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.
Subsidized not only by VCs, but also by gig economy workers who genuinely don’t understand how little they’re being paid because their liabilities are complicated and often hidden/deferred.
This seems to happen a lot especially with food service startups, because of how price-sensitive that market is. Selling anything below cost or undercutting the competition by even a little bit in that industry will give you exponential growth for as long as you can sustain it, but the instant you want to turn a profit the market will turn their back on you and go somewhere else.
Ehh, but it's nothing new in the realm of food delivery (not saying that's -right-, mind you.)
Pizza delivery drivers have been getting the same bad deal for a long time. Most teenagers/young adults who take a delivery job have no idea that they require additional coverage on their vehicle and are one accident away from a lot of financial hardship.
You just see/hear about it much more now because rather than a small business offering the bad deal it's a (multi)national company. VC is just providing a way to scale the pain's visibility up.
Thing is, for a teenager / college student, it made sense as a side job. Bang around in a shitty car, make friends you work with, get a discount on pizza for yourself, get tips under the table with no tax, and enjoy that phase in your life.
With these services, it's like as though people somehow expect gig-work - already much less certain than being an employed drivers - to be a career. License and insurance requirements, PPE, and the sheer scale of the middleman operation involved in running a huge app like this - it's nuts to think that it could be done for the same price as the conventional delivery model.
And don't forget, your parents are still subsidizing your insurance... and those tickets don't show up on your record for at least 6 months, if you go to court!
Sure... until an accident happens, you find out that your insurance didn't cover the (undeclared) use for business purposes, and you're liable for somebody's million-dollar medical bills.
Not sure where you're from but if you're uninsured and cause an accident in France you're basically fucked. If you injure (yourself or someone else) or destroy public/private property you will have to cover it yourself. Many people end up paying hundred of euros per months for decades if not for their entire life.
In the US, we often has uninsured driver coverage. If the other driver has no insurance, our own insurance will cover us and then go after the other driver. But if they have no assets they are probably not worth going after as court cases cost money.
That sounds absolutely crazy. Nordic country. You may have to pay damages, but it would not be hundreds of euros for decades, that's just entirely unreasonable.
In Sweden that would be a real possibility if you do not have adequate insurance. Say that you cause 200 000 kr in property damage by wrecking someones car beyond repair. The owner or their insurance company can claim that money from you, and if you cannot pay in cash you are now in high interest dept where The Enforcement Authority (Kronofogden) can take money straight from you account on a monthly basis to pay off said debt. If you are a low wage earner you might never pay it off.
For any serious accident there will be an investigation to determine is the driver was meeting the insurance conditions. (did he have a valid license, did he take drugs/alcohol, was he on his phone, was the vehicle modified, &c.)
You would bet money that the insurance would cover it instead of finding a way out of it? What makes you so sure about that? There are examples of homeowner's insurance not covering issues caused by renting on AirBnB, so I would be surprised if motor vehicle insurance was any different.
Ex pizza-delivery driver checking in. I made about $15/hr (incl tips) delivering for dominos in 2007. I drove a $2000 truck and didn't much care about coverage on it. It was the best summer job I ever had.
If you have nothing, it's highly unlikely you're going to get sued. People who sue always look for the party with the most money, and try to shift the blame to them.
That's what I made around year 2000. Though I delivered 'Better Pizza, with Better Ingredients'!
Gas was $1/gallon and we got 70¢ per delivery. I asked a friend about 2008 or so, when gas had gotten up to almost $5/gallon briefly (part of the cause of the Great Recession, I'd imagine), and he said they were still getting 70¢ per run. That sucks.
Also, only 1/10 orders used credit cards, so nobody paid taxes on tips - all cash. By 2008, I'm guessing it was 1/3 using credit, and now, with apps, it's probably 9/10 using cards.
But yeah, it was a sweet gig if you weren't the social / beautiful type to be a successful waiter or waitress / bartender. It paid more and was way more fun than making $6-$8 / hour at McDonalds or Target.
What crushed us was when dominos implemented the "delivery fee". As drivers we only got ~1/4 of the ~$2 fee per run, but customers began treating it as though it was a tip.
I think there's more than just visibility: the pizza driver at least has a fixed rate which doesn't change all of the time and there isn't a third party hiding part of the billing. Most of the gig apps try to obscure their share of the money, especially from the customer and driver, and anything which has the concept of surge pricing can add noise which makes it harder to understand the impact of changes.
Former pizza delivery person (long time ago). Pizza works better economically because it transports better (stays hot longer) and has higher volume. I used to load up 5+ deliveries for the same small area of town. The dispatchers were hopefully good at grouping deliveries.
> but also by gig economy workers who genuinely don’t understand how little they’re being paid because their liabilities are complicated and often hidden/deferred.
After talking to several gig economy workers, and many of them understand in very concrete terms that they are trading the value their vehicle for cash now. It's a logical short-term choice when they have bills that need to be paid today, and have a vehicle they can stretch out for a few years.
The line between being unprofitable and selling at a loss can be very blurry. What one might call "selling at a loss" another might consider "making upfront investments for ensuring and sustaining long term success".
In one option, there’s high turnover (bad for customers, employees, and restaurants) leading to restaurants not signing up with future food delivery companies due to being burned in the past. In the other option, there’s a heathy competition leading to customers paying realistic prices (an undistorted market) and giving delivery workers and restaurants more stability.
It's not anti-competitive if you're a relatively small player or trying to build a market.
Comparison: when a new restaurant opens, it's very common to hand out coupons in the neighborhood for discounts or free meals. Those free meals will be sold at a loss, with the goal of building a customer base. Think of it as marketing.
EOD, "anti-competitive" is evaluated on the outcome -- does the success of the company running the discounts make the market more or less competitive if they succeed? If a company is already the dominant player in a market, it's anti-competitive to price dump to keep new entrants out.
But if the company is new and trying to disrupt established players (or trying to create a market where one didn't exist), it's very hard to argue that there's less competition due to their success.
> EOD, "anti-competitive" is evaluated on the outcome -- does the success of the company running the discounts make the market more or less competitive if they succeed?
This doesn't seem right. If they are price dumping then it will immediately affect the competition. No need to wait for an outcome or interpretation.
> Comparison: when a new restaurant opens, it's very common to hand out coupons in the neighborhood for discounts or free meals.
I'd say this is only acceptable because it is small scale (only few restaurants fit in a neighborhood) and the amount of money isn't endless like it (often) is with VC money. The short duration makes it possible for the competition to overcome the negative effects.
The problem with VC money is that all too often it is used to destroy competition and build monopolies.
It is ignorant of reality to expect a surfeit of recent antitrust cases, as those sort of cases are only made in the most egregious of violations, and long after the damage has been done. Such as around 1999, when the several states and the US Federal DOJ brought suit against Microsoft. Microsoft had been pulling anti-competitive moves for decades before, killing alternative operating systems like BEOS or OS2. The most recent related suit was brought up against the NFL for conspiring to violate the Sherman Act, but that was 10 years ago.
Microsoft - not a VC funded company.
NFL - government sanctioned monopoly, also not a VC funded company
Now, as to OS/2, people say "poor IBM", but IBM was the monopolist boogeyman in the 70's and 80's. BEOS simply wasn't good enough. Apple OS's and Linux did and continue to do quite well.
The DOJ went after Microsoft for giving away Explorer for free, which is what every browser maker does now, and has for 20 years. How that's bad for consumers I have no idea. As for Netscape, I switched from Netscape to Explorer because Netscape crashed constantly. That was hardly anti-competitive behavior on Microsoft's part, it was bad engineering on Netscape's.
Yes, I know IE crashed too, but nowhere near as often as Netscape.
I also give away the Digital Mars C and C++ compilers, the D compiler, and the source code to all of it. Is that anti-competitive too? How about all the other free software I use every day? Should the DOJ go after their creators, too?
>This whole industry is yet another example of “fake markets” that were created by just massively subsidizing something with VC cash.
How do you reconcile this narrative with the fact that Grubhub turned a net profit every available year until 2019 per their SEC filings. [1] All told, they only took about 85 million between founding in 2004 and IPO in 2014, and they were already net profitable when they took the last 50.[2]
Most people railing against "fake markets" haven't considered the fact. Grubhub has long been profitable, same with Seamless. People still think that their uber rides are being subsidized on every ride, but uber now makes profit on every ride (at least in the us, not sure about abroad).
