
America is stuck at home, but food-delivery companies still struggle to profit - koolba
https://www.wsj.com/articles/america-is-stuck-at-home-but-food-delivery-companies-still-struggle-to-profit-11589374801
======
code4tee
This whole industry is yet another example of “fake markets” that were created
by just massively subsidizing something with VC cash.

Food delivery is hardly a new idea. By basically just having VC’s pay for
everyone’s food delivery you can create this great market and app ecosystem
that people use. Is this a remotely sustainable business model that could
stand on its own? That appears very unlikely at scale.

Hyper-local collaboration between restaurants in delivery that kicks out the
app company “middle man” could become a thing. I’ve already seen this sort of
thing work well in local markets that basically out-competed Uber etc by just
getting their act together and hiring a few developers to build a basic app.

~~~
guevara
One thing I don't understand with these "fake markets" (ride-sharing and food
delivery) is what's the end game? It seems like there is no path to
profitability.

~~~
dec0dedab0de
Raise the price? For Uber/Lyft the only thing keeping the price low at this
point is competition with each other. So as soon as one buys the other they
can raise the price. It's not like anyone wants to go back to using a taxi.

~~~
ghaff
They might go back to using black cars. Or they may decide to rent a car,
drive themselves, or take public transit (or just not go out). There are a lot
of options to Uber/Lyft at 2x price.

>It's not like anyone wants to go back to using a taxi.

To some extent. A city I normally fly into frequently, I usually grab a cab
because it's just there even though Lyft is cheaper. If I were more price-
sensitive I would probably wait for a Lyft but if pricing were similar,
certainly not.

------
foepys
It's funny how something that has been working for decades on a small scale
with mom and pop restaurants doesn't scale up even when you take 25-30% of
each order.

I guess that paying software developers $100,000+ each plus IT infrastructure
plus worldwide marketing is just too expensive in comparison to a landline.
Who would have guessed.

The endgame has always been to monopolize the market with aggressive marketing
and huge discounts for customers, financed by VC. People are not supposed to
order at restaurants directly but use delivery services so the restaurants
need to fire their delivery drivers due to low demand. I'm happy that this
hasn't happened so far and I hope all those services die fast.

~~~
wolfgang000
You could make it work if you let the restaurant handle the delivery,
domicilios.com (a Colombian company) used to do this, they were basically
online restaurants Telephone directory with a nice UI, The restaurants pay a
monthly fee to be in the site.

It worked really well until rappi(Latam equivalent of doordash) came in with a
billion of dollars from softbank.

~~~
nemothekid
GrubHub originally did this as well (maybe they still do this). I think they
realized they could better justify a 30% cut if they handles delivery as well
- before that they were a glorified fax machine.

------
gravitas
American tipping culture ruins it for me - the social anxiety of "do I tip
them? how much? what if I don't tip enough? word of mouth is I'm a bad tipper?
what if my tip insults them?" and any possible repercussions of getting it
wrong loom.

I am not at all against delivery drivers getting their due, but the whole
tipping culture is a pressure I can just avoid if I don't have things
delivered which I can go get myself. I envy the countries which lack this
automatic tipping culture.

~~~
DougWebb
How about "Hey, this person is out doing a job that could possibly kill them,
to save me from having to risk my life by going out. That's really valuable to
me; I'll give them an extra $5."

I _really_ don't get people who are against tipping people in low-paid service
jobs. (Even if they're making at least minimum wage.) If you're paid more than
they are, and their service is providing you with value, show them some
appreciation!

~~~
pnako
Do you tip the postman? They bring you letters, which can be very valuable.

~~~
humaniania
Every Christmas. The UPS guy too.

------
cs702
The list of companies that have tried and failed to build a _sustainable_
business in this space is large -- from Kozmo.com (1998-2001)[a], Webvan
(1996-2001)[b], and UrbanFetch (1999-2000)[c] during the "dotcom bubble" to
the likes of Grubhub, Instacart, and Uber Eats in recent years.

So far, it seems that only tightly integrated operations with highly
standardized food products for which the source/freshness/ripeness of
ingredients is not an issue (e.g., boxed pizzas made from frozen manufactured
components) have been able to make local on-demand delivery sustainable at a
national or global scale.

