
Doordash and Pizza Arbitrage - lunchbreak
https://themargins.substack.com/p/doordash-and-pizza-arbitrage
======
JumpCrisscross
I cut this deal with my neighborhood Italian restaurant!

I texted the owner about being miffed they hadn’t told me they were on
DoorDash. He replied. They aren’t. We compared pricing, and found the prices
advertised are way off from what the restaurant charges.

So I placed a $5,000 order to the neighbourhood homeless shelter. DoorDash
paid him over $20,000, and I get free pasta for the rest of the year. (My
neighbours have also partaken.)

Glad to know it’s scaling. SoftBank has assembled a unique concentration of
stupidity for itself.

~~~
ornornor
What was the deal? You pay 5,000, the owner gave you back your 5,000 and kept
the 15,000 as profit from door dash? The owner made a massive profit and the
shelter gets free food and it didn’t cost you anything?

~~~
JumpCrisscross
> _The owner made a massive profit and the shelter gets free food and it
> didn’t cost you anything?_

We’re in the midst of a pandemic. The restaurant stays afloat, nothing more.
The shelter got a donation, and I got promises of comped deliveries and
catering.

It cost me $5,000; it cost DoorDash over twenty thousand.

~~~
bko
This seems very unethical. The fact that you don't like Softbank or DoorDash
or the gig-economy or that you're sending pizza to homeless people is
irrelevant. The fact is you're exploiting a bug to personally benefit at the
expense of investors.

Why wouldn't you apply the same principals of ethical hacking, where you would
notify the party of the exploit?

~~~
jeroenhd
It's nog a bug, it's a feature. Doordash uses investment money to evaporate
competitors, take over the market and then raise prices for restaurant owners
once they gain control. It's a tried and proven concept.

Paying part of the meal is part of that strategy. They know full well that
large orders and large amounts of transactions cost them more money and
they're betting on nobody actually doing this. They're selling products below
the cost of production at this point, something that I would argue should not
be allowed in ethical capitalism. Investors know fully well what they're
investing in, and of not, they've either not kept their responsibility on
reading about the company they're investing in, or the company itself is
pulling massive investment fraud.

Play shit games, win shit prices. If they don't want to lose money like this,
maybe they should have a business strategy that isn't oriented about purposely
losing money to bankrupt competitors. They easily could've set a reasonable
limit of say $200 dollars to their cheaper transactions but they chose not to.

Would I go full ethical when finding exploits for an inherently unethical
company? Would I dutifully report flaws to companies selling "adult
supervision" apps used by controlling spouses? Would I give "bank phishing on
demand" websites a 90 day trial period? I don't think so. Making such software
is perfectly legal (in many jurisdictions) but is rarely ever ethical. Ethics
would need to come from two sides for me to consider responsible disclosure. I
have flooded several phishing databases with fake information, got some of
them over their resource limit and shut down as well, and I don't feel the
smallest bit of regret.

~~~
VHRanger
Just a note: it's not a tried and proven concept.

Predatory pricing hardly works in economic theory and is working disastrously
for a lot of the companies trying it (eg. Ubers financials)

~~~
blaser-waffle
Predatory Pricing absolutely works... when you have a working business model
and capital to back it up.

Walmart and McDonalds are masters of this approach.

Uber is a long-term play at disrupting cabs/transportation cartels and
incorporated self-driving cars into a non-literal roadmap. They're in it for
the long play, and even if they hemorrhage money for a while longer it may, in
fact, play out in their favor.

~~~
VHRanger
Walmart and McD don't do predatory pricing -- they just have lower prices
while being profitable.

Predatory pricing is intentionally setting loss-making prices to drive out
competition to then hike prices to profitable levels.

Notice this isn't what "ultra returns to scale" businesses are doing --
they're just profitably pricing low.

~~~
abroach
American Airlines famously killed upstart after upstart that attempted to fly
out of Dallas Love Field. They kept a lease on two gates, but left them unused
almost all of the time (AA generally flies out of the larger Dallas-Fort Worth
International Airport). Whenever any new company tried to start new service
out of Love field, American would open those two gates, match routes exactly
to the startup, and charge substantially less, clearly incurring a loss for
each plane flown. As soon as the new company was driven into bankruptcy, AA
would again shutter those gates, leaving them available to crush the next
company that tried to start at Love Field. See, e.g., Legend Airlines.

~~~
AnthonyMouse
Right, so then the startup should sell nonrefundable tickets several weeks in
advance. As soon as American starts flying those routes below cost, move your
own planes to a different route, book all your passengers with nonrefundable
tickets on the American flights and pocket the difference. As soon as they
stop, start flying those routes again.

There is presumably some regulatory burden preventing someone from doing this.
Maybe you can't move planes from one route to another so easily etc. But then
that's how the company does it. Without that method of forcing the new
competitor to incur unrecoverable costs, they can't do it.

It's theoretically possible to have a natural market barrier like that, but in
practice to be a barrier that large it's nearly always a regulatory compliance
issue. The law says you can't sign up customers on long-term contracts,
preventing new competitors from locking in customers at the current price
rather than the below-cost price. The law says an ISP has to serve the whole
city and not just one neighborhood, increasing the startup capital required by
a factor of a hundred. The law prohibits adversarial interoperability, so you
can't distribute your own apps unless you can manufacture your own phones.

Most monopolies don't come from natural causes.

~~~
DangitBobby
Can you imagine how furious people would be if they found out their airline
put them on their cheaper competitor's flights and kept the difference?
Rationality be damned, they'd be out for blood. I can hear the screaming
already. Good luck.

~~~
ryanlol
This happens every day.

~~~
DangitBobby
Really? How do I learn more about this?

~~~
ryanlol
Codeshare agreements, for example British Airways sells Vueling (budget
airline) flights under BA flight numbers.

------
inquiryaccount
This reminds me of a post I submitted a few weeks ago on HN.

A friend of mine works for a restaurant group in NYC and they like many they
have had to respond by offering delivery to folks in order to keep some
revenue flowing. He and I were chatting and he mentioned that lately, a large
majority of high value ($500+) orders were fraudulent with the fraudster
ordering things that can be resold such as high-value wine, liquor, etc that
isn't necessarily perishable. He says that the scams work like this:

1\. The order comes in via Caviar usually with a ridiculous amount of booze.
It is usually a courier delivery but he says looking back, some have been
picked up by 'customers'.

2\. There are some instances where the order gets canceled either by the
scammer within the 2 min grace period post ordering of from the actual
customer who had their account phished/received some sort of alert/and stopped
the transaction.

I am intrigued by this because there is obviously someone on the receiving end
that's ending up with a boatload of high-end booze and then offloading it
somehow while Caviar eats the dispute later on and still pays the restaurant
out.

Literally, thousands of dollars a week of fraudulent booze orders are being
fulfilled to people fraudsters using phished accounts with valid cc's. The
consumer eventually realizes the charge, disputes it, and gets their money
back leaving Caviar with the bill.

