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Doordash and Pizza Arbitrage (themargins.substack.com)
1393 points by lunchbreak 11 months ago | hide | past | favorite | 514 comments

I cut this deal with my neighborhood Italian restaurant!

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

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

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

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

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

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

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

That’s fine, I wasn’t trying to expose you, I just wanted to understand. It looks like everyone is happy, the restaurant gets cash, the shelter gets food, and you get... a lot of pizza for the rest of your life! I don’t think I’ve eaten 5,000$ worth of pizza in my life so far haha

> I wasn’t trying to expose you

No worries. I don’t feel anyone did anything wrong here.

> a lot of pizza

Orecchiette and Nebbiolo :).

> Orecchiette and Nebbiolo

Any judge with a surname ending with a vowel would pardon you, should they get pinged by DD

Great that you're donating to the homeless!

Assuming $10/pizza...500 pizzas in my life are reasonable

$10 for a pizza actually sounds pretty cheap.

In Italy $10 / pizza is a medium-high price already.

Generally, €10 for a pizza is the average one in EU. Only in UK people is prone to pay an average of 18 pounds for it, which is sick.


A small basic pizza is $8-$10 here. Domino's always has a deal where you can get 2 medium pizzas for $6/each. (used to be $5).

But if you're buying larger, specialty pizzas without coupons/promotions then you're going to be paying more like $20/pizza.

My pizzas are usually small and plain, so I'm closer to the $10 mark.

In the SF Bay Area a 14" pizza from Round Table or better is $20+. Trash pizza is still $5 each or whatever, yes, but where do those savings come from? How do they maintain the price when flour is in such short supply?

Yeah. Even in Western PA a large will set you back $20.

DoorDash loses money, but it’s not like they care anyway

Time for some cross-platform integration: start GoFundMes to crowdfund arbitrage of SoftBank derivatives in support of local small businesses.

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

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

I'm confused. Doordash is knowingly reselling an item for 75% off and someone bought many of the items. No one was defrauded; everyone in the transaction was paid what they wanted to charge, and everyone got what they paid for. What is unethical here? Are you saying it's unethical to take advantage of a sale?

what's unethical is that doordash is undercutting competitiors who can't offer such deals.

in germany, reselling something for less than what you paid for (predatory pricing) is illegal (unless it's already devalued because it's old or used)

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

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

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

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

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

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

Where I live, one company has taken over all meal delivery nationally. After destroying the competition, this company had started raising prices each year. They ask for a percentage (13%, rising each year) in an industry where the margins are already very thin.

They money grab got a lot worse after they pushed out all the alternatives and just like with Google, everybody has to play by their rules or they'll be mostly undiscoverable for a large portion of the general public. Their delivery people are still underpaid, but by increasing their percentage of the bill they take for themselves they're now turning a profit. It's gotten to the point where companies are not even allowed to lower their prices when people use other delivery systems (or the restaurant's own personnel) which are cheaper.

The company only got this large because they could afford making losses for many years. Now other companies such as Doordash are trying to cut into the market as well, using hundreds of millions of foreign cash flows and putting business owners under even more pressure. Had there not been a company doing this since 2014, Doordash or any of its competitors would have taken the market regardless.

This is the biggest problem with the reality of predatory pricing compared to the theory of it: after years of undercutting your competitors, you're finally ready to jack up prices and take a profit....just as a new competitor comes in with a new infusion of cash and undercuts your artificially inflated price. (Remember, you can't just turn any old profit, you need a large enough profit to offset the years of purposefully selling at a loss.)

Surely at some point the competition (assuming a lack of innovation to drive down prices) will realize THEY don't want to be the ones who lose money for years only to get unseated when they're ready to jack up prices? How many times can this cycle repeat?


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

Walmart and McDonalds are masters of this approach.

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

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

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

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

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

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

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

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

Most monopolies don't come from natural causes.

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

This happens every day.

Really? How do I learn more about this?

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

How can you call McDonald's predatory pricing? They have been cheap and profitable for decades.