The only "exceptions" would appear to be FreshDirect (founded by an owner of
NYC's Fairway Market) and Peapod (operated by Giant supermarkets)... BUT both
have grown more slowly and deliberately than the latest crop of startups,
while maintaining tight/integrated control over all aspects of operations.
Moreover, neither allows consumers to order on-demand -- consumers have to
choose a predefined delivery window in advance, sometimes days in advance.[d]

[a]
[https://en.wikipedia.org/wiki/Kozmo.com](https://en.wikipedia.org/wiki/Kozmo.com)

[b]
[https://en.wikipedia.org/wiki/Webvan](https://en.wikipedia.org/wiki/Webvan)

[c]
[https://en.wikipedia.org/wiki/Urbanfetch](https://en.wikipedia.org/wiki/Urbanfetch)

[d] [https://nypost.com/2020/03/15/nyc-freshdirect-delivery-
times...](https://nypost.com/2020/03/15/nyc-freshdirect-delivery-times-are-
vanishing-amid-coronavirus-panic/)

~~~
slowmovintarget
My family has been depending on InstaCart for groceries. Two deliveries a week
has kept us in fresh food (mostly) and household necessities without us having
to venture to the markets. For us, it's been vital. (We're in the risk profile
for bad COVID-19 outcomes, so we've been extremely careful).

~~~
cs702
Without a doubt, these food delivery services have been a _godsend_ for many
during these crazy times.

Whether these services can become sustainable businesses or not, we should
feel grateful for their current existence -- and for the willingness of their
backers to subsidize the cost of delivering food to our door.

These services and their backers deserve a big THANK YOU!

------
mancerayder
Having tried (extensively) Instacart, Amazon WF and Freshdirect, Freshdirect
is my absolute favorite. The fruit and vegetables are in stock, they're either
almost ripe or just ripe, and there's a bunch of organic stuff. Instacart is
hit or miss, the shoppers miss a third of the items and you feel guilty making
them work harder. Also the constant alerts on the app that (50%+) items aren't
available and to accept a substitution or a refund is a huge hassle when
you're working and get interrupted once every 5 minutes about 15 to 20 times
to make a decision. Amazon WF was the worst for me, items unavailable and the
worst part is all the fruit and vegetables were so ripe as to be inedible
almost immediately. I'm not sure what happened there. Amazon also screwed up
because they were letting people put things in carts while no delivery was
available, and auto magically removing items.

Back to the topic here. Fresh Direct has the most experience and has the best
customer experience, so I really really hope they don't go out of business or
get bought by Amazon!

~~~
jobu
Item availability has been really random at most grocery stores lately. It's
something I took for granted most of my life and has been difficult to adjust
to. Usually we make meal plans for the week, then go buy what we need. Now I
have to go to several stores, assess what meat or produce is available and
figure out on the fly what meals we can make out of it (hopefully remembering
all of what I bought at the last store).

I can't imagine how hard it is for services like Instacart to handle. Same
chain of grocery stores a few miles away from each other often have wildly
different items in or out of stock on the same day.

~~~
ghaff
It's one reason I haven't been using delivery services. I only go in once a
week or two--earlyish on a weekday. But I pretty much have to plan on the fly
(while also having pretty good freezer stock at home).

I do mostly just go into one store. But e.g. today went into a small meat farm
store and they had nothing I was looking for. Bought a couple of different
things that will be fine.

But TBH I used grocery delivery previously once because of a broken foot. And
missing/poorly substituted items were a pain and often led to me having to go
to the store personally anyway.

------
djaque
I'm not surprised. In my region, delivery companies add on something like $10
(~$5 for the actual delivery, $2 for the company's cut, and another >$2 for
the recommended tip). Compare that with "delivery native" companies. I pay
like half that for pizza delivery for instance.

I can't afford to get $20-$30 delivery food every week, so I've moved to doing
takeout instead.

~~~
turtlebits
The only reason pizza delivery "works", is because it's a very high margin
food.

In no real world can <$5 on-demand delivery work out unless you have a very
high volume of order and can pool the delivery.

~~~
germansolo
This exactly. Having been a former franchisee of one of the big three pizza
companies, I can attest that this is true. On a typical evening there could be
as many as 30 to 40 deliveries in the store per hour. With that kind of
volume, it is easy to route drivers where I can send 2 or 3 orders together to
the same geographic area. It's just logistically easier when there is a high
volume of orders and the geographic area of the store's delivery zone is
small.

~~~
scarface74
Did you have route optimization software to help?

~~~
germansolo
Yes we did, but most often you could just look at the delivery map and see
what deliveries would go together. Optimization won't tell you which orders
were not complete (waiting on an item that needed to be remade or was made
wrong, etc.) and many times just eyeing the map and knowing the delivery area
was all that was needed. Drivers also knew which shortcuts would be beneficial
to use that the optimization would not know. The software at the time also
would not be able to factor current traffic in the equation. It's been a
while, maybe they do now, I don't know, I've left for greener pastures.

~~~
scarface74
Just curious. I wrote software for the old ruggedized Windows Mobile devices
for field service workers over a decade ago. The holy grail was route/cost
optimizations. Near the end of my time there we integrated with a third party
route optimization service.

~~~
germansolo
This was the main issue with the software we used. When it was slow, it would
recommend that one driver take three orders to the same area while leaving
others in the store with nothing, but when it was busy, it would suggest a
driver only take one order even if there was three others in the immediate
area and no drivers in the store. It didn't take into account the labor and
mileage costs of its decisions. This was also a decade ago, I'm sure the
software has been optimized for better results now.