~~~
walrus01
I bet the person physically receiving the wine/goods is some gullible, naive
person who has been social engineered into thinking they're working for a
legit business.

It's like the 419 emails where they are trying to "recruit a remote working
employee in our finance department" where your job is actually to receive
fraudulent ACH wire transfers and send the money to some overseas
destinations, go to a bitcoin ATM and buy bitcoin to send to the scammer, etc.

If the scammers are reasonably intelligent and have put a degree of thought
into how to not get caught doing this, they'll introduce multiple layers of
abstraction between the physical delivery of $450 bottles of liquor, and the
point at which that booze is turned into (gift cards, bitcoin, ethereum, etc)
and ultimately in their hands. They're probably calculating on taking at least
a 20-35% haircut on the revenue before the somewhat-cleaned-up cryptocurrency
or gift cards makes it to them.

~~~
inquiryaccount
From what I can gather, it is a ring of people behind this operation likely
getting a commission for each 'drop' back at base

[https://www.google.com/maps/place/101+bowery+st/@40.7176021,...](https://www.google.com/maps/place/101+bowery+st/@40.7176021,-73.9952662,3a,75y,118.31h,90t/data=!3m4!1e1!3m2!1sN51QLh9RTLH_2mI8Vqqh5A!2e0!4m2!3m1!1s0x89c25988011d62a9:0x97fbd69389b47e3?sa=X&ved=2ahUKEwj1gc-
NybzpAhXzknIEHQx6DXEQxB0wAHoECAsQAg&cshid=1589776133008319)

~~~
jml7c5
Told the police about it? Someone would be eager to chase that case.

~~~
empath75
Cops aren’t ever eager to take on cases.

~~~
inquiryaccount
Yeah, they aren't interested in pursuing this. Phish on.

------
ChuckMcM
I love this story, especially about ordering dough pizzas.

It reminded me of this twitter thread:
[https://twitter.com/meslin/status/1225834920611848192?lang=e...](https://twitter.com/meslin/status/1225834920611848192?lang=en)

In which the author tries to order the Uline "box of boxes", a box of twenty-
five (25) 6" x 9" x 6" boxes, only to have Amazon deliver a 6" x 9" x 6" box
containing some random product. The collection product from Uline has the same
bar code as the box itself, so the pick up robot would scan the shelf for the
box, find something that SOME OTHER VENDOR had put into a 6x9x6 Uline box, and
pick that to satisfy the query.

Adding automation to a process that any human with visibility to the whole
process would say, "Wait, that can't be right." ends up in misbehavior.

~~~
joshvm
The automated system _should_ say "weight, that can't be right". Works fairly
reliably in supermarkets, especially if you allow a bigger margin of
uncertainty on sku weight. Or verify the volume/shape - or both, like
volumetric weight that shipping companies use. I'm guessing amazon has some
system to automatically assign boxes based on the dimensions of stuff that's
being picked.

~~~
hrktb
> Works fairly reliably in supermarkets

No it doesn’t.

Not just because they can be badly calibrated, but also because the range of
weight they have to deal with must make it hard to manage any sane range.

The only SCO I’ve seen doing a decent job at dealing with weight use a binary
check (“was there any product at all added to the to total weight of the
basket ?”) and they still miss products like lollipops or anything too light
to pass the range.

Sure much more reliable system could be built, especially at Amazon’s
engineering scale. But so far supermarkets are mediocre at best at this game.

~~~
Kiro
Works great in any supermarket I've been to with a self-scanning systems and
that's been the standard in my country for many years now.

~~~
mnd999
“Unexpected item in bagging a area” gets me every time.

~~~
Kiro
It used to be like that the first couple of years but the newer systems never
give me that and feel very accurate.

~~~
VBprogrammer
I used to pickup lunch from Tesco most days. Occasionally you'd find one item
that must have been weighed wrongly at the input stage. It would cause an
issue every time you checked out. Usually got fixed within a couple of days.

I wonder if they built in correlation of items which on a mis-weighed basket.

------
bransonf
Reading the title, I anticipated this was going to be something along the
lines of getting Domino's delivered for less than their delivery fee. (Side
note, does anyone actually order franchise pizza on an app? They all already
deliver for far less)

But this was far more interesting. The fact that Doordash scrapes prices, and
apparently doesn't verify... how does this happen?

I'm not familiar with the reimbursement model. I'm assuming the driver pays
with a credit card, and Doordash reimburses this amount. Regardless, there
will now be database entries for a customer paying $160 and Doordash
reimbursing $240.

What happens in a company that allows $80 to vanish like that? Unless this is
an incentive (I'm doubtful this was deliberate). Wouldn't one of the first
things you do is validate your financials? In which case, is the driver
getting screwed here? (They charge the customer $160, and reimburse the driver
for only that amount)

If not, this opens up a huge potential for fraud. There is a semi-popular
YouTube video where some young British folks set up a 'restaurant' in their
home kitchen and successfully list on a delivery app. They deliver several
orders (reimbursing the customer of course). If it's trivial to get listed,
and potentially with the wrong prices, then it's trivial to launder money this
way.

Set up a fake restaurant, deliver little/nothing to a known party, profit.
Now, maybe it would become obvious if you made the same orders or within the
same time frame. But again, trivial to generate randomness.

What protection do these companies actually have against fraud? By nature,
they're assuming trust, and this is exploitable.

~~~
9nGQluzmnq3M
> The fact that Doordash scrapes prices, and apparently doesn't verify... how
> does this happen?

It kind of happens by default if your goal is "growth at any cost".

The video you mention is likely this one, and it's actually even more extreme:
[https://www.youtube.com/watch?v=bqPARIKHbN8](https://www.youtube.com/watch?v=bqPARIKHbN8)

The fake restaurant in their garden shed, _which never took customers or
delivered any food_ , climbed up to #1 best restaurant in London (!) in
TripAdvisor's rankings, purely on the strength of fake reviews and fake photos
(artfully arranged closeups of bleach tablets etc). For kicks and video gold,
they did open for their last night, serving 1-pound microwave meals from the
supermarket.

~~~
333c
While that is a good video (and demonstrates manipulation of TripAdvisor), I'm
pretty sure the commenter means this one:
[https://www.youtube.com/watch?v=k47u9tduwb8](https://www.youtube.com/watch?v=k47u9tduwb8)

This video features (a) delivery and (b) reimbursement, both mentioned in the
original comment but not present in your video.

------
rootusrootus
After reading more about how these delivery companies function, we stopped
using Door Dash a few days ago. We found it very convenient during the
pandemic, but we like our local restaurants and we thought we were helping
them out by ordering delivery pretty often. So now we just order it as take-
out and then we go pick it up ourselves. Screw Door Dash.

~~~
slfnflctd
We came to the same conclusion a couple weeks ago. As a bonus, you're
eliminating a person/environment from the loop (the delivery driver & their
car), thereby reducing your Covid-19 attack surface.

Edit: I have also both read about & seen firsthand food delivery drivers with
someone else in the car. It's almost certainly someone from the same
household, but still, that's potentially yet another unknown, potentially
untraceable person in the loop.

