
The Future of Food Delivery [slides] - jger15
https://docs.google.com/presentation/d/1v9ifaW1Sxy_oVUtzn63BrqXKGcpMJ_eKrqb59BXjjXA/edit#slide=id.gd5b15f0a3_5_26
======
mocha_nate
“Delivery Service Partner (DSP)”

I don't know why but i kept forgetting what that meant and seeing the acronym
over and over bothered me. Future looks bright in this area, looking forward
to seeing what happens

~~~
plausibilities
I keep thinking Digital Signals Processing Q__Q

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Creationer
When do the DSPs start to vertically integrate - setting up their own dark
mega kitchens, with generic styles like 'Pizza', 'Thai', 'Chinese', 'Indian'?
These could appear as different restaurants, but in reality operate out of the
same facility.

In this way the batching could be done even more efficiently, and orders would
be coming from one mega-kitchen, with huge economies of scale.

~~~
theriddlr
That's what Deliveroo have set up in London.
[https://www.theguardian.com/business/2017/oct/28/deliveroo-d...](https://www.theguardian.com/business/2017/oct/28/deliveroo-
dark-kitchens-pop-up-feeding-the-city-london)

Then you have new delivery-only brands such as Mac Shack – with the food being
prepared in the kitchens of Bella Italia chain restaurants.

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lvoudour
I used to live in Dublin until recently and coming from a country (Greece)
where food/coffee delivery is free (apart from any tip), fast and ubiquitous,
I was taken aback by the fact I had to pay a substantial delivery fee.

The upside was that driver safety seemed to be taken more seriously (it's a
cutthroat business in Greece and drivers are pushed to their limit, accidents
being rather frequent in their line of work).

~~~
chrisseaton
How do the Greeks afford to include delivery cost in food prices, a business
usually with minuscule margins?

How much does a cup of coffee cost if the price includes delivery?

And does every food item include enough cost to support delivery
independently? How do they amortise the delivery costs across an order?

~~~
lvoudour
It's seen as part of the standard business expenses like utilities and rent.
Of course it squeezes their profit margin but what can they do? Competition is
fierce. What most joints do though is to require a minimum price per order to
allow delivery.

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jerkstate
Reading between the lines, the only real opportunity for a sustainable moat is
the dark kitchens and order batching. This has been tried and failed a few
times already, my guess is the secret ingredients are scale and marketing.

Delivery from traditional restaurants is just too low margin, historically it
was done by only some types of restaurants at break-even or even a slight loss
to increase demand, now that people are used to paying $6-10 premium, once the
music stops and the VC money stops flowing, the restaurants that stay in
business will easily adapt.

~~~
noer
The tools required for a marketplace that connects people to existing
restaurants and a "marketplace" that connects people to multiple "restaurants"
that are in reality all from the same dark kitchen are pretty different. The
former only requires staff, the latter requires real estate, equipment and
product in addition to staff. It's essentially building a restaurant with a
tech component, not building a tech product.

------
dqdo
Best shared content on HN in a long time. I love the thoughtfulness and
thorough analysis of the winners and losers of each strategy.

------
corey_moncure
I skimmed through the slides and didn't see a single word allocated to the
problem of the waste, pollution, and health effects generated by these
services or any costs involved in managing them. Perhaps the figure of $365
billion is a convenient fiction, as is so often the case when modern young
"entrepreneurs" see an opportunity to upend the underpinnings of society for
profit.

Food isn't a problem we solve with megacorporations and apps and technology.
Food isn't supposed to be optimized and analyzed and held to KPIs. Food is
best when communities of people come together to participate and interact and
nourish one another. All these services do is enslave and silo us away from
each other so that the individual's essential needs for nutrition and
community can become a profit stream in a corporation's ledger. They would
build yet another layer in America's enormous neurosis around food. No thanks,
Google.

~~~
coldtea
That.

I'd like to see a future of food delivery which is less food delivery, more
time to spend at home, more cooking and healthy choices.

But of course, as an endeavor whose main end goal is money, the future of food
delivery has to be "more, more, more".

~~~
TeMPOraL
Let's not throw the baby out with the bathwater.

Food delivery is a good idea. Myself, I'd like to see _less_ time spent on
cooking. Except few special cases, cooking is a chore for me, not pleasure.

What isn't a good idea is inherently unsustainable, VC-subsidized companies
lobotomizing the industry in order to strip-mine it for value long enough to
get flipped, leaving a shell of a market sector behind.

~~~
coldtea
> _Let 's not throw the baby out with the bathwater._

If anything, I'd like to throw out more of the baby: e.g. people learning to
grow their own fruits and vegetables, and make more of their own food, not
just cooking.

~~~
TeMPOraL
Sure. I don't see why the two can't coexist.

It's also a matter of life stages. I know I want to have a vegetable garden of
my own, either vertical in the city, or regular one in the country, depending
on where I end up in the future. But today, I very much enjoy the ability to
order a dinner or a pizza whenever my wife and I don't feel like cooking after
a full day of work.

------
amelius
This is another instance where investors step in and ruin small businesses in
an attempt to achieve a monopoly position by building a platform for an
existing type of service.

As illustrated by the following snippets from the article:

> Restaurants are struggling to adapt as they are aggregated by DSPs

and

> No DSP has been able to prove consistent profitability with their existing
> business model.