------
poulsbohemian
I've given this a whopping 5 minutes of thought, so maybe someone else who
actually knows the economics can weigh in on a thoughtful discussion...

Seems to me like this would be a very hard business to scale quickly.
Consumers don't want to pay a delivery charge and don't care about the middle
man - their relationship is with the restaurant, not uberGrubCart. The
restaurants want to control their costs too... so feels like the only way this
whole delivery business can work is if it's a third party, white-label service
serving local restaurants, getting paid by the restaurants, and it is then up
to the restaurants to figure out how to burry the costs into their pricing so
the consumer doesn't see it.

~~~
newfriend
I really don't get this. You could say the same thing about anything:

* Consumers want to buy from brands/sellers directly instead of through amazon

* Consumers want to buy from food producers directly instead of through a supermarket

* Consumers want to buy movies directly instead of deal with Netflix

* Consumers want to buy apps directly from developers instead of dealing with Apple/Google

These are all non-white-label middle-men.

These food delivery services are providing a marketplace & all the logistics.
The restaurants don't have to do anything except setup the menus. They provide
convenience for both restaurant and customers.

I really don't understand all the hate these services are getting here.

~~~
ntsplnkv2
All of these examples provided immense benefit to consumers and immense
benefit to sellers.

Food delivery really doesn't provide an immense benefit to consumers, and
restaurants don't get enough real business through it to justify its cost.

On one hand, if the food is too local, people will just say "I'll just pick it
up myself and save the ridiculous fee." If it's too far away, the food will
take forever and will likely be cold anyway. This is why pizza delivery was
always local - it is one of the few places where delivery makes sense, and the
fees were low, like 1 buck. So there's a small range where it's just far
enough to be inconvenient but close enough that the food is still relatively
good, which in most cases doesn't exist.

On top of that, you need to pay money to the driver. It's just a whole lot of
overhead for very little gain.

------
sequoia
* Courier wants to get paid as much as possible

* Restaurant wants to get paid as much as possible

* Platform wants to get paid as much as possible

* Customer wants to pay as _little_ as possible

And the customer's baseline is "pay for the cost of the food only, and 100%
goes to the restaurant" like an old fashioned, called-in take-out order. This
allows (at baseline) $0 for courier or platform, and every dollar increase in
price (for courier & platform) seems unfair, i.e. "why does it cost more." So
some platforms hide the extra cost & extract it from the restaurant, which
upsets the restaurant, and often upsets the customer when they find out.

Really I see no way "food delivered hot to your door from all over the city,
selected & ordered with no human interaction" (and lets not forget "with
returns, customer service, refunds" etc.!) can be an "inexpensive" service,
unless the costs of the courier or the food itself go way down. Restaurants
already charge $14 for a hamburger & $7 for fries, that doesn't leave a lot of
wiggle room.

I'm very curious to see how it all shakes out, because this covid situation
(which changed delivery from "luxury" to "necessity") is going to be going on
for the next 12mo at least.

~~~
rossdavidh
In my state (and several others), it's already receding. I ate my lunch at a
restaurant, dine-in, today. Obviously, lots of places aren't like that, but
more are every week. If they haven't gotten to solidly profitable yet, I think
they're in trouble.

------
hadlock
I am not sure what other people's experiences have been, but of the six food
deliveries I've attempted via major food delivery apps, two were cancelled by
the restaurant (ordered after 8pm, but before 10pm) and two did not go through
because there were no drivers available (middle of day). I am in an urban area
here in the bay area which normally has lots of uber drivers so I'm not sure
what is going on. Perhaps I am an outlier.

Of the few places in my neighborhood still open for to go, the line is so long
that if you order in advance my food is cold before I can pick it up.

We largely aren't ordering food at this point and just cooking at home. I did
order a pizza the other day and it was really good and delivered on time
piping hot, but it was a time of low demand.

~~~
WORLD_ENDS_SOON
Not sure how all the services work, but I believe the drivers are given
delivery job offers where they see information about the delivery location and
payout estimate, and they're able to accept / reject jobs based on this info.
Therefore it's not necessarily that there weren't drivers available just that
the drivers chose different jobs. It might be that you're in an area that
isn't particularly profitable for deliveries (homes or restaurants too spread
out). I believe you can also tip more / tip upfront to make it more likely
that drivers accept the job. Although these services present tipping as an
optional gratuity, if you don't tip up front it could lead to your job sitting
in the queue forever since it's not as appealing to drivers as other available
delivery jobs with included tips.

~~~
greenshackle2
On Uber Eats you can change the tip up to one hour after delivery, so if they
decide based on tip amount, that is vulnerable to bait-and-switch.

------
troughway
We have been saying for years, posting financial statements, showing hard
bottom line figures, that these SV unicorns are unprofitable, trying to
undercut the existing markets by funneling in VC money to make up for the lack
of an actual profit.

Take Uber, for example.

You cannot, in all seriousness, charge a piss poor amount for a 30-minute taxi
ride, and then take a cut from it, and expect people to somehow be okay with
it. It doesn't work and it's disrespectful to people involved. It ruins the
economy and no amount of handwavyness about market forces will make things
better.

The same thing here applies to their food delivery businesses.

There is a reason why what they are doing is illegal - predatory pricing. But
they think they are too big to fail.