At best you could try to argue that they make their money fleecing dumb "business owners" who pay for franchises.

> How can you call McDonald's predatory pricing? They have been cheap and profitable for decades.

Their pricing and food is a gimmick, didn't that movie The Founder and the subsequent articles from various outlets pretty much lineout how Mcdonald's actual business model relies on Property Management and franchising? [1]

The food, competitively priced (questionable food costs and sources are the bigger story not told) or not is only the hook/marketing costs to get you to show up in Corporate's business model, the real money is in leasing the property and the brand name to the Local owner.

Personally speaking, I had the misfortune of eating at Mcdonalds during this COVID shutdown on more than one occasion as grocery stores were closed by the time I got off work.

And other than nostalgia for what was once a haven of my childhood, I cannot bring myself to put that stuff into my body without feeling nausea afterward. Everything is overly sweet, or salty; I remember the pickles and the fries from the happy meal being pretty decent as a kid in the 90s that went down with the Hi-C orange soda, having had one of those value-meals ($15 is hardly a value mind you) as an adult with the same items was atrocious.

1: https://medium.com/@alexcjensen/forget-burgers-mcdonalds-is-...

Of all the ways I can imagine self driving cars becoming a reality, Uber creating a fleet of honest to goodness self-driving taxis seems to be about the most far fetched.

On balance of probability, I think that is just a bullet point to keep the juicy AI flavoured investment funds flowing.

It only works if you have an easy path to monopoly once you price your competitors out. A company like WalMart or Amazon can leverage their returns to scale on logistics to actually price out Mom&Pops. That way, even after the drive the small stores out of business it’s just not worth it for anyone else to try to cut in unless they can also operate at WalMart scale and afford to bleed money for a while until WalMart gets tired of undercutting them.

But there are no appreciable logistical or operational efficiencies in how these delivery services operate. And there aren’t any barriers to entry. The workforce is completely fungible so they aren’t locked in. And just the fact that delivery services are popping up like mushrooms suggests it doesn’t take much to start one up.

In theory they could eke put some advantages to scale that keep out upstarts by using machine learning to optimize delivery routes or something. But I doubt that gets them the kind of efficiency gains they would need to actually turn a profit. From what I’ve seen, it looks like their main attempt to freeze out competition is just coming from flooding your search engine hits. I don’t know how sustainable that is either.

Name me one time in the last twenty years that this "tried and proven" concept has worked?

My original comment said its not okay to steal from a company even if you don't like that company. Your post is a lot of words about why you don't like that company. You don't directly address my claim that its unethical to steal from a company even if you don't like the company.

And then you make a weird point that software can be unethical (e.g. phising software) and this somehow applies to Doordash. Just to get this straight, making peer to peer scheduling software used for deliveries is unethical? And because of that, its okay to steal from their investors (including many US investors and pension funds)?

> My original comment said its not okay to steal from a company even if you don't like that company.

Your original comment said it was wrong to exploit a bug, to which the parent poster retorted that this was a feature and not a bug.

Here, you've gone further to claim that this behaviour is stealing, and I'd like to explore that for a minute: what possible moral or legal right does Doordash have to an operating profit when it deliberately operates at a loss?

By all accounts, this below-cost pricing is predatory behaviour on Doordash's part, not the customer's: they seem to break into a market by offering delivery at a subsidized rate, then they take data based on those rates and try to strike fee arrangements with restaurants. At first glance, it seems like they sell themselves based on inflated numbers from the discount period, without disclosing that they were in fact offering customers a discount.

I see no ethical fault in beating a (sophisticated!) predator at their own game, but where do you reach the alternative conclusion?

Would it have crossed the line if the OP had tweaked the Italian places website (say for example setting a 0 height div) to include fake prices intended for the scraper to misinterpret?

For me I think it would have. Which makes me pause to consider whether I find the whole scheme too close to the ethical boundary.