For some reason, theres this streak on HN of people that think that VC's are just complete idiots, and are completely just pissing away money.
The whole “Uber makes a profit on the ride” stat is broadly just creative accounting that counts the revenue and ignores most of the costs including the huge back office operation to build and support the app, marketing, admin, etc etc.
Yes it’s good that they charge the customer more than they pay the driver, but that doesn’t translate into a “profitable transaction” from a business standpoint. If it takes $X millions in engineering costs to build and maintain an app required for that ride to have occurred then one needs to prorate that cost across each ride as a cost and so on. There are lots of examples of these creative “our transactions are profitable” claims like WeWork’s much ridiculed “Community Adjusted EBITDA” metric.
The fancier your metrics need to be to show you are “profitable” the bigger the red flag should be that all is not well in Oz.
I personally don't have the data to support or refute the "fake market" claim. I would point out however that it is not enough to be cash-flow positive for individual transactions. Sure Uber now makes money on every ride, is the business as a whole poised to make money? Will that be stable in light of likely regulations?
Like I said, I don't know. I don't think the questions can be dismissed just by assuming that VCs know what they are doing.
Edit: I went and looked at GrubHubs 2019 Q4 results [1]. They operated at a $30M loss. Most of the expenses were "operations" related. I'm not sure if that includes engineering, but I guess it doesn't.
That is why I said until 2019 in the parent thread. I suspect losses in 2019 were related to increased competition from UBER EATs, Ect.
Net income for prior years were:
Which bags were the public left holding? There have been a lot of very easy wins for investors picking up VC-backed companies in the public market. If all you did is just spray around some diversification at prominent tech IPOs, you've done extraordinarily well over time.
The OP is calling this a 'fake market'. That is inaccurate in that of course a certain number of people will pay for food to be delivered. Pizza delivery has been a thing for a long time.
Grubhub has taken a profitable share of the market which makes sense.
Some people believe that new entrants are using private funding to subsidize the price of delivery to gain market share. By doing so, they are expanding the market beyond what the economics of the market support.
Those new entrants would argue that they are doing so because once they lock in customers and restaurants, they can raise their prices or lower their costs and turn a profit.
Where this all ends up is an interesting thought exercise , but it certainly isn't an easy question to answer.
I totally agree with your assessment.
Given that, it really makes me wonder how UBER and their ilk skirt predatory pricing laws. UBER is running a loss, tanking the profit of grubhub, and now considering buying it out.
The pizza delivery operation is typically part of the pizza chain, and not outsourced to a third party that takes a hefty fee from the restaurant and the customer.
Easier to pay a kid $7.50 per hour to drive around than to pay $12 per order to a third-party.
> not outsourced to a third party that takes a hefty fee from the restaurant and the customer.
I delivered pizza for years before and during college. Looking back, I sometimes think the drivers were the ones who were subsidizing the big chains.
This was very early 2000s. I was paid about $6/hour and $0.70 per delivery plus tips which averaged $2 per delivery @ 3 deliveries per hour, 90% tax free as credit cards weren't used much then. I would walk home with $14 / hour, after taxes, which seemed like a great deal back then when the only other option for an introverted average looking guy who wasn't gonna make it as a waiter / bartender would have been $12/hour working awful data entry jobs or $8/hour doing retail.
It helped that gas was $1/gallon then, though within the next 8 years it would rise to almost $5/gallon.
But in those few years, I put on tons of miles of the worst kind of stop-and-go driving. I had a relatively decent 5 year old Honda, but after 4 years of delivering pies, it needed replacing. So essentially, I thought I was making $14/hour in a pretty cool job (driving around, listening to CDs, eating free pizza), but I'm guessing it was more like $10/hour after accounting for the wear and tear on my car.
I'd imagine most Uber, Lyft, Grub Hub, etc. drivers are all gonna see similar costs of doing business when they tally up their profits & losses over the lifetime of their car.
Have you seen the bills restaurants are getting from Grubhub and the numbers on the restaurant side?
The shadow restaurants opening up to serve these markets that massively lower the quality of the food in shared terrible kitchens (most not zoned for that and with little to no safety equipment) but using the restaurant name anyway?
It's the whole thing end-to-end that is unsustainable.
> The shadow restaurants opening up to serve these markets that massively lower the quality of the food in shared terrible kitchens (most not zoned for that and with little to no safety equipment) but using the restaurant name anyway?
Or as a recruiter recently pitched it to me, Travis Kalanicks next billion dollar opportunity!
Grubhub's profits come directly out of local restaurateurs' pockets. It's easy to be profitable when you get to set your fees and have platform lock-in.
> It's easy to be profitable when you get to set your fees and have platform lock-in.
That's exactly the VC playbook isn't it? Subsidize the market until you achieve lock-in, then stop the subsidies.
Now the market has nowhere else to go but to pay almost whatever you want. A restaurant can't afford to not be on GrubHub. A diner doesn't even consider non-grubhub options due to habit.
I'm really replying just because I wanted to say: Swizec Teller!
But, yeah, you're right. The problem is, the harder you squeeze a lemon, the less juice is left in it. And in times like this, they're squeezing harder and they've nearly squozen their whole supply.
> The problem is, the harder you squeeze a lemon, the less juice is left in it
An apt definition of a number of the world's current issues, unfortunately. I've never heard it described that way before but I really like how simple the imagery is to grasp, thank you!
This. Most restaurants are lucky to make 10-15% profit on each order and these "services" are charging the restaurant 20%, plus other fees like credit card processing fees etc. My wife runs a restaurant and she has used all the major delivery services, including GrubHub and they take a huge cut. It's not sustainable and it's driving small restaurants out of business. They also don't manage their drivers well at all. We've had drivers show up 2-3 hours late to pick up an order, with angry customers calling asking where their food is the whole nine yards. The bottom line is they can't justify the huge cut they are taking from every order, they are simply not providing a good service. And of course when there are issues customers call the restaurant, there's no way to get ahold of anyone at GrubHub. Any smart restaurant owners are going to bail on these guys and hire their own drivers as quickly as they can.
How is that margin any different than what they would pay to the front of the house? Is the only difference that people don’t order alcohol via GrubHub which is the only way restaurants actually make money?
Yes partly alcohol, but also the front of the house is cheap to run. In the old, old days you only had to pay waiters $2.13/hour and they made the rest off of tips. Now it's like $8/hour in our state (Colorado) but that's still nothing, when you consider how many tables (and entrees per table) a single waiter can take during a busy hour, far less than 20% of each entree for sure. The problem is demographics are changing. Our restaurant 20 years ago did like 10-20% takeout and delivery, the rest was all dine in. Now it's closer to 50-60% takeout and delivery for us, so companies like GrubHub are eating up a lot of restaurant profits. People just don't eat out like they used too. It's not just us, there have been a ton of articles the last couple of years complaining about these companies, this first one says GrubHub takes 30% (yikes):
When I mentioned GrubHub and DoorDash to my wife when I say this article posted, I got a 30 minute rant about how much she hates them. She couldn't even give me a fixed fee she paid from these companies, she started listing off different fees and charges, but she said it was more than 20% per order. These companies have absolutely shot themselves in the foot with how they have treated their customers. What a lot of people really want is to be able to order online or through an app, that's the value these companies provide. For us we already had a WordPress website, so I paid a small fee to install the Woo Restaurant plugin to handle the online menu and ordering. It really wasn't much trouble to setup and it's been way less trouble than any of these middle men, and we get to continue to keep the profits.
This changes the game. Restaurants are forced to price higher; now, customers will have to decide if the higher prices are worth it for the type of food they get and the frequency they get it.
There was a 24hr local place that had things like marinated beef + rice for $30 ubereats total, which is exorbitant compared to my usual $12 meals. But I'd order there 2-4 times a week because of deliciousness, habit and convenience.
> In the old, old days you only had to pay waiters $2.13/hour and they made the rest off of tips.
I guess most of the restaurants I go to in SF don't actually have waiters any more, just runners. None of them are particularly well positioned to take advantage of how we eat food now, either. They are in expensive locations for foot traffic with large dinning rooms and small kitchens when you'd want just the opposite.
That doesnt happen much, theres high competition and theres a race to the bottom to lower the price. For delivery most orders come through grubhub/seamless so a restaurant has the option to make no deliveries or cave in to ubers cut and price the food competitiely on the platform. Lots of small restaurants will probably go belly up. Grubhub sucks the market from under their feet and all the profit from their pocket. It doesnt help that people want free delivery too and the prices low.