~~~
giarc
I've had amazon deliveries where it appears the whole family was in the car.
Kind of heart breaking to think that a family of 4 has to drive around so I
can get my AA batteries same day. We need drone deliveries.

~~~
rootusrootus
Can I choose option C? :). I don't want drones buzzing around my neighborhood.
I am 100% willing to pay for _professional_ delivery drivers.

To be fair, I guess, the days of random people driving junky old compact
sedans filled to the roof with Amazon packages seems to be gone in my area.
All the Amazon deliveries are now done by a guy driving a large Sprinter van
painted glossy gray with Prime written on the side.

~~~
giarc
I'm in Canada so we don't yet have the Amazon branded delivery drivers. In my
city, many Amazon packages are delivered by a company called Intelcom. It's
people driving around their own cars, delivering packages.

------
kevindong
Very important note (near the bottom of the post) on why Doordash did what
they did:

> Note 1: We found out afterward that was all the result of a “demand test” by
> Doordash. They have a test period where they scrape the restaurant’s website
> and don’t charge any fees to anyone, so they can ideally go to the
> restaurant with positive order data to then get the restaurant signed onto
> the platform.

~~~
bb611
It doesn't fully explain why they priced a $24 pizza at $16. I wouldn't be
surprised if they're subsidizing purchases, but just skipping fees doesn't
explain that.

~~~
kabacha
Web-scraping is hard man, especially with mom-and-pop restaurant websites that
are often exported straight from microsoft word or some ancient "platform"
that got reconfigured 20 times over.

As article pointed out it picked up full-toppings pizza as plain cheese.

~~~
bvm
Surely it's cheaper to just pay someone to do data entry at that point.

~~~
free_rms
Cheaper, less sexy, and doesn't justify the jobs of several dozen engineers, a
few managers and a director.

If you're the director, which would you go for?

------
cletus
Wow, that was great. And honestly good on them for profit-taking on this
arbitrage.

The author likes to pin this on zero-interest rates ("ZIRP") and that
certainly explains why the system is awash with cash but I'd say he's missing
a key point here.

When I moved to NYC (~10 years ago) I didn't order delivery at all. Honestly
it's a huge pain. To call someone up and try and communicate an order to
someone who probably doesn't have the best grasp of English (no offense
intended here). I just couldn't be bothered.

What changed was Seamless came along and suddenly I could order food and not
have to talk to anyone. It was (and is) amazing. In NYC at least the
restaurants are still handling deliveries (with Seamless anyway) so there's
still that control. Seamless/Grubhub seem to charge exorbitant fees but that's
another issue.

As an aside, this is a key factor in my use for Uber/Lyft: the fact that the
process is _seamless_ (pardon the pun). You order a car without talking to
anyone, it arrives and it drops you off. There's no awkward payment step. No
dealing with a machine that's broken. No card skimming. It just reduces
friction.

This is the promise of food delivery platforms: they benefit the consumer in
terms of discovery, convenience and the seamlessness of ordering and payment.
You might point out that people get cold pizza because UberEats drivers don't
have the bag and you're right. But that's not an unsolvable problem.

Oh and this is the first I'd heard of Grubhub replacing Yelp phone numbers
with their own call center. More evidence that Yelp is a cess pool that needs
to be flushed. It's sad Grubhub is engaging in this. We have enough rent-
seekers. Thanks anyway.

~~~
Barrin92
I honestly don't know if I'm living in a different world than everyone else
but I've been ordering food and taking cabs all my life and I've never had to
deal with any friction. Like, you call the pizzeria, tell them what you want
and then some college student delivers your stuff, and if you order for more
than 20 bucks it doesn't cost you anything. Not even being facetious, but what
problem do these apps solve?

I also don't know how "not having to talk to someone" is a perk.

~~~
MattGaiser
> I also don't know how "not having to talk to someone" is a perk.

For us introverts it is.

~~~
yedava
It is indeed a perk for an introvert like me, but having to chose between
empathy for another human and my discomfort, I prefer the former.

Yes, it will cause me anxiety to talk to someone, and go pickup an order. But
if I was to avoid that and use an app, I'd be dipping my hand into their
pockets and stealing money for a middleman. So I end up calling my preferred
restaurant and picking it up myself.

~~~
lentil_soup
I also struggle with phone calls (or even ordering in house). Apart from the
empathy side that you mention my reasoning is also that confronting the
anxiety and getting used to it is the only way to manage it.

I rather face the discomfort from time to time and learn to handle it than
being paralised in situations when there's no other way and you can't avoid
it.

------
imgabe
Just some back-of-the-napkin math if you wanted to do this "right".

Let's say you hire drivers as employees and pay them $15/hr plus tips and
reimburse them for mileage. You charge a $4.99 delivery fee. Drivers work set
shifts and are paid hourly whether they are making deliveries or not.

That means each driver needs to be making at least 4 deliveries an hour or
you're losing money. That's not even really counting for mileage or any other
benefits like health insurance or retirement (not that jobs like this usually
provide this, but people seem to think that they should).

When I lived in DC, driving _anywhere_ could take at least 15 minutes. Getting
4 different trips from a restaurant to somewhere reliably every hour would be
difficult. Obviously, drivers can pick up multiple orders and take them in one
round trip, but you're at the mercy of what orders happen to come in and where
they happen to be located. It seems like it would be very hard to make that
sustainable.

Of course, Domino's and lots of other places do it, but they probably aren't
paying $15/hour and they also have one central location and more predictable
demand. It's more feasible if drivers always go back to one central hub rather
than having to get orders from random different restaurants all over the city.

~~~
MattGaiser
> Domino's and lots of other places do it, but they probably aren't paying
> $15/hour and they also have one central location and more predictable
> demand.

One thing to note about Dominos is that people pay at the door, so they would
need to look the delivery guy in the face as they stiff him on the tip. Not
required for the delivery apps and fewer people tip there.Because people tip,
you can pay lower wages.

I had a relative who worked as a Chinese food delivery guy for a while and he
did it exclusively for tips. The restaurant did not pay him at all.

~~~
jon-wood
In the UK tipping delivery drivers is basically unheard of, except maybe if
they're delivering on Christmas Day or something. Despite that people I know
who've worked as drivers for Dominos say its one of the best unskilled jobs
available, the pay is good, it comes with some benefits if you're working
enough hours, and they generally take care of their employees.

~~~
esotericn
> In the UK tipping delivery drivers is basically unheard of

For you it might be.

I tip delivery drivers and I received tips when I worked. Tips made up >20% of
my pay.

Rich people generally would not tip, poor people would.

~~~
wdb
Did you pay income tax over those tips?

~~~
esotericn
Are HMRC paying you for this comment? :)

------
alteria
This is absurd. Can someone explain to me why DoorDash exists? They're #1 in
share, but I get the impression that they basically bought their spot.

Grubhub has been operating in the space forever, is public, and generally had
been profitable until VCs came to town. How is DoorDash doing anything than
Grubhub? Wouldn't this capital do better in other investments?

From the outside it seems like they've duped investors into burning hundreds
of millions of dollars to hopefully build a monopoly in a structurally iffy
market.

