As we know, Uber runs a food delivery service as a standalone service in many cities called UberEATS. In October 2016, UberEATS announced that it will be introducing an increment in fares during really busy hours in specific cities. This seems eerily similar to the surge pricing practice that was recently phased out of the company's ride sharing arm. Is the Uber business model being introduced to Uber's food delivery arm, UberEATS? It seems so. Let's explore what surge pricing is about.

When Demand Exceeds Supply

Surge pricing in ridesharing occurs when the demand for drivers surpasses the number drivers on the road at a point in time necessitating a surge or increase in fares. The term is quite unpopular among Uber users. Uber in a bid to assuage customers phased out surge pricing and replaced the term with Upfront fares where Uber users are shown the increased fares before they ride.

Surely, the notion of introducing surge pricing in food delivery will certainly not receive a warm reception from customers. In trying to explain the reason for this move, a post on Uber's official blog reads: " 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. Even though more people are signing up for a flexible way to earn money every day, there are still times when there aren’t enough delivery partners in a particular area to complete every delivery request at Uber speed."

It still remains to be seen how this change will be perceived by customers. However, drivers appear to be the sole reason for the introduction of surge pricing as Uber goes on to state that, "The extra money from these orders goes toward financial incentives for delivery partners as well as our other operational costs. These partner incentives look at past patterns and aim to predict where and when there will be high demand and to encourage more people to get on the road in these locations."

You might wonder how much do Uber drivers make and how surge pricing encourages more drivers to get on the road. Well, drivers only earn money when they are on the road. However, if there are issues like traffic congestion on the roads, most drivers do not feel the need to spend hours in traffic only to earn the same thing as when they drive when roads are free. Hence, Uber increases fares so the drivers can be duly compensated for their trouble.

Uber has still not mentioned to what extent consumers will gain from surge pricing. However genuine the reason for this move may be, I think it is also important to consider the negative impact this can have on the community of UberEATS customers. They now have to face price uncertainty. The introduction of surge possibility throws away the affordability guarantee UberEATS customers are used to.