Except that local restaurants are already operating on razor thin margins. And when the only surviving restaurants are Perkins and Applebee’s, the delivery services lose a lot of their value proposition.
They have no choice. People used to have a stack of menus form local
deliveries. Nowadays the convenience made ordering food through apps the thing to do. The thin margins that restaurants operate on gets sweeped under grubhub’s and the landlords rugs. This will kill most small food business which rely on deliveries.
I think GrubHub’s partnership and tie-in with Yelp makes this a very apples-to-oranges comparison. Food delivery apps operate with or without the restaurant’s approval and aren’t able to reach into the restaurant’s pocket the way Yelp and GrubHub can (and boy do they).
Also this is anecdotal, but I’m way more likely to place a pickup order through GrubHub than any of the other apps (if they even offer that). I think it might have to do with the Yelp integration, and me associating that experience with in-person dining... so maybe I’m just naturally in a “find a place to physically go to” mode when browsing Yelp?
The takeout side of this business would obviously have no issues being profitable.
"How do you reconcile this narrative with the fact that Grubhub turned a net profit every available year until 2019 per their SEC filings."
Easy. Take away the VC funding and see if anyone wants to try or can manage to start a similar company.
In most cases, these companies are just middlemen. Many folks do not see middlemen as "legitimate" businesses, even though the middlemen make money.
Hosts and parasites can each thrive. However only one can survive on its own. Ideally hosts would prefer to live free of parasites.
It should be expected that some consumers or producers will want to cut out the middlemen. We cannot reasonably expect everyone to appreciate those middlemen for the success they may have in taking a cut (and collecting data on consumer behaviour).
There is one complicating factor, however, which is that Grubhub and similar delivery services were making things very difficult for restaurants, which is already a difficult business. It’s not obvious that in the long run the big food delivery players wouldn’t have simply been the parasite that killed the host. Now, we’ll probably never know, since restaurants will be mostly doomed for at least the next year, taking any value-add businesses along with them.
Apparently Chipotle has white-labeled delivery through their app. You just choose order for delivery in the app and it looks like ordering off Pizza Hut or something. But once the order is placed and you get into tracking, you do see a thing that says it's "Powered By Door Dash."
It will be interesting to see if any of the big chains can force the delivery suppliers to allow multiple integrations, and Chipotle lets the lowest bidder deliver your food. Ultimately I think that's the next step. It doesn't make sense that there's a super special delivery driver who works for Pizza Hut. A better solution is to have multiple delivery providers delivering food and other goods for everyone. I think people would be surprised to find out how much generic delivery work there is to be done. Like every car garage has one or more parts delivery services. And these are mostly people in regular cars delivering your particular car's brake pads from a warehouse to the auto shop. Why can't Uber, or Door Dash, or whatever deliver that too?
Shoot, that's what Amazon does. They got Prime to burn less money by calculating which shipper is the cheapest to get to the destination on time, and ~~proceed to ship it via LaserShip anyway~~ later started using first-party delivery when that became cheaper than dealing with a carrier (although they still ship via UPS in rare cases here).
The advantage to a Pizza Hut driver is they can pick up several deliveries at the same time without waiting. Any app allowing multiple restaurants from a wide area inherently increases delivery costs. There are edge cases where that’s ok, but it’s not a multi billion dollar company at that point.
Pizza places have a dynamic load that is only somewhat predictable. They would greatly benefit from instantaneously dynamic availability of drivers. There's no reason why the Uber/DoorDash/etc driver can't pick up multiple pizza orders from your pizza shop and deliver them without providing service to another company for the duration of that delivery. The benefit is that now that driver doesn't have to come all the way 5 miles back to your pizza shop, because maybe McDonald's a block away has a delivery need. And someone else who just delivered a brake pad to the auto shop next to your pizza shop can pick up the next pizza deliveries.
I think the primary benefit of having your own driver is that you get to put your branding on the car and the driver's uniform. It's not clear to me how much seeing that little "Pizza Hut" car topper impacts sales.
Balancing across multiple restaurants is only useful if they have different peaks during the day. It’s mostly useless when they all share similar profiles as you need to employ more people for the peak load at lower efficiency.
Restaurants can also make use of drivers they directly employ durning downtime to do other stuff like sweep up.
We live in an world where UPS famously saved hundreds of millions of dollars in labor and fuel costs by favoring right hand turns in their routing. Tiny improvements at scale are a real savings both in cost and environmental impact. Not having to return to the same single central hub after each delivery alone would be a massive cost reduction.
Once you start optimizing across large numbers of drivers you end up dispatching the same driver to the same restaurant to do multiple pickups anyway, which then need to be delivered quickly. Outside of peak times having fewer drivers than restaurants seems like a net win, but restaurants can make use of drivers when their not making deliveries. This also means their in the restaurant and thus lowers delivery times.
Believe me I understand why it seems possible, but this is one of those cases where real world data doesn’t fit abstract models very well. One example is during peak times both the restaurant and it’s drivers get overwhelmed so preparation time is increasing. Another example is if their returning to the same location they can easily return empty insulated boxes, but that’s problematic if their doing pickup from 10+ restaurants a shift.
Wouldn't that imply an algorithm weakness in this case? It seems like the wider the network and the more driver's you have the more optimal routes can be given algorithms good enough.
Pickup and delivery is not simply instantaneous events at the end of a route. For example, you need different processes for in house drivers vs 3rd party drivers. Many pizza places benefit from gathering orders into insulated containers for delivery which drivers then pickup an return.
On the other hand someone showing up at potentially hundreds of restaurants is hardly going to know each of their systems very well or be recognized on sight.
I was thinking about that the other day, and it's actually a huge difference in the delivery model when you move from "single pickup point, multiple delivery points" to "multiple pickup and delivery points." The first is pizza, the second is a taxi, even if the taxi "passenger" is your order from Cheesecake Factory.
> I know that there are other companies trying to be a middle man in this way. It’s going to get rid of even more of Door Dash’s profits
And this is the unwritten prelude to how Snowcrash happened and the mob got involved in food delivery. I can already envision Uncle Enzo capitalizing on his new venture.
But seriously. has anyone actually seen or know anyone who has used Caviar? Dorsey sold it to Doordash a while back for nearly half a billion in cash. Aloha is still the standard for POS systems in restaurants, and something called toast has become more an more popular from the restaurants I frequent that are still open and want to be mobile as they can't allow people to come in. It looked like an old Square thing with a card swiper on top. This is there website [1] apparently they've been around since 2012.
Their model is primarily taking a share of credit card transaction fees plus a monthly fee for physical devices. While they’re doing poorly right now without restaurants open, they have a large war chest (raised their series F in February).
Even when PCs were new (we're talking late 80s), and not really networked there were a ton of small businesses that would buy a business system like TakeOutTaxi and make a go at delivering local restaurant food to homes and businesses. You called a dispatch center on the phone, put in your order, and 20-30 minutes, and greasy magic... BIG MAC! These businesses would often do well if the operator/owner/manager was a 10x hustler. I helped a couple of these get started in the late 80s, and they both did well until the hustler slowed down. Two-sided markets are hard, and two-sided hyperlocal markets are uber-difficult.
Exactly. There is a small dev outfit in my second-tier US city that caters to precisely this market and is doing quite well considering many restaurants added this to their website or replaced their website outright. They assume their customer is the average mom-and-pop restaurant and set up their business accordingly.
I am curious why Shopify doesn't lateral into this market. They already have the majority of the infrastructure for retail.
Square's been doing what Shopify hasn't, to be honest. I've seen a half-dozen restaurants who didn't do pickup/delivery before the pandemic who are doing their own delivery now — all have stood up square.site fronts. (Probably helps that a lot of them probably used Square for POS anyway.)
Shopify will wait until a partner builds it on their platform, see if they're successful, then acquire them. They've done it a couple times, they have tons of cash and don't need to take huge risks.
Not only that, but honestly, most taxi companies, at least in my area, will go pick up food, liquor or other things and make deliveries. There's also a couple local delivery services that specialize in just that.
They've been doing well here during the lockdown, especially with liquor deliveries, or so i've heard. Things like uber and just eat aren't really that popular or used here though. Just the few chain restaurants use them.
With taxis you don't share delivery routes. It is inherently more expensive.
Food delivery is not new. The new thing are the web interfaces. Now people don't need to visit shops to learn about new things. People can shop delivered goods all the time. This allows to drive down delivery costs with scale.