~~~
nradov
In most circumstances predatory pricing is perfectly legal. We're not talking
about monopolies here.

------
chipotle_coyote
I wasn't sure that Doordash et. al. weren't profitable, but I'm not surprised.
When I thought about it, it seemed _really_ hard to figure out a way that the
economics of most third-party delivery food services can work over the long
run: the restaurant has to make a profit; the delivery company has to make a
profit; the delivery driver has to earn enough income to feel like the gig's
worthwhile. The delivery company doesn't want to charge the customer so much
they feel like the service fees are untenable, so they need to also charge the
restaurant, yet there isn't enough margin in the restaurant's normal pricing
model to let them pay the delivery fees and turn a profit.

The current system has balanced this in a way that's left a lot of restaurants
feeling like they're being charged usurious amounts, yet the delivery company
still isn't making money -- and customers who notice that that $16 pulled pork
plate at Armadillo Willy's is a $19 plate from Doordash _not_ including any
added delivery or "service" fees may be less enthused about making those
orders regular things if the restaurant's within comfortable pickup range.

------
DenisM
Startup idea: A service for collective food ordering for you and your
neighbors.

The night before you all vote on the restaurant to order from and the time,
then everyone orders their own favorite dish, then the restaurant delivers it
to one of the houses.

Benefits: Cheap food! Meet your neighbors!

Downsides: Cheap food... Meet your neighbors...

EDIT: some prior art [https://www.restaurantdive.com/news/uber-eats-launches-
group...](https://www.restaurantdive.com/news/uber-eats-launches-group-
ordering/568540/)

~~~
MattGaiser
DoorDash and UberEats should just have a discount for people who can piggy
back their order off another.

~~~
koolba
The end state of this is going to be a bunch of self-driving cars selling
individual pizza slices.

~~~
jpindar
Ice cream trucks but for pizza! Playing Italian music.

~~~
DenisM
Niiice. Can you fit an oven inside tho?

------
jedberg
Not entirely surprising. We've gotten a bunch of takeout during this time, but
never using those services.

We're getting takeout to support our local businesses.

The delivery companies take such a big cut that the local business barely
breaks even or loses money on the deal. Most of them have asked people to call
in directly and pick up if they possibly can, and some even have re-employed
their workers as delivery drivers for direct call-ins.

I go out with my mask and goggles and pick it up. There is so little traffic
it doesn't even matter. I get there super quick and park right in front. Then
I stand in line with all the poor Grubhub/Ubereats contractors who I know
aren't getting a great deal either and we all get our food. I usually let them
cut me in line because I know their tip may depend on their speed.

~~~
ghaff
There's traffic where I live but the couple of places I pick up from have zero
lines, contractors or otherwise. So it's not a big deal to get a takeout
pizza/sub once a week or so.

------
Deimorz
Here in Calgary, Alberta, Canada, we've had these food delivery services
competing for the last few years, with their own apps, exclusive agreements
with restaurants, and so on:

\- Uber Eats

\- DoorDash

\- SkipTheDishes

\- Foodora

\- Fantuan

\- HungryEats

Foodora just shut down two days ago: [https://www.globenewswire.com/news-
release/2020/04/27/202270...](https://www.globenewswire.com/news-
release/2020/04/27/2022709/0/en/foodora-Canada-announces-plans-to-close-
business-while-assuring-support-for-employees.html)

And there were at least two more that were previously available but seem to
have been acquired: Just Eat (by SkipTheDishes), and Nomme (by DoorDash).

It's ridiculous how many companies are fighting over a market that doesn't
even seem to be close to profitable for anyone.

~~~
foepys
In Germany consolidation already happened and the only player left worth
mentioning is Lieferando, operated by Takeaway.com, a Dutch company focused on
food delivery. Lieferando is only profitable since 2019 after acquiring
literally all serious competitors and creating a de-facto monopoly.

------
bbarn
Anecdotally, for the first few weeks, everyone I knew was all about supporting
their local restaurants. Now that it's been over a month, over 2 in some
places, with companies laying people off left and right, and the only place
you're legitimately supposed to go is the grocery store, as infrequently as
possible, I'm getting cooking advice questions from those same friends. People
are starting to realize just how extravagant eating out really is. A broke
nation isn't one that orders delivery every night.