I disagree. In the case of this submission, the restaurant was getting negative reviews due to poor delivery (e.g. not keeping food warm) - all of which were the fault of DoorDash, and the restaurant had no control over it.

Doordash is exploiting and harming the restaurant so that Doordash can make money. I think it's totally fine to make changes to your own site to thwart this. Doordash is in full control of this. They're the ones scraping the site, and they're the ones who should pay the price if they do a poor job.

I think that is a fair point which I wasn't really accounting for. Doordash should really get permission from restaurants before inserting themselves as a middle man, even on a trial basis.

Also, it occurs to me that if the artificially low prices resulted in doordash recieving more orders than would be usual, I doubt they would have disclosed that in their dealings with the restaurant. Though that is hypothetical and still suffers from the two wrongs don't make a right issue.

I think it is a bug. I think they relied too heavily on automation and scraping to get a list of all the restaurants, menus and prices. From the original article:

> My first thought: I wondered if Doordash is artificially lowering prices for customer acquisition purposes.

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

So I don't think its a feature.

> what possible moral or legal right does Doordash have to an operating profit when it deliberately operates at a loss?

It doesn't have an operating profit whether you exploit the bug or not. Doesn't mean its okay to steal from them. Even if they do deliberately lose money (e.g. first Uber ride free up to $10), exploiting it is unethical (e.g. tricking Uber into thinking you're on a new phone).

The rest of your argument is again, why you don't like Doordash or why Doordash is unethical. I won't address this point because I think its unethical to steal from an unethical company so their ethics is irrelevant.

If I think Walmart is unethical, is it okay shoplift from their stores?

This is the crux: does it count as stealing to accept the offer of a contract which causes the offering party to lose money?

My answer is no. They offered the service at a certain price, you accepted it. Whether either party profits or not is not part of the contract.

So no theft has taken place. If you want to claim that's it's unethical to take the free money that they're offering, you need to provide a justification for why that is. The onus is on you.

The only way I can see you attempting to justify it is by saying that it involves taking advantage of unforeseen consequences of the contract. But as has been pointed out, they fully intended to lose money, so that doesn't work.

Arguing from the position where you define the ethical framework and then refuse to engage in any discussion about whether that framework is correct is kind of tautological.

In this case a homeless shelter ended up with a lot of pizza (which I'm presuming they consented to receiving), a local business got a cash injection and the OP got some perks. Under your ethical framework a bunch of silicon valley types had to find some other way of pissing $20k up the wall.

I know which outcome I prefer, though I personally wouldn't have done it.

> If I think Walmart is unethical, is it okay shoplift from their stores? You've made a false equivalence here, a more correct question would be: "If Walmart prices a gallon of milk at $0.25, either by mistake or for the purpose of getting people to buy milk at Walmart and not their local grocer, and I buy 100 gallons to give to people who can't afford milk right now, is that unethical?" ...to which the answer is, no, that's not unethical, you paid the price listed on the tag and Walmart (conceivably) paid the dairy farm their usual rate, so the only company hurt was the one that made the mistake or predatory pricing move.

How do you define "stealing"?

On Wall Street this is called arbitrage.

If you don't want to lose money on sales, don't sell for less than your cost. People buying your product is not "stealing".

My comment also stated that it's not stealing if you order from a business that decided to operate in a way that causes them to lose money if you order with them.

Investors know that the company they're investing in will lose a lot of money and the know about the business practices that basically give away money in order to gain popularity. It's not their money anymore after they gave it to the company. It's true that if the company goes bankrupt they lose out, but they can prevent losing that money by not investing on companies handing out free cash.

The software itself is not unethical, the business practices Doordash/Uber/Yelp/etc. follow to make their software popular are. The problem is that these companies seemingly can't make a profit without using huge investments to crush the local competition. If they were to act ethically, I would have no problems with these companies.

Also, taking away future profit is not stealing, it's part of the risk of doing business. Don't stuff your money into risky business ventures if you don't want risk.

It's quite sad that pension funds are investing in these predatory businesses but protecting their investments because they're too big to fail undermine the entire concept of competition in capitalism.