Additionally, online shops streamline the ordering process. No person is needed to note down orders.
Additionally, self-driving cars and robots will eliminate the cost of the last mile. Like Uber, whoever owns the market when the robots will go life will rake in huge profits.
Food delivery doesn't necessarily let you share delivery routes, either. If you're paying for groceries, yes. If you're paying for two theoretically freshly-cooked dinners from a local restaurant, you want that food to come directly from the restaurant to you. The difference between ten minutes and forty minutes can substantially affect food quality and customer satisfaction.
As for food delivery robots, I mean, sure, but building a business that only succeeds if other people deliver world-changing technology at scale before you run out of capital seems a wee bit on the risky side.
>Food delivery doesn't necessarily let you share delivery routes, either.
Right, that's my thinking (and anyone is free to steal this idea with my encouragement): there should be a way for someone to commit to some dish, started at some time, and then others can "hook" onto the order for a discount. Then you get economies of scale: it costs a lot less than O(n) to batch it up to n orders.
That's a surplus that can be shared between the tech platform, the restaurant, and the end user.
Similar logic for delivering that same food to people who are close to each other.
> there should be a way for someone to commit to some dish, started at some time, and then others can "hook" onto the order for a discount
This is how Uber Eats already works in Toronto.
There is a section in the app with restaurants that have orders already in progress and with a timer on each one and if you order within that limited time, the delivery fee is $0.
Ritual kind of does what you're describing without the delivery. They're targeting offices. One person orders and the rest of the office is alerted. The first person picks up orders for anyone else that puts an order in within a few minutes.
> With taxis you don't share delivery routes. It is inherently more expensive.
For large parts over here in Germany I don't see route sharing in food delivery as well. Some delivery drivers I can observe via GPS (could be faked, but looks plausible) and many are delivering via bike (Pedelec etc.) or scooter and have limited space to transport also when observing restaurants they often pass a single order ober as well.
This of course can be different in areas with other order frequency and other amount of restaurants offering delivery and other distances. (Don't think many orders go further than 2km here)
It doesn't seem like self driving cars will be viable for the foreseeable future at Uber scale, the problem is just way too hard to generalize across the entire U.S. market and there are dozens of unsolved security and safety issues that I think will keep things cost prohibitive for a while. I think you'll definitely see it on a small scale in certain cities, but it's not coming to suburbia or the boonies any time soon.
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.
I think for both of these companies, the path to profitability is eventually cutting out the human aspect for automated delivery. Self-driving cars is a good vision for the business and a very end-result. And for food delivery, I'm seeing more of those robotic carts that contain food driving around sidewalks in the Bay Area.
It's pilot-scale, relies on human labor, and has some obvious problems which would break down immediately at scale. Plus they're annoying to navigate around. But they do exist.
No path to profitability. A path to growth, and a path to publicly traded company, and a path to VC's getting lots of money from that process.
Also a process for new companies to emerge to put the now-struggling attempted-profitable public companies out of business as they seek a business model.
The obvious one is bringing costs down by automating labour, with self-driving cars etc.
There also may be a 'change the world' sort of outcome, where consumers en masse like the product so much that they change their behaviour and lifestyles, even if it eventually turns out that they spend more overall than they might have before - if people stop owning cars, cease cooking at home, taking away revenue from supermarkets and auto manufacturers. Although this doesn't appear to hold up in the first analysis, second-order effects might start to appear - e.g. if consumers change their lifestyles, can you capture the value that they would have invested in owning a kitchen, or a garage and driveway?
This is all very speculative, I'm not claiming Uber etc can achieve this, just that different equilibria are possible - for instance, I gather that in some Chinese cities street food is incredibly good and cheap while density is high enough to make owning good cooking facilities a real pain.
The company may lose money and ultimately fail, but you're still getting paid.
You also get to call yourself an entrepreneur / founder / investor / whatever for your next thing.
The point of these kinds of businesses isn't to build skyscrapers that last 100 years, it's to build a pretty sandcastle, get paid and go do something else when the tide comes in.
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.
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.
Haven't basically every single taxi company got apps too? Uber raised the bar, but haven't fundamentally changed the market. (The excess supply financed by VC money led to more traffic, but that's it.)
I'm curious as to how a basic app could replace the on demand delivery logistics / handle the volume that a platform like UberEats sends to restaurants ?
Maybe my urban area is different but restaurants here are doing 10+ orders per hour across all delivery channels. The bottleneck becomes the # of delivery couriers available and smartly assigning them to deliveries.
I agree with this. It's seems to me that it's much more than "hiring a few developers to build a basic app."
There's the cost of delivery personnel, and having enough delivery windows to be practical for customers.
It seems to me there are benefits from scale, and a large, aggregated platform that make delivery feasible for many restaurants.
I was going to say that its nice to live in a dense city that always get the latest tech offerings, compared to the suburbs anywhere
but then I remembered how many of the scooter offerings have already disappeared
these food delivery courier services can disappear just as quick, to be replaced by smaller local networks and restuarant specific services just like they used to be
Where I live we have had a local delivery service that coordinated with places that normally deliver, but was still pretty extensive beyond just pizza. It started mostly geared towards late night food for college kids, but has expanded significantly. It was around long before GrubHub, Doordash, Uber Eats, etc. came to our area.
The service is now a part of "LoDel". LoDel seems to run a multitude of delivery services in different locations under different names. I don't know how this business model plays with restaurants, but it seems to be a bit of a halfway house between calling up your local pizza place for delivery or ordering through UberEats and the like.
It seems like another aspect of this is some combination of "aiming at regular customers, being willing/able to scale, educating consumers".
The VC model is like a lot of models. They're aiming for the section of consumers that will give them a 25% cut for picture-delivery to the door.
The opposite scaling model is a truck that delivers soup and vegetables from a central production facility to every house on a street once a week on a schedule flexible enough to keep costs low.
The restaurant model has been selling prepared food at a premium in exchange for the experience (not that they don't have ultra-low margins but they are automatically following a model that doesn't scale).
> This whole industry is yet another example of “fake markets” that were created by just massively subsidizing something with VC cash.
Agreed.
> 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.
Also agree, and this model also applies to the Food supply. I hope we see a record breaking year in CSA subscriptions and community gardens are overflowing with plants this year. My local one has already had all of its plots taken.
I still don't understand why there is a single global (or rather, country-wide) app for food delivery. Unlike getting cabs, this is hardly something you do when you're away from your home city.
If you had an app that only served, say, NYC, you can reduce burn drastically, not worry about scale issues too much, and run a business that's profitable without screwing over either the restaurant or the delivery person.
This is absolutely a problem that can and should be solved at a local level. As a consumer, you gain nothing by using an app that serves 100+ cities.
I still don't understand the idea of "apps" for everything. There no reason these aren't just web apps which can be accessed by people who don't have phones. Dividing these apps into arbitrary regions seems pointless. And if it's just a web app who cares if I visit fooddeliversite.com/region or fooddeliverysiteforregion.com. The only difference is I have to create an account for each site with the latter which is very inconvenient.
Anecdotal, but I only use food delivery apps when I travel, specifically for business trips. After flights + a long day in a possibly unfamiliar area, I defer to the app.
I admittedly tend to do business travel to cities but TBH, eating out at a nice restaurant is one of the perks of having to travel--not having a probably lousy pizza delivered to my hotel.
But then, I know a lot of people who do room service and I haven't in literally decades.
90% of the time, I agree with you. Expensing nice restaurants I want to try is one of the best perks of business travel.
The other 10% of the time, my flight got delayed and I arrived at my hotel at midnight. I want nothing more than to eat something quick and simple, and get to sleep. That's where room service or a food delivery app comes in, and at a lot of hotels the room service after midnight is a lot worse than a delivery app.
If you live in a gated residential complex, how is the food delivery person supposed to meet you? Same issue. In my experience, you meet them in the lobby.
Service delivered directly to your hotel room door is typically offered by the hotel exclusively.
> If you live in a gated residential complex, how is the food delivery person supposed to meet you? Same issue.
I know some people who just provides the gate code in the delivery instructions that UPS and FedEx uses to open the gate. This is becoming more necessary in my experience because of Amazon using gig workers for delivery.
That only applies to large, sprawling residential communities that have guards. Smaller-scale multi-family housing buildings (that have say, 20 units) with a locked gate at the entrance won't have the type of service you're describing.
The delivery person goes to the reception and either the call you or send the delivery guy to the room. Also works for packages and other things and hotels are used to this.