Add that to all of the general "food delivery is a fool's game" arguments, and
none of this should be a surprise to anyone.

------
neonate
[https://archive.md/o07Eq](https://archive.md/o07Eq)

------
MattGaiser
This is because they are handing out discounts like crazy. I haven't paid for
a delivery during this entire crisis and usually get $5 coupon to go with it.
DoorDash gave me 30% off the other day and it was on a $100 order. How can
that make sense?

~~~
londons_explore
Because they still got $70, and all they had to do was drop 10 bucks of stuff
in a fryer?

~~~
MattGaiser
I would normally pay $100 for this food with their typical delivery service. I
am getting a large discount on the regular takeout price through DoorDash.

~~~
chrisseaton
> How can that make sense?

If you discount something but you're still making money, and your discount
gets more people to buy the product, then you can make more money than you
would have without the discount.

That's how it can make sense.

~~~
foepys
No, in reality VCs are eating the loss (real loss, not less profit) in hopes
of higher returns later when everybody needs to order via this food-delivery
service due to the rest being bankrupt.

~~~
almost_usual
If prices are going that high people will stop using it.

Also the employees will eventually want more benefits higher pay etc as the
company grows.

Companies whose efficiency relies on humans can not be that profitable no
matter how much money you throw at them. Computers are more efficient than
people. Simply using computers to coordinate people isn’t as efficient as no
people.

You see hyper growth and large profits specifically from tech companies whose
product could run for awhile if every human left.

Food delivery would exist for 0 time if every human left.

~~~
foepys
It's not so easy. Delivery services mainly bill the restaurants. They take a
25-30% commission which the customer doesn't know about. Then they do
aggressive marketing on TV, on the streets, and online to make their services
known to customers. They brag about the convenience of ordering through an app
or via website.

Meanwhile they employ an army of sales reps, hyping their services to
restaurants. They downplay the commission rates and emphasize that the
restaurant will be let behind because they are not represented online while
everybody else is.

Luckily restaurants started to notice that being online doesn't really matter
for a local business. Put your menu up and a phone number next to it.

------
tibbydudeza
I ordered once when the fast food places opened for deliveries after our
lockdown ended and it was bloody expensive.

The prices as listed in the app was definitely more than the in store price
and there was admin fee and a 10% driver tip (not mandatory).

------
roland35
I tried instacart for the first time this year because of the stay at home
order and while we've had a couple good orders for the most part it has been a
frustrating experience and we will change over to a different grocery store
which offers their own app and pick up instead of delivery.

A few problems with instacart and other deliveries for me:

\- uncertain delivery times. Even when the shopper marks the order as
completed it can take up to an hour to get to my door. It seems they bundle
orders but this isn't clear and makes me worry about cold or hot food

\- inaccurate orders. I have gotten 3 extra ranch dressings which I have never
ordered!

\- constant changes to orders due to items being out of stock. Not instacarts
fault but it is still a bad user experience

\- I am tempted to leave a poor review of a shopper but then I think they know
where I live! Less than ideal.

Overall I would rather interface directly with the stores and restaurants.
There are just too many things which can't be generalized across a platform.
New restaurant discovery isn't something I need either.

------
beefield
For me it is one of the more amazing market failures that restaurants can't
come up with a food delivery/online order coop. Owned by restaurants and
offering services to the owners at cost. (same applies to e.g. hotel booking
sites who are able to rack in outrageous fees while producing outright
disgusting dark patterns to the end customers)

~~~
deminature
Running a three-sided marketplace at city-scale is a complex software and
operations problem. I'm not really surprised restaurants haven't figured it
out as their expertise is in creating great food, rather than solving problems
like these. It also doesn't make sense for them to focus their efforts here if
you subscribe to the idea of comparative advantage
[https://en.wikipedia.org/wiki/Comparative_advantage](https://en.wikipedia.org/wiki/Comparative_advantage)

~~~
beefield
I subscribe to the idea of comparative advantage, but I also subscribe to the
idea of welfare losses of abusive monopolistic behaviour, which _all_ of these
platforms quite openly and obviously aim for.

And being a member of a coop does not require expertise in the core competence
of the coop itself. It requires understanding that the existence of the coop
is beneficial for you. Heck, I am a member of a major food market coop, and I
have zero knowledge (and interest) of food supply chain management.

------
ryandrake
I guess I'm just not in the demographic here, but I don't get all this food
delivery that's going on. I think 5% of the articles here are about restaurant
delivery. I can't believe this is such a big thing! Did you people eat at
restaurants this much _before_ the coronavirus? Why is it, all of a sudden,
that the only way to eat is to get delivery from Chipotle?