~~~
petra
>> investors step in and ruin small businesses

Food delivery platforms will get centralized. If not by investors, By Amazon.
By someone.

Why ? Because consumers want that. It's more convenient. And probably network
effects apply here.

With food delivery centralized, Dark, big centralized kitchens will win over
restaurants(for most popular meals). They're just cheaper. It's just
specialization and higher volume.

Long term, making delivered food isn't a good place for a small business. And
that'll happen with subsidies or without.

BTW: in the future, in most industries, a small business will only survive by
making rare and unique things.

~~~
perpetualpatzer
I'm not quite as pessimistic on the food delivery market as you are and would
be interested to hear your/others' reactions.

>Food delivery platforms will get centralized. [...] Because consumers want
that. It's more convenient. And probably network effects apply here.

I agree consumers want all restaurants in the same place. I'm less convinced
that that implies platform consolidation because every party has incentives
towards multi-tenanting to ensure access. Both restaurants and end customers
have incentives towards multi-tenanting to reach each other and for a market-
making DSP to demand exclusivity, they have to undermine the core thing both
sides of the market want (access to supply/demand). A16Z has a good discussion
of multi-tenanting as a limit to the economic value of network effects here
[0].

> With food delivery centralized, Dark, big centralized kitchens will win over
> restaurants(for most popular meals). They're just cheaper.

I agree there are cost efficiencies to dark kitchens and the delivery market
is likely to trend that direction (cheaper real estate, leaner front of house,
less decoration work, etc). It's not clear to me, though, that there are
worthwhile economies of SCALE to be had here (at least in the core urban
market), or that they're necessarily winning.

* Ingredients are low-margin, with prices dominated by transportation, so bargaining power over suppliers is limited.

* Delivery time matters. That's a small pro for large kitchens because you can more accurately forecast demand/staffing, but also a medium-sized con because 5 locations spread out in a city with 20 units of capacity each are more likely to be close to demand than 1 location with 100 units of capacity.

* Cooks aren't fungible, which makes it hard to capitalize on scale without consolidating similar restaurants. The guy who makes my favorite lamb vindaloo is a TERRIBLE sushi chef (in fact, he doesn't even make a very good a saag paneer, imho). If he were trained, he could probably learn to make a mediocre pad thai, but I'd probably still be happier ordering from a known thai restaurant. With 70% annual turnover in the restaurant industry[1], you're going to need to pay for a lot of training to capitalize on the more predictable staffing by supporting a large (i.e. multirestaurant) menu without sacrificing quality. If you plan to support a small menu at scale (e.g. combining a NY borough's worth of Indian restaurants into one giant Indian kitchen), the demand you'll need to support it will be spread out over a borough, so you're likely to have difficulty maintaining service levels.

* People have different tastes in food and there's value in variety. I probably have a neighbor who really likes my restaurant's saag. If you merged the two Indian restaurants near me, had an expert pick the best recipe for each dish on their menus, then taught those to the combined kitchen staff, either my neighbor or I would be disappointed in the saag.

>Long term, making delivered food isn't a good place for a small business. And
that'll happen with subsidies or without.

Without subsidies, this ultimately depends on whether it's harder to make good
food or to build awareness of said food. A restaurant can hire a delivery
driver to transport food, which puts a cap on the cut a DSP can demand from
them for the delivery portion of their service. It's slightly less efficient,
but trivial to implement. The expensive/hard part is getting people to place
orders before your lease runs out. If there are multiple DSPs willing to list
your food in order to sell their own delivery services, that seems like a
recipe for lower start-up costs, which would tend to favor pop-up
restaurants/Kitchen Incubators/iteration at small scale relative to the
classic sit-down storefront restaurant model.

[0] [https://a16z.com/2019/05/09/data-network-effects-
moats/](https://a16z.com/2019/05/09/data-network-effects-moats/) [1]
[https://guide.michelin.com/us/en/illinois/chicago/article/fe...](https://guide.michelin.com/us/en/illinois/chicago/article/features/restaurant-
employee-turnover)

~~~
petra
Great analysis. You've given me some food for thought.

How did you get such deep understanding of that industry?

~~~
perpetualpatzer
> How did you get such deep understanding of that industry?

I'm not certain I have.

This is just how I'd expect it to work based on the arguments in the slides,
my own dinner decision habits, a summer working at Chili's, and a
consulting/pricing professional background.

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not_a_cop75
Forgive me but as someone who has a fridge, microwave, stove and oven,
delivery does not appeal to me.

There is a whole frozen pizza in the store that sells for 3 dollars, and a
slice of pizza from the 7-11 that goes for 2 dollars. Pizza delivery is the
one food where delivery has matured, and even today it's a very limited buy.

When do people do it?

Parties -> Almost any demographic

Workload is too high to go out -> Students and younger adults

Going outside is extremely uncomfortable and/or dangerous -> Primarily older

Unmotivated and lazy -> A small fraction of any demographic

The thing that can finally drop prices as we know it is the quadricopter. A
self navigating delivery channel has at least reasonable chance to bring the
price well into tolerable levels for most americans.

