers excited about paying a little extra to have something delivered on-demand wasn’t an easy sell for most products. While many people order food to be delivered — in some cases, multiple times a day — there are just few cases when most people need to have a t-shirt or most other things delivered right away.
“It’s not never, but it’s not enough to build a great business,” one former exec said. And to support its valuation, Uber needed to build big businesses.
Another problem Rush was facing was with pricing. Customers flocked to Uber’s ride-hailing business in large part because it was generally cheaper than taking a cab. But Rush, by contrast, was typically more expensive than the competition.
The prices at local stores that were Rush’s partners are usually higher than what consumers would pay at Amazon or other online retailers. And once you factored in Rush’s delivery charges, products were often much more expensive, even compared to Amazon’s next-day delivery service, said another former Uber executive.
And that’s not to mention that if consumers need something right away — and don’t mind paying a little extra — they generally just go to the nearest store.
“It’s hard to get the level of success of the ride-sharing business in this world,” this former exec said. “In ride sharing, I’m just replacing a cab. Here you’re not going to get that immediate replacement of behaviour. I can still just go down to the bodega.”
Rush’s partners started growing frustrated. Uber kept telling them it would expand Rush into additional cities, one business leader said. But aside from a few limited trials for particular clients, it never did.
The feeling started to sink in among some of the businesses using it that Uber was going to “kill off” Rush.
“They were basically trying to beat out local courier services,” said another former employee. “But it kind of started being an afterthought.”
Uber redirected some of its Rush sales team from working to bring in new business to trying to keep existing clients happy.
When they realised Uber wasn’t going to continue to develop or expand Rush, members of the Rush team were upset and disillusioned, several of the former employees said. Some of Rush’s earliest internal leaders started leaving, especially as it became clear that Uber was starting to focus its logistics ambitions on other areas, most notably Eats and Uber Freight.
As Uber geared up in the fall of 2016 to launch the Freight business, which pairs truck drivers with loads that need to be hauled, Rush became a quiet footnote not even worthy of a company blog post.
The team had struck a nationwide deal with CVS that was supposed to be announced in November, but Rush’s partnership with CVS got downgraded from a high-profile splashy launch to a quiet experiment. This spring, Uber emailed its restaurant partners who were using Rush and asked them to switch to Eats. It warned them it was killing off the API it had released just a year before.
Meanwhile, the Eats team started curtailing Rush’s dealings with restaurants. It even blocked Rush from signing on Yelp’s Eat24 delivery service as a customer, according to The Information.
Uber had a big incentive to promote Eats over Rush for food delivery — the former could contribute much more to the company’s overall sales than the latter.
With Rush, Uber could only count its delivery fees as revenue, because consumers were typically placing orders through another company’s website or app, one person familiar with the two services said. But with Eats, all orders go through Uber’s app, so it can count the order cost as well as the delivery charges as revenue, this person said.
If a customer ordered $US25 worth of food and agreed to a $US5 delivery charge, Uber could only count that $US5 fee as revenue if the order were delivered by Rush. But if the customer placed the same order through Eats, Uber could count the whole $US30 as revenue. And with Eats, Uber was able to take bring a greater portion of that $US30 order down to its bottom line.
Another problem Rush faced is that Uber doesn’t have the time to focus on smaller businesses or corporations that don’t move at its lightning-fast speed. So it’s devoted its attention to building out Eats, which is already in 27 countries and 100 cities. That’s a pace that Rush just hasn’t been able to match.
“I think at this point, it’s not that it’s critical to the company’s future, per se,” said one long-time Rush employee about the delivery service. “Whether it’s important for the ride sharing business, I don’t think so. It’s a story for recruiting, a story for Wall Street.”
The problem for Uber overall is that the difficulties it’s had with Rush raise questions about how easily the company can use its existing business model to upend other markets — a key piece of the story Uber sold to the investors who gave it such a high valuation. And with Uber’s management and priorities in flux following Kalanick’s resignation in June and a months’ long investigation into its workplace and culture, the company’s ability and commitment to continue to develop Rush are more uncertain than ever.
Uber doesn’t dispute that the success of Eats has forced it to rethink and lower its ambitions for Rush. But the company still believes it can become a major logistics player well beyond the realm of food delivery.
“We are thrilled to invest in the fast growth of the UberEats platform, while continuing to build technology that helps power delivery logistics for other businesses to offer more convenience for their customers,” an Uber spokeswoman said.
But whether Rush will ever meet even these lowered expectations is an open question.
“Really when it comes down to it, (Rush) hasn’t offered a significant benefit beyond what people have already,” said Mike Ramsey, an analyst with market research firm Gartner. “There isn’t a giant demand for delivery today, and where there is a giant demand for delivery, there’s already infrastructure in place.”
Rush, Ramsey continued, was “kind of adding on the edges.”
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