I guess I was never much of a restaurant guy before all this stay-at-home, and
ever since stay-at-home, I've gotten food delivered exactly zero times. It's
not even something I'd consider, given that there is a global pandemic and I
have no idea whether anyone in the pipeline between cook and driver is sick.
Food delivery is the business I'd have predicted would go to 0% in a viral
outbreak, but here we are with it flourishing. Totally astounding. Maybe I'm
the only one surprised, I don't know.

------
legohead
We are using Instacart and have been very happy with it. The article doesn't
specifically mention Instacart, which seems to actually be doing very well
thanks to the pandemic [1]

And as for the other services, from the article it sounds like a lot of the
issues are directly related to the pandemic. I think there will be a golden
period for them _after_ the pandemic, or perhaps sooner. I would have never
used a grocery delivery service before -- the idea of someone choosing &
touching my food is unappealing to me. But now that I've used it several
times, I am loving it and want to continue using it.

[1] [https://www.foxbusiness.com/lifestyle/coronavirus-
instacart-...](https://www.foxbusiness.com/lifestyle/coronavirus-instacart-
profitable-first-time-april)

------
almost_usual
Tech companies whose efficiency depend heavily on the physical world (outside
of servers) are not tech companies.

How long could the product run in theory if every human left? If it’s
days/weeks then you have a tech company. If it’s not you don’t.

True tech companies should have a high GAAP margin.

~~~
RivieraKid
Profit margin is determined by market power (monopoly on one extreme, perfect
competition on the other), not by being a tech company.

~~~
almost_usual
People are harder to control than servers. The government also cares more
about monopolies and people than servers. Uber and Lyft wouldn’t be investing
billions in self driving otherwise.

The markets will demonstrate how profitable these companies are in the long
term I suppose.

------
3fe9a03ccd14ca5
It's already expensive to eat out. Costs can be 2x or 3x versus making it at
home (even for simple dishes, such as pastas). I doesn't seem like either the
restaurant nor the delivery service has much power to increase prices.
Besides, we mostly want to support the restaurant (who lose a cut), so I'd
rather just pick it up myself.

Anecdotally, I've seen more people learning how to prepare food at home, since
they have much more time. Personally I've dived into bread making. We're also
regularly preparing large dinners and freezing portions.

~~~
DenisM
>Personally I've dived into bread making

Why is it bread for everyone? Can't even buy flour these days to save your
life...

~~~
3fe9a03ccd14ca5
Fresh bread is so different and tastier than store bought. It's easy to make,
and can be adopted into almost any meal. It was a fundamental cooking skill
lost in the last few generations.

Sorry to hear about your flour situation. Flour is much easier to get for us
now. Most stores are restocked in this area (south bay). Even Costco has their
mega bags back in stock.

------
GauntletWizard
Food delivery companies should be a lifestyle business, not a megacorp.
There's definitely room for a dozen companies of a few dozen people working on
delivery apps, and for a few thousand integrators across the country helping
businesses install - And that's it. The amount of margin you can squeeze out
of these companies, sustainably, is 5-10%. 5-10% of gross restaurant profits
is still a very big market. But it's not a winner-take-all

Look to Dominos as a model - I've been following their reinvention as a "tech
company". Dominos corporate doesn't own many stores. Local affiliates do that.
What Dominos corporate does is half logistics (Getting shipments of pizza
products to stores, negotiating bulk rates) and half tech (Running the
ordering systems, website, and marketing apparatus).

In some ways, they've long dealt with the "uber" model problems of
employee/contractor divide. Stores are mostly owned not by corporate but by
small local companies. Those small companies do actually employ their workers,
but don't have the same problems that giant business do, because they are
"small businesses". In return they are a lot more autonomous than Uber city-
managers, and the "corporate" entity takes a smaller cut of the profits than
Uber does.

------
Scea91
I live in Prague and my feeling is that both food delivery and grocery
delivery works quite well here and hopefully the delivery companies are
thriving. We order quite often (multiple times a week) for the past 3 years
and I could count negative experiences on the fingers of one hand probably.

Grocery delivery is, of course, easier because there is no strict time limit
usually and the orders can be pooled together.

------
atsjie
Couldn't read the article; but might this business model make more sense in
Europe or Asia (scooter, cyclist delivery by young people)?

Not sure how food-delivery works in the USA, but I'd think the low density,
car-focused infrastructure might make it less competitive compared to
cyclist/scooter deliveries elsewhere.

------
starpilot
And the restaurants themselves don't make money from this. Is food delivery
just a shell game?

~~~
poutine
Food delivery the traditional way (the pizza delivery guy) is profitable for
restaurants and provides a wage for the delivery person.

If there's a problem with things it's the model of the delivery apps and
sharing economy, not the economics of food delivery itself.

~~~
starpilot
I think it was obvious from context what I was referring to.

------
WalterBright
Most companies struggle to make a profit. It's an endemic characteristic of
the free market.

