Could Uber have done Dunzo's work better?

What would you say to an intracity courier service using well-maintained cars/bikes/autos?

Imagine this.

I book an Uber ride with absolutely no intention of getting in the car! But I do intend to have a box to be delivered across the city to a friend of mine. I book the ride, the car arrives, I place the box in the backseat and ask the driver to start the ride. At first, the ride starts with a visibly baffled driver (apprehensive about the contents in the box). But it takes on a smooth course once the driver realizes the contents of the box are not radioactive.

En route the destination, I am tracking the cab movement on my Uber app. Finally, the destination arrives. The addressee is waiting for the car to arrive (details shared beforehand). The box is delivered in good condition, the driver gets paid, all without me physically travelling in the cab, thus saving precious time and energy.

Too good to be true? Let’s take a look.

Dunzo, a hyperlocal concierge & delivery startup, gained a lot of attention when it received $12 million from Google (the first direct investment by the search engine giant in an Indian company). It claims to deliver/serve the following needs:

An interesting common element amongst these is that none of these products are owned by Dunzo.

On the other hand, Uber is a ride-hailing company that offers price-based options for the cabs available for travel (POOL, Go, Moto, Auto, X etc.). It operates in both 2-wheelers & 4-wheelers, the modes offered varying from one city to the other. In addition to providing commuting services, Uber has partnered with local restaurants to provide food delivery services withing a stipulated time in the form of UberEATS. Recently, it has been acquired by Zomato in an all stock transaction.

Like Dunzo, Uber does not own the vehicles in operation or the food items getting delivered.

Competition for Dunzo is mostly from Swiggy Go, Any.do, 6Wunderkinder and DoneThing while Uber has competitors such as Ola, Rapido and QuickRide.

The delivery business is a strong overlap between Dunzo and Uber.

Nationwide Presence

While Dunzo has spread its feet across the 8 major cities (Bangalore, Pune, Gurgaon, Hyderabad, New Delhi, Chennai, Jaipur & Mumbai), Uber’s network encompasses an additional 35 major cities across the nation.

In terms of reach, Uber is a lot closer to the end user than Dunzo. Also, looking at the geographies in which Dunzo is absent, Uber coverage is available where the need for a delivery partner either lies unfulfilled or can be introduced.

Accountability

 A big question that comes up is the accountability of the services on offer. If you have some important documents to be delivered across town (passport, certificates, application etc.), accountability becomes vital.

 In its Terms & Conditions, Dunzo states:

• “You hereby agree and acknowledge that Dunzo is only a facilitator between You, the Merchants and Delivery Partners (as the case maybe) and Dunzo only provides You with access to the Platform to connect with Merchants and Delivery Partners for You to initiate transactions on the Platform. You hereby agree and acknowledge that Dunzo will not be a party to any of the transactions that are initiated by You through the Platform and Dunzo shall not be liable in any manner or incur any liability with respect to the services performed by the Merchants or the Delivery Partners, as the case may be. Further, You hereby agree and acknowledge that Dunzo shall not be liable for the conduct, acts and omissions of the Merchants (including their employees and consultants) and Delivery Partners in the course of providing their services to You, or for any loss or damage to the Item or otherwise caused to You as a consequence of or in relation to the services being provided to You by the Merchants or the Delivery Partner, as the case may be.”[1]

 In its FAQs, Uber states:

•  “Unprofessional delivery partner behavior like inappropriate physical contact or verbal aggression will not be tolerated. If your delivery partner made you feel unsafe, please let us know here. You can also record your feedback by rating the delivery partner. Do this through the Uber Eats app once the order is complete… A member of our team will look into your concern and get back to you at the earliest. We usually respond to all requests within 24 hours, we appreciate your patience.
• Delivery partners are expected to be respectful and act in accordance with our Community Guidelines at all times. Unprofessional behavior, inappropriate physical contact or verbal aggression from delivery partners is not tolerated. If your delivery partner made you uncomfortable in any way, let us know... We'll review the details and be in touch as soon as possible. To help ensure that your delivery partner is accountable for their behavior, please also rate them accordingly.”

Looking purely at the above info, Uber seems to assure a higher accountability when it comes to the delivery experience and professionalism.

Uber seems accountable for the conduct of its delivery partners, whereas Dunzo is not liable for that.