~~~
MattGaiser
DoorDash is winning in terms of market share for one thing.

[https://www.cnbc.com/2020/01/17/doordash-took-the-lead-in-
th...](https://www.cnbc.com/2020/01/17/doordash-took-the-lead-in-the-food-
delivery-wars-in-2019.html)

I bet a big thing for DoorDash is DashPass. That would lead to people ordering
food for anything as the price is basically the same as in restaurant then.

~~~
adrr
I have Dashpass free from my credit card. Its not the same as ordering from
directly from restaurant as Doordash marks up the prices 10% to 25%. I always
thought Doordash was a terrible deal without it, you're paying marked up
prices, delivery fee and a tip. Doordash is winning because they have the
widest selection of restaurants since they are using their own drivers
compared to Grubhub. Not sure why Postmates and UberEats failed to capture
more market share since they offer the same service.

------
craigc
This is the sad state of VC funding in this day and age.

I can’t help but wonder if movie theaters could have exploited a similar
loophole with MoviePass before they went bankrupt. Something like this:

1\. Movie theaters buy up MoviePass subscriptions

2\. They use those subscriptions to pick different movies to see every day at
their location

If they picked 30 movies a month that would be approximately $450 a month in
revenue (at $15/ticket), $440 of which would have been pure profit.

~~~
slg
Theaters still have to report tickets sold and kick back roughly 50% of the
ticket price, so you would need to cut that revenue number in half. Also I
don't remember the exact timeline for Moviepass's various restrictions, but
there was a limit on the upside at various times due to policies like
preventing users from watching movies multiple times (which would generally
cap the max tickets below 30 since most theaters don't get 30 new movies a
month), limits on how many tickets can be purchased for a single theater that
would lock users out from using that theater for the rest of the day, and
users being suspended for "fraud" that was often reported to be just heavy
use.

------
victor106
> The owner insisted the driver take the pizza in a heated bag so the customer
> didn’t get cold pizza, but leave an ID so the driver would be compelled to
> return the bag.

>Doordash was causing him real problems. The most common was, Doordash
delivery drivers didn't have the proper bags for pizza so it inevitably would
arrive cold

What this means is that the restaurants really care about their customers. The
delivery really really don't care.

I spoke with a few restaurant owners in NYC and they all universally hate the
delivery companies. The restaurants are charged anywhere between 30% - 40%
which is a ridiculous amount.

There's another company in India called Swiggy. I used to travel to India and
would frequent a few bars in Bangalore and Hyderabad. All of them absolutely
hated them for the same reason.

------
yftsui
This reminds me of the SliceLine episode of Silicon Valley Season 5.
[https://www.youtube.com/watch?v=Txl90NEl92U](https://www.youtube.com/watch?v=Txl90NEl92U)

Its even better, DoorDash is doing this without even switching boxes.

~~~
tcarn
So true. So many of these apps need to do some basic math and not "try and
make it up with volume" if their gross margin is negative...

------
ngngngng
I don't understand why doordash, uber eats, deliveroo, and similar business
are starting to exist. Restaurants have been running successful delivery
operations independently for ages. And there are many software offerings to
help businesses get set up with delivering food.

Why do we need a centralized on? Is it just the benefit of being able to
browse in one app/website everything available for be delivered to you?

~~~
peteretep
I've spent many thousands of dollars on app-delivered food over the last few
years (Foodpanda, Uber Eats, Grab Food, Lineman, and Deliveroo). I use the
apps because:

\- GPS tracking of the driver, and helpful notifications

\- Discovery of new restaurants

\- Detailed menu (and occasionally useful suggestions of menu items)

\- I don't have to create a new account or fuck around with giving some
restaurant my credit card

\- I don't have to speak to a human

I'm hungry right now. I can pick up my phone, and in 30s, without needing to
do anything other than click on the food I want to eat, in 25m I will have a
human with food at my building's lobby.

~~~
eitally
That last bit only applies in dense downtowns. In the Bay Area, if I'm hungry
_right now_ and that happens to be roughly dinner time, I'm waiting 50-70
minutes for a food delivery.

~~~
peteretep
My guess is that your app of choice can show you estimated delivery times for
different restaurants based on distance and avg preparation, adding yet
another reason for using

~~~
eitally
Yes. I'm just saying that the majority of restaurants in the greater bay area
will have lengthy delivery times during weekday dinner hours... the exception
being if you order from a place physically close to your delivery point.

------
dvduval
Lose a few 100 million today for a monopoly next year. I make the assumption
here that these delivery services are intent on dominating the search results
so that independent restaurants are not able to compete. They are forced into
using the services, or rather having a large majority of other orders coming
from these services.

~~~
mlthoughts2018
The problem is all these businesses (ride share, food delivery), have
extremely low margins and the tech to spin up a competitor is extremely cheap
and commodity.

Thus the “monopoly” you allegedly get later is deeply unsustainable at the
profit level and scale required to recoup losses on any timescale that would
work for investors, assuming you can even hold onto it in the face of constant
reemergence of competitors.

This is what Naked Capitalism has been point out about Uber for years and
years. Uber just keeps changing the story. First rideshare itself would be
profitable. Then logistics and trucking would be a sexy new profitable area.
Then self-driving cars, then food delivery.

It’s frankly just a Ponzi scheme at this point that was foisted onto unwitting
retirement plan investors.

GrubHub / DoorDash / etc., are just more of the same.

You can’t take businesses like taxis or food delivery, with well understood
economics, round trip costs, density requirements, low margins, etc., and just
slap an app on top and make them somehow different than they really are.

Artificially increasing the supply of something that’s fundamentally not
sustainable at that price just will not work.

~~~
trixie_
It works great. All those management middle men of thousands of delivery and
taxi companies have been replaced with software. Razor thin margins are enough
to keep the servers running and a small team of developers managing it - for
the entire planet.

It's difficult for any company to abuse their position as they're easily
repalcable. So the margins will get lower, and more of the money paid by the
customer will go directly to the supplier. Efficiency incarnate.

~~~
almost_usual
Uber is laying off 800 engineers tomorrow, they have thousands. All of them
making salaries probably in the range of 250K-500k. Not really a small team of
developers.

~~~
trixie_
Numbers are relative? Compared to the management overhead of all the taxi
companies in the world it is orders of magnitude smaller. And after today it
is 800 people smaller on top of that. So yes, very small, very efficient.

------
dangoldin
This quote summarizes it all for me: "Amazon just bailed on restaurant
delivery in the U.S."

If amazon, a "real" business with a reputation built on ruthlessly cutting
margin can't get it to work why would anyone else?