------
roland35
I think focussing on creating a shopify-type tool to allow places to make
their own apps is probably better than trying to take on the entire process
yourself. There are just too many variables across different venues and
geographies.

------
phendrenad2
I wonder if this is a hint at the true inflation rate to come. I pay $60 on
average on a food delivery app for lunch for two people in the bay area, which
already seems higher than what I paid pre-pandemic.

------
parasubvert
Everyone is acting like this is a failed industry or business model. It’s not,
it’s under strain from COVID, but clearly it is growing.

It is a far better experience than calling local taxi companies. The same
reason people use Uber.

------
julienchastang
I saw a show once a while back about tiffin (lunchboxes) carrier networks in
India. The show was making an analogy with how packets are delivered over the
internet. These networks are extremely efficient and have very few errors.
Could this model be replicated in the US or Europe for a more economically
sustainable food delivery business model?

Edit: the tiffin containers are made of metal and therefore are reusable
instead of all the Styrofoam and plastic that ends up in the landfill for US
food delivery so they seem far more environmental too.

~~~
subpixel
Under different circumstances I believe you could make this work in NYC as a
sort of "so uncool it's cool" business. I've even thought about it.

But when the office buildings that should allow you to deliver 100+ meals to a
single address are empty (everyone is working from home), the logistical
hurdle is insurmountable.

Of course the hurdle of collecting tiffins in the first place from New Yorkers
who are used to throwing away plastic is also daunting.

------
devit
Isn't this just a problem due to money-losing competitors selling at low
prices?

Getting restaurant food delivered is a waste of money compared to getting bulk
food delivered from supermarkets, so those who order it are probably not very
price sensitive, and thus simply raising prices until the company is
profitable should work without losing so much customers that economies of
scale are lost, assuming there are no money-losing competitors.

------
partiallypro
This is what surprised me about Uber wanting to buy Grubhub. I am near willing
to bet that Uber (or Lyft) will never turn a lifetime profit. So Grubhub, is
in a model that is even harder to break into. The only way this will ever work
is for there to be a monopoly with one company doing all deliveries. The
problem is obviously that they aren't just competing against all the other
national food delivery services...but they are competing with the restaurants
themselves. When people want delivery they order pizza, the delivery fee is
virtually nothing. The only time I use something like Uber Eats is when I am
under intense time constraints and can't leave...or I just can't leave for
other reasons. Otherwise I'm not going to pay $25 just to have a delivery of
food. I can go to Domino's and pay $3 for the same service. I just don't see
how the model is sustainable. It works great in our current easy money society
but eventually it will not be able to escape the idea that you need to
actually make money.

One model I do think is interesting is something like Goldbelly. It's not
instant food, but you can get food from any participating restaurant in the
nation and have it mailed to you and you then cook/reheat it. That eliminates
so much overhead, and you're using an existing logistics provider. Obviously
that isn't quite the same market, but it's similar and seems much more
sustainable.

~~~
mkolodny
I think the main reason services like Uber Eats aren't profitable right now
are because of competition. They have to out-market and under-price their
competitors.

Buying GrubHub may make Uber Eats profitable in places where GrubHub is their
main competition.

~~~
almost_usual
So they’re only profitable as a monopoly because they can charge high prices?
Seems like a bad business model.

------
markbnj
When we get take-out, which is admittedly not very often in these times, we go
straight to the restaurant. I'd much rather do the driving and let them keep
the overhead of the delivery service fees. We live in a suburban area west of
NYC and most of the local places that are still doing takeout are struggling
with low demand, so lines and cold food have not been the problem.

------
Izkata
It took years before I was willing to try out Peapod, and then in February
_this year_ they just completely left the Midwest. Looking for alternatives,
they seem to make extensive use of gig workers picking up things from public
stores (Peapod had employees and private warehouses), so I said fuck it, I'm
just making my own trips to the grocery store again.

~~~
ghaff
The only time I used Peapod, I had a broken foot and was on crutches for a few
months so it was difficult for me to go to the store and do a full grocery
shopping.

It was... OK. Invariably there were items missing and substitutions I didn't
care for. But it got me most of my groceries and it wasn't really hard for me
to go to the store to pickup another item or two.

But I haven't used them since I was off crutches that time.

------
aejnsn
I think the business model is solid. I think the implementation of said model
is to be blamed. However I am having difficulty in logically pinpointing why
my kneejerk reaction is to the implementation.

