Uber has announced that the unpopular surge pricing model applied in the ride-hailing side of its business will now be introduced to its food delivery service, UberEATS, in a select number of cities.
Uber revealed the news on a blog post (opens in new tab) on its website, where it said that the reason for its decision was simply a response to the growing popularity of the service and the demand being placed on it by the “tremendous appetite” of its customers.
“In order to maintain the speed, reliability, and selection people have come to expect from Uber, we depend on having delivery partners available in the right places at the right times” wrote the company. As a result, it has to find a way to incentivise more drivers to come out to work when there’s a local shortage.
Supply and demand
Uber doesn’t use the exact phrase “surge pricing” in its post, instead saying that UberEATS customers will be asked to “pay more for delivery when they order from restaurants in areas where demand is high but delivery partners are scarce.”
The logic behind the timed price hikes is similar, though, and with surge pricing proving to be an effective method with its car drivers, it makes sense to introduce a similar model for delivery drivers.
Just like when ordering an Uber car, customers will be warned of the extra charge before they make their order. You’ll know if you have to pay extra to order from a certain restaurant as it’ll feature an arrow beneath its name.
The exact charge appears above the menu, and as a separate line item before checkout and on the order receipt so it’ll be hard to deny you weren’t made adequately aware of being charged any extra.
By doing this, Uber hopes it will be able to keep offering delivery from all of its restaurants even when it’s busy so that customers don’t have to miss out on the places they love most just because they’re ordering at a peak time.
Uber says that the extra money will go “toward financial incentives for delivery partners as well as our other operational costs.”
The new pricing model will be introduced to US cities Phoenix, Houston, Dallas, DC, Miami, and Atlanta first. It won’t be city-wide, instead only high-demand areas are likely to see it applied. Considering UberEATS is now in operation in 43 cities across the globe, it’s likely the price surges won’t be limited to US cities as it increases in popularity elsewhere.
Though it’s unpopular, the surge pricing model is currently tolerated in the ride hailing service. It could, however, be under threat in London as an employment tribunal is due to rule on whether Uber’s drivers are self-employed or should be given basic employment rights by the company.
Uber is arguing that its drivers are self-employed and can choose to drive when and where they please, which is part of why the surge pricing model is so important; Uber can’t demand that its drivers come out so it has to find other ways to convince them.
If the tribunal finds that Uber drivers are actually workers, they’ll be entitled to certain rights under employment law such as sick pay and the national minimum wage which will have severe implications for Uber’s current business model.
It could also have a knock-on effect with regards to the employment status of its UberEATS delivery drivers, who have already protested (opens in new tab) the company's treatment of them.