 Financials

“Authorised Capital of a company is the maximum amount of share capital for which shares can be issued by a company to its shareholders/investors. 

Paid-up Capital (also called paid-in capital, equity capital, or contributed capital) of a company is the amount of money it has been paid from shareholders in exchange for shares of its stock. It does not include any amount that investors later pay to purchase shares on the open market. Paid-up capital is important because it's capital that is not borrowed. Paid-up capital can never exceed authorized capital. It doesn't need to be repaid, which is a major benefit of funding business operations in this manner. However, shareholders expect a certain amount of return on their investments in the form of capital gains and dividends. While the business is not required to return shareholder investment, the cost of equity capital can still be quite high.

A company does not usually issue the full amount of its authorized share capital. Instead, some will be held in reserve by the company for possible future use. A company that is fully paid-up has sold all available shares and thus cannot increase its capital unless it borrows money by taking on debt.

Companies that utilize large amounts of equity funding may carry lower amounts of debt than companies that do not. A company with a debt to equity ratio that is lower than the average for its industry may be a good candidate for investing because it indicates prudent financial practices and a decreased debt burden relative to its peers.”[2]

Looking at the table above, we can see that both Dunzo and Uber have more or less exhausted their capability to issue more shares as of now. While Dunzo still has a little leeway of nearly ₹ 1.9 million to issue additional shares, Uber is only left with ₹ 0.02 million. The Difference shows that Dunzo has a leeway of INR 1.7 million approx. over Uber in issuing remaining capital to its shareholders/investors.

 Also, the debt-to-equity ratio for Dunzo is a mighty (-)2.17 while for Uber it rests at 0.44. This implies that Dunzo is a much riskier investment because the business might not be able to produce enough money to repay its debts. The negative debt to equity ratio indicates that Dunzo has interest rates on its debts that are greater than the return on investment. “Companies that experience a negative debt to equity ratio may be seen as risky to analysts, lenders, and investors because this debt is a sign of financial instability.”[3]

Uber has more flexibility over its finances than Dunzo. 

There are no stipulations or requirements attached to the funds it raises through the sale of shares while Dunzo will face limitations imposed by creditors on usage of the funds raised through debt.

“Dunzo’s financial health in the current fiscal is not going to improve drastically either as it’s fighting the deep-pocketed behemoth – Swiggy. Besides Swiggy Stores, the Nasper-funded firm had launched parcel and documents moving service Go in Bengaluru.” [4]

Check the encircled guideline mentioned above. Dunzo does not deliver stuff which needs anything other than a 2-wheelers.

That drills down the Dunzo customer base to a lower number. This is where Uber has a significant advantage over Dunzo.

For any type of Uber cab (Go, Pool, XL etc.), the boot space is usually unutilized for many of the intra-city runs. 

Let’s look at a few probable scenarios here:

1. For a cab without a booking, I can transport a parcel from A to B within the city at a price within a specific time limit without any hassles
2. For a cab already having a booking from C to D, I can still transport a parcel from A to B falling anywhere on/between/beyond points C & D

Dunzo promises deliveries without any minimum order value within 60 minutes 24x7.

In the US, a study by QSR magazine found that UberEATS delivers within 35 minutes.[5]

Puma India has recently partnered with delivery app Dunzo to strengthen its delivery network as it looks to cash on the cricket world cup fever by selling cricket shoes and merchandise through the platform.

“From the limited-edition One8 Gold Spikes to fan tees, consumers can now enjoy the ease of real-time delivery of their favorite merchandise where and when they need it.” - Abhishek Ganguly, MD, Puma India.[6] 

In the wake of COVID-19 impact on every enterprise, Uber can look at capitalizing its existing network in last-mile deliveries as well by collaborating with Amazon, Flipkart, BigBasket etc. (when the lockdown guidelines are favourable, of course!). It could well be the shot in the arm that is badly needed for a sustainable run in the Indian market.

“The beauty of Dunzo's platform is that it cuts across categories and brings almost anything a user could possibly want and that a merchant can offer, online. Our endeavor at Dunzo is to save consumers time by helping them find and get whatever they're looking for, locally," - Kabeer Biswas, CEO of Dunzo.

Of course, a major catch here is Dunzo’s primary business is delivery, while Uber’s primary business is commute. Whether Uber looks at tapping this market remains to be seen. 

References & Sources:

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