~~~
thewebcount
I mean, think about it – Amazon can't run it like their current delivery
service. They can't mark it as delivered, but then not deliver it until the
next day. They can't drive up to the curb, throw it over your fence and then
drive off. They can't claim to have delivered it but just not bothered. They
can't say they're giving you a pizza from Pizza Hut and then actually give you
a pizza some guy made in his basement. In other words, they can't run it like
their current business.

~~~
dangoldin
Yea for sure. At the same time they did acquire Whole Foods and are doing food
delivery through prime. They do own the warehouses here rather than acting as
couriers but I would not be surprised if they just found out the economics
(especially given their strengths) to just not work out for them.

------
dvduval
The restaurants need to work through their own trade organization where they
band together and push out the delivery businesses that are costing them
money, and then allow delivery companies to bid for their business.

~~~
spurdoman77
In the end the customer needs some single easy interface where to order food
from. It is kind of difficult to see how this could work in a way where
restaurants would dictate how customers prefer to order.

~~~
dannyw
Why doesn't Google build this as an extension of Google Maps?

Charge restaurants no fee for the platform, if they provide their own drivers.
Charge restaurants money through Google Ads to promote their restaurants for
higher results.

In a few years, get Waymo's driverless cars on the game.

~~~
icebraining
Google is already facing antitrust lawsuits from the EU, DOJ and US states,
and you want them to add more fuel to the fire?

------
zeckalpha
In another form of arbitrage with “substitute goods”, we’ve noticed
restaurants with completely different menus on delivery sites than directly.
We ordered anyway and the packaging was totally different. Someone is
fulfilling orders for a fancier restaurant with generic food. I ended up
throwing it out because I wasn’t comfortable with it.

------
three14
The real arbitrage opportunity is for a competitor to DoorDash to place orders
through DoorDash, and pay the delivery person a small fee plus let the
delivery person collect the DoorDash fee. You could scale this up to huge
numbers.

Curious if doing so would survive a lawsuit. On the one hand, DoorDash could
argue that it's unfair competition, but only by admitting that their
deliveries are priced too low, which itself is unfair competition. I don't
know how unfair competition is regulated.

~~~
yoaviram
Or serve a different version of the pizza place's website to the Doordash
scraper with lower prices?

~~~
deadly_syn
Wouldn't be too hard to do, use a PNG for your human menu and embed a "door
dash" priced menu below.

------
neap24
I've noticed the opposite phenomenon at a popular restaurant in Austin. The
menu through DoorDash is priced higher than the normal price. Curiously, the
restaurant's own, in-house delivery system is the same price as dining in.
This is when I stopped using DoorDash...when I discovered that using the
restaurant's own delivery system is just as easy and maybe cheaper.

~~~
fokinsean
Which restaurant? (I live in Austin)

~~~
neap24
Tarka

------
5revive
it will be interesting to see the impact of SoftBank withdrawing on
consumption patterns of city-dwelling professionals. So much of their daily
life is subsidized courtesy of Son

------
mietek
_> How did we get to a place where billions of dollars are exchanged in
millions of business transactions but there are no winners?_

“(…) What sphinx of cement and aluminum bashed open their skulls and ate up
their brains and imagination?

Moloch! Solitude! Filth! Ugliness! Ashcans and unobtainable dollars! Children
screaming under the stairways! Boys sobbing in armies! Old men weeping in the
parks! (…)”

[https://www.poetryfoundation.org/poems/49303/howl](https://www.poetryfoundation.org/poems/49303/howl)

------
x3blah
"Which brings us to the question - what is the point of all this? These
platforms are all losing money. Just think of all the meetings and lines of
code and phone calls to make all of these nefarious things happen which just
continue to bleed money. Why go through all this trouble?

How did we get to a place where billions of dollars are exchanged in millions
of business transactions but there are no winners? My co-host Can and my
restaurant friend both defaulted to the notion "delivery is a shitty margin
business" when discussing this post.

You have insanely large pools of capital creating an incredibly inefficient
money-losing business model.

It's used to subsidize an untenable customer expectation.

Third-party delivery platforms, as they've been built, just seem like the
wrong model, but instead of testing, failing, and evolving, they've been
subsidized into market dominance.

The more I learn about food delivery platforms, as they exist today, I wonder
if we've managed to watch an entire industry evolve artificially and
incorrectly."

A contrary view, from 4 days ago, arguing third party food delivery market is
not created by VC, the startups are not over-funded and that they are
delivering splendid returns to investors.

[https://news.ycombinator.com/item?id=23171915](https://news.ycombinator.com/item?id=23171915)

------
bambax
> _Now suddenly each trade would net $75 in riskless profit ⇒ $240 from
> Doordash minus ($160 in costs + $5 in boxes)._

If you do this over and over, obviously you can use the same dough and boxes,
so costs are just what you pay Doordash.

------
sherlock_h
What if you strip out the entire 'aggregation' and customer facing side of
DoorDash/GrubHub/UberEats and rebuild them as complete back-end logistics
services to the restaurants? You charge lower percentage of orders or just a
monthly fee to help procure and pay the labor and route deliveries. Seems like
that's the actual challenge for restaurants

~~~
Consultant32452
Chipotle has white labeled DoorDash for delivery in my area. If I open the
Chipotle app and make a delivery order, the "track your order" screen says
it's "Powered by DoorDash."

~~~
chrisseaton
> Chipotle has white labeled DoorDash ... it's "Powered by DoorDash."

Disclosing who’s powering it is the _opposite_ of white labelling.

------
ed312
Do businesses have any recourse here? E.g. for the pizza situation - can a
business ban DoorDash and its ilk?

~~~
throwaway_dflka
It's an interesting question. I suspect there's some trademark arguments to be
made regarding confusion as to who is providing the product and service and
whose failures any mistakes reflect. That kind of attribution, and the product
quality it promotes, is one of the central purposes of trademark law. But
there's also the first sale doctrine--that after you sell your physical
product, people can do with it as they please, including resell. I suspect it
comes down to how clear Doordash makes it that the restaurant is not involved
in the service, but I'm not an expert in these areas, and this is obviously
not legal advice.

~~~
xkcd-sucks
All the regulation around food and beverage sales stands to the contrary -
Normal people can't resell liquor, nor resell takeout food from a licensed
restaurant.

Relatedly, it's surprising that delivery times aren't monitored because of
(totally appropriate!) food safety laws on holding food at proper temperature

~~~
vinayan3
> Normal people can't resell liquor, nor resell takeout food from a licensed
> restaurant

That's actually good and a bit surprising. I find it quite disingenuous that
DoorDash lists restaurants that haven't agreed to do take-out or delivery. Not
only that by having a call center call into a restaurant it's just making the
experience more expensive.

There is one restaurant in SF that was going to push for legal action.
[https://www.eater.com/2020/1/29/21113416/grubhub-seamless-
ki...](https://www.eater.com/2020/1/29/21113416/grubhub-seamless-kin-khao-
online-delivery-mistake-doordash)

------
lambentor
> the only viable endgame is a promise of monopoly concentration and increased
> prices

This is it! I've been involved with Foodpanda and Delivery Hero. The name of
the game is, indeed, becoming the #1 player in the market. The tool of the
game was M&A. That's what you see everywhere with Delivery Hero, Takeaway
Group, Just Eat trading positions across the world. They are effectively
cutting and slicing the world into countries and regions where each of them is
#1 and the others don't compete. Such "collusion" creates incredibly
profitable markets, as the #1 doesn't need to share 30% of top-line with
Facebook and Google, can charge a 15% take rate to restaurants AND
additionally, a delivery fee to consumers.

------
simias
>I knew Doordash scraped restaurant websites. After we discussed it more, it
was clear that the way his menu was set up on his website, Doordash had
mistakenly taken the price for a plain cheese pizza and applied it to a
'specialty' pizza with a bunch of toppings.

If that's really what happened (sounds plausible) that means that you should
be able to trick DD even more by designing a website specifically in order to
confuse the scraper. Have some cheap dish listed at $50 but in a way that
would be scrapped as $5 or something. As long as a human would have no issue
parsing the menu and understanding the actual price I don't really see how you
could get into trouble, it's DD's fault for having crappy parsers.