Huh? Ordering food to a hotel is totally normal, the concierge is not offended by "smelly hot food" and certainly I've never heard of a hotel asking guests not to order food.
There are substantial fixed costs around developing an app that are cheaper when amortized over a larger market. It’s more efficient to write one app to be used globally than 100 apps for 100 different cities.
Also people definitely get food delivered while on vacation or traveling for work. Probably even more often than they do at home since they don’t have access to a kitchen to cook in.
Also brand recognition. Over here pizza.de for a long time was the market leader. You can't beat that name and push it with a national merketing campaign. Wehreve in the country, go to pizza.de.
(Meanwhile deliveryhero / Lieferheld acquired them using VC money (Rocket Internet and others))
I used grubhub pretty exclusively as a consultant who was unfamiliar with my surroundings and too tired/jetlagged after a day of work to find food. The same chain restaurants and hotel food gets old very quickly.
It's very helpful for travel – e.g., I could use Ubereats even while I was in Japan, despite not knowing the language or which apps are good. And I'm much more likely to order delivery while traveling, since I can't cook.
I'm also not really sure what advantages there are to having 100+ local apps as opposed to a few national ones, there genuinely is a lot of infrastructure involved, and it's easier to push back against bad behavior on large companies (e.g. when PostMates was pocketing their drivers' tips.)
In principle you could make the same argument about lots of businesses. There are reasons Blockbuster, Wal-Mart, Target, Starbucks and the like dominated or destroyed their local competitors. The same would most likely happen to a local food delivery business.
>I still don't understand why there is a single global (or rather, country-wide) app for food delivery
uber eats works in a lot of countries. i've ordered food using it on south america, north america and europe all on the same account with the same experience.
It wasn't so long ago that I was calling up restaurants directly for delivery. I don't do that anymore.
There were difficulties ordering over the phone sometimes. People would mishear you. They would be overwhelmed with orders at busy times. A few places had online ordering directly, mitigating these issues.
But some of the most interesting aspects in contrast to the apps is how they charged for delivery. It was common for, say, a pizza place to hire their own driver. But, and maybe this only works in cities, I ordered from some people who seemed to contract out. It seemed like some of those people were making it ok as a standalone business, though you wouldn't necessarily know that the restaurant wasn't employing them directly or that they did deliveries for multiple places.
A lot of places seemed to eat some of the cost of delivery but not raise the menu prices. So they would only let you deliver above a minimum price or order size. And of course you were expected to tip the driver.
But these apps take a hefty fee on top of the posted price, and they have a charge that goes to the courier, and you can tip above that. It seems like added consumer costs are higher than with the old way.
I actually have the opposite experience - if my delivery goes wrong on an app there is nothing I can do. If my local restaurant fucks up I call them and get it sorted. Oh and 'delivery between 8:30-8:35... 8:35-8:40..8:40-8:45...8:45-8:50.... Like jesus, these companies hire *thousandss of software engineers and AI experts and this is what you get? I know the restaurant is more than 10 minutes away and you're telling me my delivery will be here in 3?
I think the biggest value add - from a user perspective only - is as follows:
1.) accessing a local directory of restaurants with their menus
2.) accessing a common user interface experience for ordering
3.) not having to enter credit card info
4.) common portal to receive updates from the restaurant on the delivery
The actual dispatch of the driver and hiring of the driver is not a key component of the user experience and could easily be handled by the restaurant owner.
I feel like Square is uniquely positioned to provide 1-4 given their existing access to restaurants via Square POS and Square websites (Weebly).
I think its more that delivery specifics is a don't care for most end users - other than being able to see where the driver is. Actually the key value-add for the delivery apps is the credit card on file. Typing in 16-digits CCNs and 3 digit CCV and expiration for every restaurant every time you order (and perhaps more importantly, worrying about the safety of doing so) is a huge hurdle.
Yeah; I am asking though because it seems many here seem to say or at least imply that it would be better if restaurants had their own drivers, however I fail to see how it does not have overhead or could be more optimal.
So I suspect it stems from irrational hatred towards middleman services.
Is there enough demand for non-standard food types (I have to imagine more folks get pizza delivered, than say, sushi) for each restaurant to maintain their own group of drivers?
Not saying the end result has to look like uber eats, etc, but there do seem to be efficiencies from having X drivers collectively cover Y restaurants, with X << Y
> just getting their act together and hiring a few developers to build a basic app.
Developing a new app each time sounds like a very expensive way to go. If that allows them to beat Uber then Uber is in trouble in this market. Because the next step is to create a service that any restaurant can join for fixed payment. Even with customization marginal cost for such thing should be quite low, surely lower than everybody building their own apps from scratch and maintaining them over time. And that's pretty much what delivery companies offer? So how developing your own app would be more effective than just using already developed app and adding a couple of menu items to it?
When restaurants where closed some local restaurants started creating food boxes you could order for the weekend with recipes and most of the ingredients based on their menu/style. No app, just send an e-mail and pick up on Friday.
"This whole industry is yet another example of "fake markets" that were created by just massively subsidizing something with VC cash."
To what extent has America (and its followers) been led to believe these types of companies, who always seem to have a non-sensical name, and the narratives they construct ("fake markets") are the future of the American economy. While these middlemen may be a part of the future and play a role, are they receiving a disproportionate amount of attention relative to their true importance.
The reality here is that the VC-backed monstrosities are incapable of showing any price sensitivity because they can massage out local market difference with vast amounts of capital.
Local approaches can work and be sustainable, but they have to be able to charge a price that actually makes sense for the delivery. Right now that simply isn't possible because the VC-funded behemoths are capable of undercutting anything that moves in the space and attempts to be cash-flow positive in any sort of sustainable way.
Their business isn't food delivery but food distribution. The restaurants are paying for a spot on their webpage (some of these companies don't deliver, and charge the same price i.e. Just Eat).
I think this idea does apply to any model where the distribution/search costs are minimal i.e. Uber/Lyft. I think Lyft is a great business btw but their costs are totally wrong (i.e. they don't really need hundreds of software engineers milking the company dry).
> This whole industry is yet another example of “fake markets” that were created by just massively subsidizing something with VC cash.
Yes, we saw this back in the dot com bust when similar delivery companies like Kozmo went under. These companies margins are thin with little room for error or ability to survive recessions.
Some like Instacart may work as a subsidiary of a larger business like Costco with other stable revenue streams, as a value-add. But not independently indefinitely. I hope Instacart, etc. have been searching for a buyer, it may be their only possible exit.
> 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.
It may be happening in Silicon Valley now. Some food service companies like Coupa Cafe have created their own apps and delivery services to cut out Uber Eats, etc. Not sure if they will merge their apps and delivery services though. Will be interesting to see.
In many places, like Pittsburgh (Wheel Deliver), there was a company that did restaurant delivery for a reasonable fee. Everyone had a stack of takeout menus and you just called up and asked for whatever you wanted. I don’t see what the apps bring to the table except discounts.
>local markets that basically out-competed Uber etc by just getting their act together and hiring a few developers to build a basic app.
There is the sweet spot. A wix/squarespace style service which offers businesses a boilerplate white-label app which they can use to offer delivery to local customers.
Not only that, but in the 50s through the 70s, it was very common for grocery stores to deliver groceries. This is not a new idea by any stretch of the imagination.
The biggest problem with grocery delivery is lack of control. We tried doing in-store pickup but the shopper did not pick a lot of the things we asked for, and the substitutions they made were awful. You're completely at their mercy and they're exhausted and don't want to take the same level of care as you would yourself(I don't blame them).
The grocery store is not designed for the level of efficiency a system like this needs. It's designed to make you walk from one end of the store to the other slowly looking at all the products to gather each individual item on your list. It's great for marketing but terrible for efficiency and for social distancing. As long as the delivery and pickup is done from the same stock the grocery shoppers pick from it'll never be as reliable as just going in yourself.
Grocery delivery is not the same as grocery shoppers. For me, the two largest local grocery chains are offering grocery delivery and/or pickup, which always bypasses the shelves - IIRC one of them has the shelf-stocking people pack the deliveries before they go onto shelves; the other is packing the deliveries in the logistics centres alongside with the stuff that goes to restock the many smaller stores.
Obviously, having someone go to a store just for your purchase and walk along all the isles to pick stuff up is horrendously inefficient.