Contrast gig economy (I cannot believe I am using that term) workers of today
with milk delivery workers of the past. What's different? A schedule? A
subscription?

~~~
acheron9383
Probably the efficiency of a milk route, you can do more of a traveling
salesman walk. Rather than a one order to one driver, which is probably
substantially less efficient. Amazon/Wholefoods doing more of a scheduled
delivery might be a money maker in the long run, it is less gig like though
than Uber Eats, Grubhub, etc.

------
cm2187
On a similar topic, a lot of people anticipated that online retail would do
great with the lockdown, but in the early days of the lockdown, outside of
groceries, ecommerce has taken a noze dive (-40%-ish). Does anyone know if it
is still the case now?

------
ccktlmazeltov
Delivery food always taste bad, and it's always expensive, and you're always
getting slow deliveries if you don't tip.

Honestly I just don't see why would anyone spend the money, the guilt trip
(from not tipping), and the bad food.

------
blawson
I'm surprised OpenTable or something similar doesn't yet allow restaurants to
include delivery as an option yet.

For restaurants that already offer delivery (pizza places), avoiding the food-
delivery middleman seems like a win?

------
m3kw9
I’m still in awe the cost of delivery can be quite cheap. The margins are
probably super thin because of competition. No wonder Uber wants to buy
Grubhub to get more bargaining power

------
HumblyTossed
How much of the cost of a Dominos pizza, for example, is the cost of delivery?
That number is how much you can charge for delivering food. Nothing more.
People just won't go for it.

------
nerdponx
They charge super-high fees to restaurants and their service doesn't seem
_that_ complicated or expensive to run.

What do these companies spend so much money on that they struggle to break
even?

------
rsuelzer
Paywalled so I couldn't read the article. But, I am surprised that they cannot
turn a profit. I generally pay about a 10-15 percent charge on my order before
I tip the driver.

They don't pay their drivers (maybe a few dollars an hour?), provie any
benefits, pay rent.

Look through my fees, I have paid doordash about $100 over the course of 17
deliveries, and $120 in tips to drivers. That's a lot of money for doordash to
basically route my order to a restaurant and driver.

What exactly is the overhead? Maybe it's because I work for a small company
where five developers have been able to compete with teams with 100 plus
engineers, but I don't see these apps as super complicated or requiring a huge
engineering team.

~~~
profunctor
I'm pretty sure they pay their drivers or have I been completely misled?

------
dzonga
all vc funded delivery apps, should die a hard slow death. death by 1000 cuts
of bleeding cash. not only do they treat drivers like crap. mess up orders. n
take advantage of local restaurants tryna survive. fake markets indeed. few
commentators pointing grubhub profit, without noticing grubhub is taking a 50%
cut from restaurants. i.e mafia style

------
Apocryphon
So while Uber, Lyft, and Airbnb are getting killed by lack of business, the
food delivery companies are getting killed by too much? So much for the gig
economy. It's almost as if there's something structurally unsustainable about
these companies.

~~~
mc32
The ULA triumvirate is different from the others. There are few businesses
that can survive prolonged quarantines without outside help.

The fact that delivery business is having trouble in the most fecund business
state is a testament to the (non) viability of the business as structured.

In other places food delivery is assisted not by expensive four-wheeled
vehicles but by cheap two and three-wheelers.

~~~
bsder
Yes, the ULA triumvirate were profitable because they simply ignored those
pesky laws that cut into their margins.

Food delivery doesn't have any laws you can break in order to make your
service more profitable.

------
travisporter
How/do the robot delivery companies change this?

------
fnord77
somehow, ubereats added 12 bucks to my $30 order for delivery. how can they be
struggling with that much markup?

------
yalogin
I still don't think that sector can make money the way its currently
structured. Unless the customer pays for the delivery themselves and the
delivery stops taking a cut from the restaurant money, I don't see it really
making sense. Sure there is a boom right now but it will zag the other way as
soon as the shelter in place guidelines are lifted or when the vaccine comes
out. Then, people would want to go out. This is the time for these companies
to change user expectations and behavior.

------
eggie5
why does everyone say Grubhub is not profitable?

------
squnch
A real testament to how many broken business models have been funded by VCs in
the last decade... they can't even make money delivering food when the
government has ordered everyone into their homes.

~~~
ntsplnkv2
It's a complete failure. People don't want to pay outrageous prices, so they
don't buy in. Restaurants don't want to pay fees. The companies want to make
money so they have to squeeze somewhere - squeeze customers, you lose
customers. Squeeze drivers, people no longer drive. Squeeze restaurants, they
don't buy in.

It's just a system where everyone loses.

~~~
psychometry
Owners of commercial real estate in urban markets are the ones who have been
winning, seeing their property values skyrocket even as they put the squeeze
on their tenants.

------
egypturnash
Gee, maybe this is a thing that should be part of what a restaurant does, with
costs baked into their operating budget!

Nah, I’m sure there’s enough money in this for it to be worth an entire
publicly-traded corporation with stockholders to keep happy and immense
amounts of VC to pay back.

Oh, no, they can’t? Well. Bye, I guess. Good luck collapsing the company
behind you to avoid being on the hook for all that VC you blew through, guys!
Enjoy your market correction.