~~~
bootlooped
I'm not sure I would call a scraper crappy if it was fooled by a site
deliberately designed to fool it. It would be like calling somebody's vision
crappy if they were fooled by an optical illusion.

Scraping can be an adversarial exercise, but not typically in that manner.

------
balls187
Keep reading the level of skullduggery these companies go through and keep
saying to yourself "Tech is a meritocracy."

Yeesh.

~~~
MattGaiser
Merit for businesses is defined by consumer acceptance and consumers love
these apps.

~~~
_bxg1
It's because the consumer experience is so subsidized. Consumers would also
love an app that sends them $1.10 for every $1.00 they spend in it.

------
_bxg1
This whole sphere of economic activity is a gigantic farce. It would be
hilarious if it weren't so pestilent. The only upshot I can see is that it
feels like people are finally catching on to it.

------
overthemoon
>> Uber Eats is Uber's "most profitable division” . Uber Eats lost $461
million in Q4 2019 off of revenue of $734 million. Sometimes I need to write
this out to remind myself. Uber Eats spent $1.2 billion to make $734 million.
In one quarter.

These might be stupid questions, but... can this go on forever? No, right? Is
there precedent for this? How long of a horizon do companies like this expect
to be a money toilet? What happens to everyone else if companies like this
collapse? Why hasn't it happened yet?

~~~
gvb
The foundation is immense "VC" funds that are throwing money at (often
"unicorn") businesses that are using the money to grow their currently
unprofitable businesses. The premise is that, once they are big enough to
drive all the competing businesses out of business, they will be able to
transition to being profitable.

The poster child of these "VC" funds is Softbank.

The foundation is crumbling. [https://www.cnn.com/2020/05/18/tech/softbank-
earnings-intl-h...](https://www.cnn.com/2020/05/18/tech/softbank-earnings-
intl-hnk/index.html)

When these companies collapse, the investment funding them will have to write
down the losses the "unicorns" have built up, and there will be a lot of
investors that will be sharing in that hurt.

------
saos
> Amazon just bailed on restaurant delivery in the U.S.

Yeah and Amazon just plugged £500m into Deliveroo in the UK. They are going
for UK food delivery market and potentially Europe with that investment.
Deliveroo is pretty amazing.

1\. I can track my driver in real-time 2\. Communicate with drivers via
Whatsapp 3\. Great range of resturants 4\. Super convenient. Order comes
usually within 30 minutes

~~~
TulliusCicero
Are they? They were in Munich but then pulled out. Looks like only Lieferando
still exists here, as far as I can tell.

~~~
saos
[https://uk.deliveroo.news/news/amazon-leads-
series-g.html](https://uk.deliveroo.news/news/amazon-leads-series-g.html)

But it seems there has been some issues getting the funding past the CMA –
[https://www.gov.uk/cma-cases/amazon-deliveroo-merger-
inquiry](https://www.gov.uk/cma-cases/amazon-deliveroo-merger-inquiry)

I believe you're correct. Deliveroo did pull out of Germany.

------
exacube
I'm curious to hear how restaurant delivery services are meant to make profit;
is it really through service fees (or a monthly subscription model), and tips?

Cost per meal seems way too high for people to use it often. Maybe it make
economical sense for larger party orders, but how often do those kinds of
orders happen during considering the COVID situation?

~~~
MattGaiser
I assume it is the 30% they take from the restaurant.

~~~
dannyw
30-40% from restaurant + up to 35% in promotional fees from restaurant +
delivery fees + service fees from the customer.

~~~
MattGaiser
The promotional fees are on top of the 30-40% for the order?

~~~
dannyw
Yep - this is optional though, it's essentially an ad service.

------
roystonvassey
Interesting. I always suspected this to be true but not the extent, especially
the overall profits generated by food delivery cos. For e.g. one of India’s
largest delivery co reported a loss that was double the revenue! [1]

The other way to look at this is to think of it as a global capital transfer
mechanism, from the super rich to the “real” economy. Sure, it is not
sustainable in the long run but while it lasts there is significant transfer
of capital which appears difficult to otherwise do, thanks to resistance to
capital taxes. I really do not know what to make of the incentives for fraud
though.

1 - [https://yourstory.com/2019/12/foodtech-startup-swiggy-
loss-r...](https://yourstory.com/2019/12/foodtech-startup-swiggy-loss-revenue-
ilfs-financials)

------
xwdv
Initially I thought this may have gone the other way, setup a business with no
physical location, get on Doordash, and when you get orders you place orders
at other restaurants not on the platform, then pick up and deliver their food,
while charging some kind of markup on their prices.

------
blackrock
Is there really a monopoly play here for food delivery?

Granted, DoorDash can possibly be used for other kinds of delivery, like
medicine and groceries.

It seems the cost of labor and transportation is too high to make it feasible.

But the actual play, might be robotic. To first take over the manual market,
and then, conduct research into automated delivery services, like aerial drone
delivery, or robotic dog delivery.

Once that technology is viable, then phase out the human delivery people, and
replace them all with robots.

I actually never thought something like this would ever be economically
viable. And then one day, a pandemic hit the entire world.

------
inquiryaccount
Oh, one other interesting thing I've heard happens regularly. Couriers have
multiple cellular devices. The second account usually get batched orders from
the same restaurant they are already at which leads to a host of problems for
the customer and restaurant. This leads to the order that was ready first to
just sit and die in the courier bag while they work to maximize their
earnings. Couriers sometimes leave before the second-order is ready and return
well AFTER it's been ready to retrieve it because they are out and about
delivering other orders.

~~~
JMTQp8lwXL
With location services, should be simple to detect this occurring. The apps
could do something about it, if they wanted.

------
raverbashing
I don't see why it's hard.

Probably because Grubhub and Doordash are approaching this with the "holistic
mindset" of a "visionary" mind like the WeWorks founders. Hence we get
behaviour like this which is probably illegal in multiple ways.

Provide your work at a fixed price per order. Or you might take a
(transparent, explicit, of those who actually _signed up for the service_ )
commission, fair enough.

Providing a good service is hard on itself, but it won't distract you from all
the other crap and won't alienate the people that actually make your service
work.