It's obviously inefficient to send someone to a store to grab stuff, but "giant room with products on shelves" is a pretty efficient setup. They can do some of it in the back room, or a warehouse full of pallets, but to a large extent companies end up building "dark stores" that are almost the same as a normal store, but with no customers allowed in.
To a large extent store chains already have them, that's the (few) logistics/distribution centres out of which they supply the (many) stores. The store shelf is essentially just a short-term cache.
Are the preexisting logistics centers designed around picking up single items off the shelves? I would have expected them to be set up around bigger blocks of product.
The preexisting logistics centers are designed to take a pallet of item X and allocate different amounts of it to different boxes each going to a different smallish shop; doing so in an multi-hour cycle (2-3 times a day?) to ensure that every type of product is distributed along these boxes. During this process they also put part of the product not in "delivery truck going to shop A" but to "delivery truck going to home deliveries". It does need some ripping of bigger blocks of procuct and repackaging to bags, but it happens at the same time as they're ripping even bigger blocks of product for supplying stores and shelves.
But the essential difference is the "push vs pull" - instead of one delivery pulling items from everywhere (which is a new process that grocery chains did not have) you have the supply process pushing items to many delivery targets, which is a process that grocery chains already have and have optimized.
But you run into the same issues mostly because Kroger's delivery service is "just as 3rd-party" as Instacart. It's still an employee going through your store, grabbing stuff off the shelves and delivering them to you. There's basically zero first-party advantage.
Yeah, this is exactly what it was. We used a Kroger store because they had a much better selection than Safeway and in the end didn't really get what we wanted. At the time I had guessed it was because the 3rd-party picker didn't know where some of the items were and didn't have time to go looking for them.
At least the in-house grocers are more familiar with the layout and product offerings. From a process perspective, couldn't supermarkets process the delivery orders during stocking?
Having been warned about Instacart I made a point of doing just that, only to have the grocery store run the order through them anyway. The whole experience felt fraudulent, from the bait-and-switch between service providers to the bait-and-switch from carefully chosen sale items to expensive and inappropriate "substitutes". Reportedly at least Instacart proper has a feedback mechanism. With the white labeled service you're out of luck.
If Instacart was able to pivot to full end to end food delivery with their own distribution chain it could have long term viability. Their current model of just having people shop in normal stores is problematic for many reasons, not the least of which because normal stores are BY DESIGN slow and inefficient for picking up a list of items.
Instacart had early advantage because full scale grocery delivery infrastructure was broadly in its infancy but if and when the likes of Amazon, Wal-Mart and others go full scale on their own offerings then structurally it would seem impossible for Instacart to compete with that.
> when the likes of Amazon, Wal-Mart and others go full scale on their own offerings then structurally it would seem impossible for Instacart to compete
I agree completely. I signed up to be a shopper with Instacart, and the experience was awful. To get work, there was a 'first come, first serve' queue I had to check at a specific time several times a week. Not great, I thought, but okay, we'll see how it goes.
Well, apparently people had set up bots or something, because all the orders worth taking were scooped up in less than a minute when the appointed time arrived. I couldn't even read the screen fast enough to see what was there before it was gone. I walked away in disgust immediately and never considered working with them again.
But Walmart and Amazon/Whole Foods are doing the same thing but just having their own pickers in their store. Until my Kroger delivery comes from the warehouse and not the the actual store Instacart will be fine.
Amazon Fresh might be a real competitor but it seems like they're running into the same problems as grocery stores.
yea I like this idea... tech should be empowering people to cut out the middle man, not create services that rob them with 30% cuts of the profits on delivery
Not only is all the VC subsidization questionable, but Doordash, Caviar, Uber Eats, etc. all strike me as just the shallow veneer of a delivery service. It's just about the leakiest abstraction of any major product that I can think of.
You have the restaurant, which is physically optimized for in-person meals. Take-out on its own is already fairly clunky at many sit-down restaurants, there's no waiting area, pick up counter, no easy way to pick up at the curb, etc. Pickup is clearly not the focus of those physical spaces.
Then you have the integration between the app and the restaurant. This is the one thing about the entire flow that is actually integrated in a meaningful way, but still it's only at the single point in time of placing the order. If anything goes wrong, if there's a delay in preparing the food, or anything is sold out, or if they end up giving you the wrong person's order, there's always a runaround of whether you should talk to the delivery support or the restaurant itself. Seeing as at least something goes wrong with probably 1 in every 3 or 4 orders I do, this loss is a probably a really big deal for profitability as I am always getting refunded for something that was missing or went wrong or getting a $10 credit for an unexpected 3 hour delay.
And then you have the delivery handoff itself. I suspect this mostly works well in the suburbs, but living in an apartment building this is yet another opportunity for things to go wrong. I would prefer not to have to come downstairs outside the building to pick it up when I'm paying ~$20 for this delivery to my door, but very often the delivery people complain they can't find the building (it's clearly marked on google maps), or that there's no parking (I live in a very dense area, why are all these apps so car-centered in their delivery crew? Why can't I request someone on a bike that wouldn't have this problem?).
Basically, delivery could be done very efficiently, and profitably if we made some bigger changes. There should clearly be specific restaurants, maybe even some that have no seats at all and are just a pickup kitchen, that are optimized for efficient pick-up and marked as such. Cities need to change their street design to accomodate how many more deliveries are happening today, vs when these streets were designed many years ago (this is not just a problem for food, look how many rideshares drop people off in the middle of the road because there's no space to pull over to a curb, or how many Amazon or UPS trucks block streets and bike lanes because there are no dedicated 5-minute stopping zones).
It reminds me of Marc Andreeson's recent "It's time to build" essay. Our whole world is structured around how things used to work 40 years ago, and nothing significant can ever be changed. So we have to have these crazy, expensive hacks like Doordash to try to shoehorn in new services that people want, instead of making deeper adaptations as residents' needs and preferences change.
Since this week Uber Eats is charging a 10% service fee and distance depending delivery free. That's roughly 25% of my food order. It's getting expensive.
Luckily, I found out the restaurant does delivery by itself too and then it's free instead of the £7 I got charged by Uber so next time :)
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.
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.
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.
This does open up an opportunity to offer an easy self-driven delivery services for restaurants. You probably can't take a % cut, but you can probably treat it like a SAAS and offer to own the delivery software and hardware so that restaurants can keep their own delivery staff, take orders online and handle issues.
That entire value proposition is predicated on offering the customers a good experience and offering the restaurant staff a good experience with no hassles.
But as you say, that's not what the VCs want - they want to lock the restaurants in and profit as a middleman.
Yes, that works of be something that could work. Like a Shopify just for restaurants. Pay $25/no, get a basic ordering interface for your customers and options to let customers pay via CC or to pay the driver. Maybe add bonus add-ons like a very basic CRM and marketing newsletters for a few bucks.
Only that this is not sexy for VCs because that's something everybody could do. Although Shopify is also something everybody can do and already did very often.
This already exists. I can’t for the life of me remember the name of it. I did some free IT work to help a local pizza shop. The vendor built the custom website and the POS system.
For a small restaurant which does a few deliveries only it's hard to be profitable. They could do that for brand awareness or attracting new customers.
On a small margin profitable are the ones who specialize in cooking for delivery (mostly for pizza) but with tough competition.
For the UberEat, Foodora, deliveroo, ... style delivery coordinators it is tough - their game is to cover each and every restaurant they can get to offer wide variety on offerings, but little optimisation potential in the delivery routes. Playing for the endgame where there is no alternative and they can raise prices.
Customers also tip less now that they don't need to stiff the driver to their face. I had an uncle who worked for a Chinese food place tips only, i.e. free for the store. You couldn't do that now as people don't tip through the app.
Killing it in places with a strong tipping culture seems thorny, though. A restaurant that charges high enough prices to pay its servers well without tips is presumably going to have trouble attracting customers. Even if they say there's no need to tip, that's factored into the price, the psychological heuristics that people use around economic decisions like this are well-known to be irrational and generally crap.
And if servers' actual pay is increased enough to make up for not making tips, I'm guessing that back-of-the-house staff will start demanding higher pay, too, because the unfairness of the pay disparity would be a lot more apparent if servers and bartenders got better overall pay and known, stable, transparent pay.
And I'm guessing there are other problems that come into play that I don't even know about, since I haven't worked in a restaurant since I was a kid. But I'm guessing it all boils down to something akin to how car dealerships that price transparently can't make it, even though basically every consumer ostensibly wishes that car dealerships would price transparently, because it's too difficult to get your customer base to actually grok how this works when presented with it as a real option.
