Serve It Up

By: subSPAC

EXECUTIVE SUMMARY

• The delivery market is booming, set to hit a whopping $1 trillion by 2030. And right in the middle of this rush is Serve Robotics.
• Fresh from a new deal with Uber Eats, Serve Robotics has made headlines, revealing plans to go public via a SPAC merger.
• The company’s big plan is to shake up the delivery game by blending AI, robotics, and autonomy

DETAIL

The delivery market is booming, set to hit a whopping $1 trillion by 2030. And right in the middle of this rush is Serve Robotics. Fresh from a new deal with Uber Eats, Serve Robotics has made headlines, revealing plans to go public via a SPAC merger.

The company’s big plan is to shake up the delivery game by blending AI, robotics, and autonomy. The company says that its systems can cut costs, speed up deliveries, and redefine efficiency.

But as promising as it sounds, it’s a tough market. Many delivery companies have tried and stumbled. Serve faces a dual challenge: mastering the tech and making it profitable. Can it succeed where others couldn’t?

Delivery’s Dollar Dilemma

The surge in delivery demand during the pandemic era has been evident. Food, groceries, and other essentials became the staples of e-commerce, catalyzed by changing consumer behavior. Giants such as DoorDash and Uber Eats have capitalized on this shift, expanding rapidly over the past three years. However, their financials reveal a paradoxical scenario. DoorDash’s revenue growth of 30% but were accompanied by a 190% increase in losses.

The two primary factors that are culprits to this are a prevailing labor shortage leading to wage inflation, and regulatory interventions capping delivery rates in several jurisdictions. These challenges compress the profit margins, making scalability and sustainability concerns for delivery enterprises.

Serve Robotics’ proposition seems poised to address these structural challenges. The company wants to use automation to potentially redefine the economics of delivery. By reducing last-mile delivery costs to under $1, Serve Robotics plans to introduce a model that could recalibrate the profitability matrix for delivery businesses.

In a market where the combined value of food, grocery, retail, and pharmacy delivery is currently $350 million—with projections soaring to $1 trillion by 2030—Serve’s approach could significantly disrupt the industry’s established order. The company’s tech-driven model promises not just efficiency but also a potential solution to the industry’s enduring profitability conundrum.

Robots Ready for the Streets

At the heart of Serve Robotics’ value proposition lies its commitment to Level 4 autonomy. Understanding Level 4 is crucial: it denotes a system where, under specific conditions, the vehicle can navigate all aspects of its journey independently. In the realm of autonomous delivery, this level of self-sufficiency offers a transformative edge.

However, Serve’s Robots aren’t without its challenges. Unexpected obstacles, like police tapes or construction detours, present ‘edge cases’—situations where the robot’s algorithms might stumble. Serve’s response to these edge cases is noteworthy. Instead of a complete reliance on built-in autonomy, the company has also equipped its robots with dynamic rerouting capability. While the machine can navigate around many barriers, the incorporation of remote supervisors ensures a safety net, bridging the gap between automation and real-world unpredictability.

Street crossings further illustrate the blend of autonomy and supervision. While supervisors assist in these scenarios, the robots aren’t merely passive entities. Their built-in systems can detect potential risks, like an inattentive driver, adding an extra layer of safety.

The robots’s physical specs include a touch screen interface, adaptability to various terrains, a top speed of 7 mph, and a cargo capacity of 50 litres. Given that the median urban delivery spans just 1.3 miles, an “all-day battery” and substantial cargo space should ideally align well with market needs.

Commercialisation Plans

Serve Robotics’ marked a significant milestone in May 2023 with Uber Eats’ announcement, expanding their existing partnership. This commitment to deploy over 2,000 robots on Uber’s platform by 2026 across several US markets aligns with Uber’s overarching strategy: leveraging autonomy to enhance profitability margins. This partnership isn’t Uber’s first foray into autonomy. Prior engagements include Waymo’s autonomous vehicles soon to be incorporated into Uber’s Phoenix operations for both ride-hailing and deliveries.

But the Serve partnership holds a distinct flavor. Originating from a pilot in West Hollywood, this collaboration has seen exponential growth. Monthly growth rates for Serve’s robotic deliveries under Uber’s umbrella have surged by over 30%. An expanding roster of over 300 restaurants across West Hollywood, Hollywood, and Fairfax underscores the collaboration’s success, with bots now active seven days a week.

In terms of fleet presence, Serve claims approximately 100 robots in the Los Angeles domain. This number is projected to swell, catalyzed by the expanded Uber Eats alliance. Moreover, this fleet doesn’t exclusively serve Uber; it’s also leveraged by other partners. A notable mention is 7-Eleven, which recently embarked on robotic sidewalk deliveries with Serve in LA.

Transparency regarding financial facets of the Uber Eats partnership remains limited, with no disclosed specifics on the deal’s value. Yet, a pivotal aspect of Serve’s business ethos emerges. They operate on a “delivery-as-a-service” model. This means revenue accrues post-delivery, a structure that holds potential implications for margins, especially in the medium-term. The strategy not only ensures payment per delivery but could also buffer Serve against potential market fluctuations.

Bottom Line

Serve Robotics’ trajectory in the delivery landscape is noteworthy. By leveraging advanced autonomous capabilities, they address key market inefficiencies. Their partnership strategy, as evidenced by the Uber Eats collaboration, hints at a clear understanding of industry dynamics. Their “pay-per-delivery” model not only offers a fresh revenue perspective but also aligns with market volatility. As the delivery sector expands, the core differentiation will lie in operational efficiency and cost management. If the company is able to efficiently land and manage commercial partnerships while lowering costs, it could significantly benefit from the growing market.

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Originally Posted August 14, 2023 – Serve It Up