------
kyleblarson
My initial response to this headline was anger as I assumed that the arb would
inevitably screw over the small business owner. That anger quickly turned to
glee upon reading the first couple of paragraphs!

------
azinman2
Isn’t this fraud? What’s unclear to me is if it’s illegal, or just unethical.

------
jaboutboul
Honestly at times it seems like all these Uber for this or that, DoorDash and
whatever other logistical services were created with the premise of just
keeping people busy and making them feel like they have a job (one that often
costs them money to work at).

Once upon a time you started something and hoped to figure out how to scale
and find product/market fit. These days with the cloud it’s become trivial to
scale almost anything that’s not building cars or spaceships.

All these other BS startups have no hope for profit and no end game in sight.
It’s kind of pathetic.

~~~
MattGaiser
> Honestly at times it seems like all these Uber for this or that, DoorDash
> and whatever other logistical services were created with the premise of just
> keeping people busy and making them feel like they have a job (one that
> often costs them money to work at).

Are you referring to customers or restaurants or drivers?

~~~
jaboutboul
I’m referring mostly to drivers, but programmers and basically everyone else
in the chain as well.

Let’s throw a stupid amount of (not our own) money and manpower at programming
a solution to a well defined problem and then grab a bunch of low wage workers
and milk them. We will keep everyone, engineers, drivers, restaurants busy all
the time to make it seem like we are making progress but in reality we are
just burning time, money, oil and the last mile workers to the ground.

With all this money being thrown around you would think they would be able to
engineer a solution wherein instead of committing identity theft (which is
essentially what the author describes) and exploiting workers, they are
actually solving the problem in an honest way which also provides an equitable
wage.

Enough with the unethical bullshit. If you have to pose as the business to
“help” a business all while exploiting cheap labor you aren’t solving a
problem and you don’t have a right to exist, no matter how much money you got
from SoftBank.

------
karagenit
One thing I'll point out is that we don't actually know if delivery services
(for restaurants such as pizza places that the article mentions) are
profitable period. It's entirely possible that businesses offer delivery at a
loss (i.e. cost of delivery is more than the delivery fee, so it hurts their
overall profit margin) because they expect the increase in revenue due to
added convenience for customers to offset the lower profit margin.

~~~
MattGaiser
Companies like Dominos are mostly delivery, so I would imagine they must
profit.

------
burroisolator
How does the author know it isn't the driver that will get the short end of
the stick here? To put it differently, what would happen if the restaurant
mistakenly charged the driver who is picking up the food more than listed and
then the driver pays that mistaken amount with Doordash's credit card? Will
they be penalized/fired once Doordash discovers the accounting error?

~~~
grumple
It would be illegal to penalize the drivers, at least financially. I doubt the
driver is given the choice of not buying the food based on price. If Doordash
did have some way to penalize them, they could just bounce over to Grubhub or
others. Doordash is advertising food at a given price - they must sell it at
that price, regardless of price of purchase.

------
gandutraveler
I remember the time when I self referred the shit out of doordash, caviar few
years back only to stop because I started feeling bad about it.

------
olalonde
I'm surprised a guy in finance can't see the potential efficiency gains and
economies of scale a delivery company could have over all restaurants having
to operate their own delivery service. I don't know about DoorDash
specifically (not in the US) but it seems obvious to me that those services
are here to stay and they can be run profitably.

------
novalis78
Reminds me of the discussion in ‘The Bitcoin Standard’ about zombie industries
directly or indirectly build on top of unsound monetary policies. One could
argue this capital burning colossi exist by virtue of access to a populations
purchasing power / wealth. Instead of multiplying productivity and increasing
living standards they stall progress.

------
ww520
Perverse incentive drives odd behaviors. People would have shipped bricks to
themselves if the arbitrage warrants it.

------
ram1981
The part of the article that shocked me was the Google hijacking. It seems
Google is allowing it as a policy. Why screw these poor restaurants?

[https://support.google.com/business/answer/6218037](https://support.google.com/business/answer/6218037)

------
noad
This is so asburd it feels like a story in bad movie. We have pushed finance &
capital so far into the realm of fiction that it doesn't really make sense
anymore.

Artificial growth for the sake of artificial growth, just so you can get to
your exit and leave someone else holding the bag. Ponzi schemes at massive
scale.

How did the startup/VC world become so entangled in all this bullshit
capitalism?

~~~
Spooky23
Same way they did in the 90s, lots and lots of dumb money.

My son and i have a tradition when my wife attends a nonprofit board meeting
every other month. She leaves and we order some five guys on doordash while we
play a PlayStation game. I use a new email every time and usually get free
delivery and a coupon. Doordash loses, Five Guys loses, and we get some dude
to deliver a burger.

~~~
spurdoman77
Though according to the article only doordash loses here, not fove guys.
Doordash pays the difference netween menu and paid price.

------
econcon
Where I live in India, nearly 90% of the restaurants and hotels get their food
from one place at rock bottom price.

And the restaurant/hotel the customer is dealing is responsible for arranging
delivery and serving.

------
et2o
Something just doesn’t make sense with this story. Ok, it’s possible doordash
has accidentally mispriced a pizza. But why would they misprice a pizza but
then pay the correct price to the restaurant?

~~~
icebraining
Because the person calling the restaurant to place the order gets the correct
price. Why isn't it detected and fixed then? Probably a mix of bureaucracy and
undermotivated employees; the call center people don't really know or care if
DD is making a loss on purpose or not, even if they know how much the final
customer actually paid.

------
monkeydust
Nice - this made BBC news!
[https://www.bbc.co.uk/news/technology-52724062](https://www.bbc.co.uk/news/technology-52724062)

------
crazygringo
> _That’s what is so odd to me about third-party delivery platforms. The
> business of food delivery clearly is not intrinsically a loser. Domino’s
> figured it out. Every Chinese restaurant in New York City seemed to have it
> figured out long before any platform came along. My friend is figuring it
> out._

Domino's and Chinese are _very_ specific high-margin businesses. Basically the
_highest_ -margin restaurant businesses.

That doesn't, in _any_ way, prove that food delivery in general is _not_ a
loser. In fact, if you have to specifically pick the two highest-margin
examples as your examples... maybe the industry in general _isn 't_ all that
sustainable.

------
spv
It's kind of hard to imagine how DoorDash execs are going to explain to those
investors who find this on HN / elsewhere and ask them what the eff is going
on ?

------
akeck
Since at a high level this seems like mis-assigning VC funds, could someone
who does this arbitrage eventually be sued by Softbank to recover VC funds?

------
OwlsParlay
I don't get the opening story. If his restaurants weren't delivering, who was
Doordash picking up from? Did they just get doggy-bags to go?