Again, restaurants can only get away with paying the wages they do because of tips. If tips disappeared overnight I'd hope that vast majority of waiters and drivers would just leave as it doesn't make any sense any more. It works like this in literally every other industry, yet Americans always explain this as if restaurants are some super special snowflake industry where this cannot possibly work. I'm yet to see a reason why it wouldn't.
I'm not saying it's impossible, so much as I'm suggesting that the people who have the greatest ability to make the change (restaurant owners) have more reasons not to change it than they do reasons to change it.
I would argue it doesn't really work at any scale outside of extremely dense areas. where I live, there used to be good take-out joints and mediocre delivery joints. none of the good places offered delivery, but the price for a meal was pretty similar. with grubhub and friends, a lot of the better places do offer delivery now, but it ends up being a bit more expensive.
I'm pretty sure the places that do their own delivery have to cut corners on ingredients to be able to do it while matching the prices of their take-out only peers. that is, the delivery fee they add to the order doesn't actually cover the cost of delivery, so they make it up by cutting costs elsewhere. when the cost of delivery is transparent, most people just aren't willing to pay what it takes to employ even the most downtrodden citizens of a developed country to drive around delivering food.
> 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.
How many of the mom-and-pop places provide delivery using family/teenagers that get paid less than minimum wage?
Lots of local pizza and Chinese food places have done delivery profitably for years without intermediaries. Also, not local, but Jimmy Johns does delivery as well and makes it work.
On whole, these places don't rely on sub-minimum wage help any more than other small businesses do.
I wonder if restaurant meal delivery is a problem that has been solved, that is waiting to be solved again.
Something that I tend to think about, coming from working for a manufacturing business, is that quality problems are often rooted in manufacturability, which is rooted in design. A unique meal, that is made by hand from a bunch of variable ingredients, is a design waiting for scale-up problems, unless you change the design to support higher volume production methods.
People figured this out a long time ago, how to manufacture foods that could be scaled way up, and even delivered. A supermarket is such a solution. The food might be less exciting, but the quality level (i.e., reproducibility) is very high.
The industry is trying to solve a design problem with delivery technology.
do we have any data showing that local deliveries handled by mom and pop restaurants were profitable in the first place?
We surely have a lot of data at scale now to show uber eats and co loose a ton of money, but I'm not conviced the local restaurant paying a salary to a driver etc were many a lot of money either? I really dont know
Yes. How do you think food got delivered before GrubHub?
And yes, they were making money doing it. If they weren't, they would just stop doing it. These sales were also far more profitable than UberEats or whatever...which is kind of obvious given that they weren't paying their drivers a 30% cut. The real value of these companies is the marketing (which is why the companies that have been doing this for years, like Just Eat, didn't provide delivery at all until recently).
...but yeah, people really underestimate how bad a deal some of these places are for small businesses. Most large restaurants (i.e. McDonalds on UberEats) are actually paid to be on the service. The small businesses get reamed (Just Eat is opening dark kitchens, whenever they see someone making money...they move in and kill the business).
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.
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!
In other countries those people are simply paid more. That’s why foreigners hate American tipping culture.
In foreign land: delivery person gets $10
In america: service pays delivery person $6. Client must device whether to give delivery person $3-$5.
Big uncertainty about which situations call for a tip, and which don’t, and how much.
In restaurants you can at least say “I pay to reward good service”. But with delivery, I am getting an undifferentiated bag of food at my door. Nothing differentiates service quality level. Deciding what amount to pay absent any interaction is confusing. And why is it based on a percentage of food?
Your argument is based in the assumption the worker has little pay. In america this is true, the worker gets little because tips are expected to make up for it.
In other countries, no tips are expected, so salary makes up for it.
How did you decide on a value of $5? Why do you tip at a restaurant, but not at a grocery store? (Why do you tip the server, but not the janitor?) What if we just charged everyone the real amount up front, and paid workers their real wage up front? I prefer each of my transactions to be one transaction, not two.
I don't go to grocery stores; I have my groceries delivered, and I tip them well. If the businesses I buy from raised prices so they could pass the additional revenue on to their workers as hazard pay, and I had any confidence at all that they were actually doing that, I'd be glad to stop tipping.
Oh, yeah? Well, I really don't get people who really don't get not tipping!
Tipping is dumb. It being percentage based is silly. I have to "appreciate" the service more because... I ordered a more expensive bottle of wine? C'mon, that's silly. It's also crazy arbitrary. We don't tip fast food workers, but we do tip people at Starbucks? I recently had someone come out and fix my washer. I had no idea whether or not to tip.
I think of that Mad Men scene when these conversations about "appreciation" come up.
Peggy: "you never say 'Thank you'!"
Don: "That's what the money was for!"
I'm a simple man, but I like service exchanges being what they say on the tin. I give you money. You give me service. No hidden societal expectations that involve more out-of-band funding.
You missed their point, which is that you hope $5 makes you seem generous but it might not be perceived that way, and knowing the deliverer’s need and reaction can’t be known creates discomfort and hesitancy to order delivery.
under normal circumstances, you're usually not home when the postman brings your mail. some people give their postman some cash if they happen to run into them, especially if it's around a major holiday.
as a random anecdote, I was talking to the ups delivery guy for my building the other day, and he said he's been making more money in tips than from his actual paycheck during the present crisis.
My postman mostly brings me junk mail, that I throw directly into a bin next to my building's mailboxes rather than bring it up to the apartment. That's not his fault, of course. There's no mechanism for me to tip him on any regular basis, unlike the delivery apps that let me add a tip to my credit card payment.
Not tipping (at least in the U.S.) is viewed as insulting. Tipping culture is usually taught to kids as “tip in proportion to how good your server did.” By offering no tip, you indirectly state to the waiter that they did poorly. Growing up, I was taught to always tip at least 10% so that you don’t end up with spit in your food :)
there are a lot of good arguments against tipping culture (and some for), but it's really not that hard to figure out how much to tip a delivery driver. in normal times, anything at or above 15% (or $2-3, if it's a small order) is enough not to get remembered as a bad tipper.
if you're in an unfamiliar situation, you can always just ask what a typical tip is. service staff at a fancy establishment will probably try to evade the question, but otherwise the person will usually answer honestly.
if you really just want to "set it and forget it", there's virtually no situation where someone would hold a 20% tip against you.
aside from the fact that it's custom and the prices/wages are already set with the expectation of tips (ie, adjusted down), you are essentially bidding for attention. stiff the delivery person enough times, and you might find that your future orders find their way to the end of the delivery route.
if you're this concerned about saving money, you probably shouldn't be ordering food for delivery or dining out in the first place.
In places in India, it is customary to tip the postman whenever you receive something important - particularly, government documents like a passport, driving licence etc. because those are specially tracked and it's easy for the postal worker to recognize the envelope/packaging too.
interesting - is it because of the implication that, since they can easily recognize the package, they could also easily "lose" the package? Are people tipping as a sort of implied form of racketeering, or is it just genuine gratefulness for delivering an important item?
As I understand it -- primarily from TED Talks -- corruption in India is endemic and somewhat expected. Sure, it's a form of racketeering, in the sense that many government employees have to give their boss a cut, and if they don't, they will be replaced by someone who does. It's typically presented as an "expiditing" fee.
And the cause there, as presented by Wikipedia[1] is fascinating to contemplate. The abnormally high tax rate (especially compared to the services provided) increases the demand for corruption to avoid taxation. Taxation avoided reduces money available for bureaucrat salaries, to where they are almost reliant on the bribery system to make ends meet. And hence the pressure on line staff to kick back money up -- a promotion would separate you from direct contact with the public and represent a loss of income that must be replaced somehow. It's kind of a weird Laffer curve phenomenon where higher tax rates yields less revenue.
I believe it's just an expectation that has been built by previous tippers. When there's a significant positive event like childbirth, obtaining a driving license, e.t.c, naturally people tend to tip. This sets a precedent and they start expecting as a sort of obligation.
The way I've sort of thought of tips, it's more like "well, they're driving X miles to/from the store to deliver my order, so the tip should maybe cover that, plus a bit more if they're friendly". But in times like this sometimes I'm ordering from a very short distance that takes a minute or two of driving, so they hardly need, say, $3 dollars tip for gas since it probably wasn't even 1/10 a gallon to get the food and deliver it.
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]
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).
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!