~~~
MlkedChocolate
You assume the unmotivated and lazy are a small fraction of any demographic. I
have an unqualified feeling that it is a big portion, and that it is growing.
I hear too many references to netflix tv shows, and a lack of conversations
that spark my curiosity. I hear of people not sleeping to catch the latest
episodes that aired in another country first.

------
mitchtbaum
* [Kitchen incubator - Wikipedia]([https://en.wikipedia.org/wiki/Kitchen_incubator](https://en.wikipedia.org/wiki/Kitchen_incubator))

* [Communal apartment - Wikipedia]([https://en.wikipedia.org/wiki/Communal_apartment](https://en.wikipedia.org/wiki/Communal_apartment))

* [Communal dining - Wikipedia]([https://en.wikipedia.org/wiki/Communal_dining](https://en.wikipedia.org/wiki/Communal_dining))

* [Soup kitchen - Wikipedia]([https://en.wikipedia.org/wiki/Soup_kitchen](https://en.wikipedia.org/wiki/Soup_kitchen))

* [Factory-kitchen - Wikipedia]([https://en.wikipedia.org/wiki/Factory-kitchen](https://en.wikipedia.org/wiki/Factory-kitchen))

* [Perpetual stew - Wikipedia]([https://en.wikipedia.org/wiki/Perpetual_stew](https://en.wikipedia.org/wiki/Perpetual_stew))

* [Bhandara (community kitchen) - Wikipedia]([https://en.wikipedia.org/wiki/Bhandara_(community_kitchen)](https://en.wikipedia.org/wiki/Bhandara_\(community_kitchen\)))

* [Coliving - Wikipedia]([https://en.wikipedia.org/wiki/Coliving](https://en.wikipedia.org/wiki/Coliving))

* [Campus Kitchen - Wikipedia]([https://en.wikipedia.org/wiki/Campus_Kitchen](https://en.wikipedia.org/wiki/Campus_Kitchen))

* [DC Central Kitchen - Wikipedia]([https://en.wikipedia.org/wiki/DC_Central_Kitchen](https://en.wikipedia.org/wiki/DC_Central_Kitchen))

* [Karma Kitchen: Growing in Generosity]([http://www.karmakitchen.org/](http://www.karmakitchen.org/))

* ...

* ...

* ...

* ...

~~~
wyldfire
Yeah, markdown or something like it would be a nice flourish. But I guess HN
kinda likes to keep it simple instead. _shrug_ (hey -- that's some formatting
right there)

~~~
amelius
I'm wondering how he got the asterisks to work ...

~~~
dang
[https://news.ycombinator.com/formatdoc](https://news.ycombinator.com/formatdoc)

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pedalpete
Every time I see a delivery bike out with a huge backpack full of food, I feel
as a society we've gone a bit wrong.

1) The delivery rider/driver is making nothing 2) We are packaging every piece
of food and sauce in single use plastic 3) The restaurants are losing money
(though this is being addressed somewhat) 4) People aren't leaving their homes
for the 5 minutes it takes to walk down the street and support a local
business.

I really hope this is a trend that goes away, but I doubt it will.

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mtrn
Question: How hard would it be to write create open source components to run a
DSP collaboratively, e.g. with the power asymmetry created by aggregation

> aggregated by DSPs

removed?

~~~
pedalpete
The same argument was made for an open source Uber, and I think it's a noble
idea, but it appears the problems of routing and competition are complex
enough that it just doesn't work.

------
dpflan
I'm not aware; are there any examples of super apps in the US? If SnapChat
added Dominos delivery, would that be a satisfactory hypothetical?

------
groby_b
"Ethics aside, they can..."[1]

I expected nothing less from somebody who worked for Uber.

I mean sure, investors will (pardon the pun) eat the ideas up. There is, after
all, money to be made. But the overall state of our industry, where people
feel very comfortable discussing business models with a prefix of "Ethics
aside" is depressing as hell.

Let's not even mention the problem of externalities, of impact on rural
communities, of the immense problems that consolidation will bring, or of the
exploitive nature of the "gig economy"

[1] Slide 25:
[https://docs.google.com/presentation/d/1v9ifaW1Sxy_oVUtzn63B...](https://docs.google.com/presentation/d/1v9ifaW1Sxy_oVUtzn63BrqXKGcpMJ_eKrqb59BXjjXA/edit#slide=id.g59095fa191_0_139)

~~~
itronitron
sort of humorous that they included a cartoon which is mocking a part of their
proposal