~~~
rhodysurf
yes

------
abrookewood
There's an episode of Silicon Valley where Pied Piper bankrupt an unrelated
start-up using this method so that they can hire their developers.

~~~
tempestn
Yep, this is the real world Sliceline.

------
lonelappde
Saying that delivery can work for most food in most places just because dirt
cheap pizza and super dense NYC can do it, strikes me quite naive.

------
blackboxlogic
Sounds like the driver is the loose end. I wonder if the author considered
becoming a Doordash driver just for the arbitrage transactions.

------
nelaboras
so they have two possible endgames:

1) find a sucker (aka retail investors) that buy a loss-making stock

2) become a monopoly and squeeze everyone to get higher margins (kind of how
booking.com pushes hotels to increase their standard prices so that booking
can offer a discount; which you also get if you call the hotel itself).

------
bvandewalle
I said this in another post about Grubhub but similarly to this article I
really don't get it. Those apps are all 25%+ expensive than ordering take out
directly with the restaurant, they screw the restaurants and all those
delivery companies lose millions.

Did everyone really become THAT lazy that driving 10 minutes to get your meal
is that much trouble?

~~~
perseusmandate
Meal delivery doesn't just exist because people are lazy. It has been around a
long time via the much more inefficient process of calling a restaurant that
you already knew about, having someone spend time with you on the phone
getting your order and credit card # and then dispatching a delivery person
they employed directly to deliver the order to you.

~~~
rightbyte
My experience is that calling for pizza is faster and easier than using an
app.

------
salimmadjd
Some background -

In my past life I started Crazymenu.com The idea initially started as a
central place to host all the restaurant menus with the idea of eventually
expanding it to SAAS tech layer for everything restaurant related. The idea
ultimately pivoted into google maps for restaurant menus. Meaning companies
would just pay me a service fee to incorporate these menus into their services
(ordering food, review sites, restaurant apps, etc.)

I self-funded the idea and after my first beta launch (2006, I believe) I was
pitching an angle investor (Mr. X) who years later became an early investor in
Doordash.

Right away, Mr. X said why not go into online food ordering business and then
may be do delivery, etc. I never liked the idea of dealing with all the
transaction headaches and told him I wasn't sure about the idea and dealing
with so many fragmented restaurant softwares. From what I could gather
attending a few National Restaurant Association events in Chicago and speaking
with lots of restaurant owners, I noticed two categories. Very small mom and
pop operations, or small medium chains. All the small to medium chains already
had invested into some technology layer (some were closed off) and unless you
could integrate with them, there was no interest to working with you and the
smaller mom pop entities were either too busy or they were so bombarded by all
types of tech solution offerings that they didn't want to listen to you.

Years later when Mr. X had invested in Doordash I had private chat with him.

I told him in my opinion, restaurant delivery is restaurant business. Meaning
that it'll be very hard to compete. On top of one huge exception. You never
crave DoorDash, you crave pizza or burger or Chinese food.

When the OP says Dominos figured out the model as did lots of family owned
Chinese restaurants. I can understand that.

I believe this is a very vertical business. For one thing it's mostly around
the brand, and the brand experience. This is the same reason Starbucks avoided
franchising (if you think about it, DoorDash is a bit like franchising a
delivery business) as did In-N-Out. These smart people had already figured out
the nature of building a food brand experience.

Getting a cold food, soggy pizza destroys the brand.

This is very different than Amazon or UPS delivering books. Because delivery
of books or jackets doesn't impact the brand at the same level it does with
food. Not to mention when you don't deal with risk of food getting cold you
can really scale delivery by mastering routing and all the different things
UPS can do with scale.

Ultimately, we either see a very vertical experience. Uber buying several
popular food category chains (pizza, burgers, fried chicken, etc.) or the
reverse, PEPSI's parent company buying UberEats/Grubhub or if there is a
massive consolidations and Uber or Grubhub can charge in an economically
sustainable way.

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vowelless
So funny how this mirrors the pizza app thing from HBO Silicon Vally.

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RobLach
I think I finally understand "growth hacking".

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WorldPeas
Maybe they should rebrand as sliceline.

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foobaw
i know no lawyer wants to provide conclusive opinion here, but this has to be
illegal

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SergeAx
> If capitalism is driven by a search for profit, the food delivery business
> confuses the hell out of me.

The modern Silicon valley venture capitalism is not about operational profit,
it's about company valuation.

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linsomniac
"Isn't business supposed to solve problems?"

This is a common misconception... Capitalism is only designed to solve one
problem: maximizing shareholder value.

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geofft
> _How did we get to a place where billions of dollars are exchanged in
> millions of business transactions but there are no winners?_

Simple. Capitalism is broken.

In order for capitalism to work, there has to be a meaningful profit/loss
_incentive_. People who are doing the work must get rewarded if the work is
done well and penalized if the work is done poorly.

We already started moving away from this many years ago with the growth of
large corporations. When was the last time that you at your "capitalist" firm
were aware of revenue and costs for the things you were working on in a more-
than-superficial way? When was the last time you saw someone make a buy-
vs.-build decision based on the actual numerical cost of the employees needed
to run the project and not just handwaving? (When was the last time you even
knew what the cost of the employees on your team was, given the widespread
taboos about compensation?) When was the last time that someone who said "I
saved the company X million dollars" got some proportion of those X million
dollars? When was the last time that someone who needlessly made the company
spend X million dollars in the first place paid for it?

The function of a big company is to abstract away the cold, unfeeling
invisible hand of the market and protect people/groups who make unprofitable
decisions. This is actually totally fine and good in the short term - nobody
makes consistently good decisions, and insurance is a thing for a reason. You
want people to take bigger risks on behalf of the company than they're willing
to subsidize with their own paychecks, which is _why_ individual artisans and
professionals team up to form a company in the first place. But it's grown
past that. As the article points out, some regional director somewhere is able
to _convince other people at the company that their work is profitable_ \-
with no hard link to whether the work is, in fact, profitable. And that
scenario is entirely plausible for all of us; it's not specific to this one
company in any way. If you're in the unlucky position where both you want to
draw good charts and everyone around you wants to see good charts, there's no
real way to figure out if you're wrong unless the company as a whole is dying,
and there might be a host of reasons why it's not dying that have nothing to
do with your decision-making.

And now venture "capitalists" have decided that this model needs to scale out
from protecting teams to protecting entire companies. You can run a business
for years without even attempting to make a profit and get acquired based on
the potential of the business. No more messy realities of the market
determining whether you are in fact profitable or not - what matters is
whether you _look_ profitable. And, again, this is genuinely good at small
scale, because it allows new ventures to ignore bumps and potholes that would
otherwise have ended a small company. But if you scale it up, it also allows
new ventures to ignore driving straight off a cliff.

I expect capitalism to work very well if implemented right. But I don't know
how we go from where we are today to actual, functioning capitalism.

~~~
somatic
You say that capitalism is broken, but the capitalists are all doing very
well, even as everyone else feels the pain.

If the capitalists are doing very well, then how can you say that capitalism
is not doing very well?

To answer this question may require you to undergo a paradigm shift.

Think about it.

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nie100sowny
We really need a true crisis. Free market economy needs to let such companies
to buncrupt. Lesson must be learned.

Unfortuanetelly looking what FED is doing, it won't happen soon :(