Did you actually read what I wrote above? I mentioned boxed pizzas specifically as an example of "tightly integrated operations with highly standardized food products for which the source/freshness/ripeness of ingredients is not an issue" and noted that only those kinds of operations "have been able to make local on-demand delivery sustainable at a national or global scale." Those operations include not only Domino's, but also other pizza delivery chains (Pizza Hut, Little Caesar's, Papa John's, etc.) as well as other standardized-food-product delivery chains (e.g., Jimmy John's).
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!
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.
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.
Sounds like a nightmare to me. And stores may not want to "plugin" their own systems because at that point, they're just commoditized with already razor thin margins.
The one downside to FreshDirect? It's very expensive. I'm lucky enough to be relatively price insensitive, but recently became a big fan of Trader Joe's. Obviously they're known for being economical, but I'm astounded how much cheaper it is. Even Whole Foods and the like.
Cooking 16 oz of cruciferous veggies and an ~8oz piece of meat is my standard lunch. At FD it's 10+ dollars (depending on the level of prep you want on the veggies). At TJ and grocery stores, even in NY, you can hit sub $5, easy.
Of course, the delivery itself is a huge convenience. But is it a 100% premium? I wonder.
FD orders come from their warehouses. With Amazon WF, a shopper goes around the store picking your items. The last time I was in a WF almost half of the people in the store were Amazon shoppers. That's why their inventory is not up to date. It's also less safe during this pandemic compared to FD.
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.
A recent $30 Thai dinner for myself and my wife came to $58 after delivery fee, service charge, and tip. Ridiculous for the convenience of saving 20 minutes (round trip) of drive time.
Of course we didn't pay it did takeout instead. I feel bad because there's a tier of service workers that I'm not supporting anymore, but marking up ~100% prices us out.
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.
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.
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.
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.
In Europe I get 1.90 delivery for a 10eur pizza. No hidden service fees/taxes/expected tip or anything. 11.90eur is the final what I pay. When I visited US however this shit with hidden fees was terrible. Where I live I never cook nowadays. I don't even shop. I only order in. Couldn't imagine this to be a possibility without food delivery apps.
Yeah, and it might just be that there was a surge of hiring recently, but I've had a lot of bad luck. Two delivery drivers showed up at the wrong street and I had to guide them to my place. One managed to deliver it inside the next door apartment and not call me, so I had to wait an hour for my neighbor to get back from errands to give me my order. Another time delivery took like two hours.
I think restaurants/delivery companies are having a hard time adapting to all of the new (different type of) demand while at the same time having a huge cut in profits.
Good on you for doing takeout instead. It's safe with a mask, gloves, and care. It nets you a nice break from the house, and it directly supports the restaurant staff.
Also, IME, the order accuracy is vastly superior. In fact, a few people ordered lunch to our workplace yesterday, and they didn't have one of the non-meat items I ordered (intentionally), so they replaced it with a meat item, without even trying to contact us first. Just insane to think someone thought that was an acceptable substitute, let alone without even confirming.
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.
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.
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.
>I really don't understand all the hate these services are getting here.
I'm not hating them at all - in fact, I think I've only used them twice and I really don't have an opinion...In fact, having not used them extensively, I'm looking at them with the eyes of an outsider...
Where I disagree with you above is the question of value vs business model. In each of the examples above, there is value being added and a business model that works. In the case of these delivery services - there is value being added, but the business model seems off and that's what's causing it to not be profitable.
In all of your examples, the big company provides a service in that it offers better discovery options in a single place. When it comes to restaurants, that's not quite the same.
Maybe if UberGrubCart let users order delivery from famous restaurants in another state that might be a real value add - but in a hyperlocal market like restaurants they have an uphill battle to fight.
On a per-restaurant-basis, it'll likely not work. The attractive part of an aggregator is that you don't need to keep a few people per restaurant to make deliveries. And you need to have them available whether people order or not, because predicting demand is hard, and if you disappoint once, you might not get another chance.
If you have the drivers work for an aggregator, it gets much easier. That doesn't have to be a for-profit corporation though, it could be restaurants getting together and cooperating.
Why can't you aggregate? It's just whether the aggregator is making the deal with the restaurant or the customer. Making the deal with the restaurant has a lot of advantages.
Oh, you mean have it separated where the aggregator basically just works as a delivery service for the restaurant? The user orders from the restaurant, they dispatch to the aggregator who handles pickup & delivery?
That could work, and would certainly shift the power towards restaurants.
> which wouldn't get the same buzz or VC valuation.
But a local, profitable delivery service wouldn't need to be a VC-funded business. It could start out very small, serving just a handful of restaurants in a single neighborhood. If it caught on, other restaurants could join in and it would grow.
It wouldn't need "buzz" either, since it would only need to market itself to restaurants, not to consumers (who would deal directly with the restaurant in the proposed scenario).
>But a local, profitable delivery service wouldn't need to be a VC-funded business. It could start out very small,
Which might not be sexy, might not make you rich overnight if ever, but gosh darn it might send the next X generations of your family to college debt free and put a pool in the backyard. We spend so much time in this world chasing financial engineering rather than focusing on business fundamentals.
It almost reminds me of how Flywheel is an attempt to compete with ridesharing by providing a better UX frontend for traditional taxi cab companies. I wonder how they're doing.
* 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.
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.
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.
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.
Yea, stopped using food delivery apps for this exact reason. As a New Yorker, https://www.eatnyc.org/ has been pretty useful for finding what local restaurants are still reliably open for pickup and delivery. They also don't take any commission from restaurants, so I think my goto restaurants actually prefer me using it.
I've ordered at least 10 times through the Chipotle app (delivered via DoorDash) and never had problems. I was very surprised to get the food in under <20 minutes.
A few times the estimate was off and from the status/tracking page, it looked like the driver was making another delivery before mine, but that didn't delay my order more than 10 minutes or so.
I've had similar issues. Tried delivery services for first time recently through Chipotle with ETA of 15-20min. Doordash was fulfilling the order, which showed up after 1 hr. By the way, the Chipotle was 3 min drive from my place. Since then I've been picking food myself.
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.
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.
I don't see how it helps with voting on a restaurant. Also it seems that the instigator is picking up the bill. I wouldn't want to bicker with my neighbors over them forgetting to pay. The workflow should be brainless, else people will start thinking and that's the end of it.
Most importantly, I've never heard anyone using it, so it wasn't done right.
> I don't see how it helps with voting on a restaurant.
I'm confused about what you mean here.
> Also it seems that the instigator is picking up the bill.
Correct. The model rewards people for piggybacking because it incentivizes them to choose a restaurant that might not have been their first choice.
To avoid being the "instigator", you can just always choose to piggyback. It's always an option in my city.
> I wouldn't want to bicker with my neighbors over them forgetting to pay.
I also don't understand this, but perhaps you meant it in a context other than UberEats.
> Most importantly, I've never heard anyone using it, so it wasn't done right.
Many people won't realize they're using it. It shows up like a delivery discount: "Order in the next five minutes and pay $0 for delivery" or something like that. Everyone UberEats user I know uses it -- some exclusively. We never talk about it though, this is just what I've observed when watching them order.
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.
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.
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:
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.
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.
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?
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.
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.
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.
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.
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.
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.
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)
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
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.
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.
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.
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.
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.
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.
I've been getting into bread buying. I find a loaf at QFC from Essential Baking Company, one with a stiff crust so that I know it's fresh, then take it to the register to pay for it. It works really well.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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?
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.
You're blaming the implementation because fundamentally the service makes sense.
Let's say I am a restaurant owner. I want to take orders online. I don't know anything about payment processing, making a website, etc. Grubhub makes a ton of sense to me because they handle all of that stuff, as long as the price is right.
Maybe it's impossible to offer such a service profitably. But that seems weird to me.
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?
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.
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
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.
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
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.
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.
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.
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.
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.
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.
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.
How much of the middle class can afford to routinely eat at restaurant prices, especially now that many people are stuck at home with their families, thus changing the opportunity cost of cooking?
Under and unemployed people staying in their homes are not going to order. They save money. People working from home could order but many of them feel insecure abut the future and also save money. Notice spike at the end: https://fred.stlouisfed.org/series/PSAVERT (the Dec 2012 spike was due to accelerated payment of bonuses and compensation in anticipation of increase in tax rate)
You can innovate and VC all you want, but it the demand decreases, so does the revenue.
I'm sure that's a factor, but I think its more about peoples monthly expenses going down since so many things are closed. No vacations, no sporting events, no weddings, etc.
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.
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.