What makes it unethical is the "quid-pro-quo". If he didn't expect to get free food for life it would be OK.

Interesting take, but I think the compensation only takes it from an act of charity down to exchanging favors, which isn't unethical in itself. The very act of buying a pizza is a quid pro quo. This money for that pizza.

This reminds me of the scene in Silicon Valley where Richard bankrupts a similar delivery service that's not profitable in a specific use case by ordering a huge amount of Pizzas.

15000 minus the actual cost of the food.

... so you basically used Doordash's algorithms to make Softbank donate $15k to your local homeless shelter?

That's fucking awesome. Way to go, man.

Why wouldn't the pizza place order $100K worth of pizza from themselves to themselves? They don't even have to make it.

A Doordash delivery guy actually has to pick up the food though right?

This also does probably provide some legal cover as well.

He can pick up empty boxes and then immediately hand them back as the delivery address is the restoraunt address, no?

If the food delivery driver is knowingly not delivering any food, but is paying for the "food" anyway... that seems pretty close to fraud.

If you order a shitload of real food and the pricing works out well for the restaurant, it's weird but it is still following the rules that DoorDash set out.

But if Doordash never made an agreement with the restaurant in the first place, like in the article, the restaurant has no obligation to follow any of Doordash's rules.

That doesn't mean they won't fall afoul of some state or federal laws in doing that.

Right but this thread is about the driver pretending they picked up food that never existed. IANAL but sounds like fraud on the driver's part.

Why does the food not have to exist? You can deliver actual food and toss it for that kind of money

Nobody saw the episode of Bagpuss [1] where the mice just role out a cookie, and then take round the back of the "factory" and deliver it again? Apparently we've been waiting 46 years for this particular innovation to have a real world opportunity!

[1] https://www.imdb.com/title/tt0771367/

I can only assume that such a large order would be eventually flagged by the system. But I imagine ordering 50 pizzas every night can be relatively "normal"(feeding the night shift or whatever).

This really makes me happy but I hope you delete this before it becomes mainstream and DD catches on.

I hope it goes mainstream and they all go under because nobody wants to pay their crazy prices while not actually supporting a restaurant

I mean if anything their prices are crazy low. I can buy about 30 minutes of a real human's time to deliver me food for about $3. With pizza joints and Chinese takeout it's averaged into the prices but not with these delivery apps. I've seen a few inflated prices but almost every restaurant around here is just charging the same as they always have.

A delivery service that supported the restaurant would be way way more expensive.

I can’t where I live. My $20 takeout order is $40 from any app. Entrees are several dollars higher, then there’s a delivery fee then a service fee then the tip for the driver.

> delete this before it becomes mainstream

ignoring the fact that this post itself is top of HN and going viral?

I don't really think going viral on HN === mainstream ;)

DoorDash engineers are on here too. Unless they want to keep quiet about it ;)

I've always dreamt of having a post of mine read in court.

Hi judge!

In this case DD is essentially acting like a ticket scalper. And since DD screwed themselves, is there even a law broken?

No idea, I'm not a lawyer. But in the original post he mentioned that he "cut a deal" with the restaurant, which to me suggests that he got the $5k back, possibly in cash, from the restaurant. If he then pockets to tax he saved, that smells like tax evasion.

He then tweaked his story to say that this cost him $5k. Why did he say he was cutting a deal then?

I think he’s saying the owner will comp him deliveries. Not pay him back.

Ah, I overlooked the "free pasta for the year", thank you

You make a great point. They also mention they are an options trader on wall street, so $5000 easily could be throwaway money for a double-good cause

The person who posted the comment about $5000 pasta is not the same as the person who wrote the article (who mentioned trading).

Haha, thank you, I wasn't thinking

if you ever apply to YC, this is your YC story.

I've been thinking about this comment a lot today. It's cool that you have relationship with the owner of a local restaurant! I know the owners of a local coffee shop pretty well and it's been really interesting (and a bit depressing) discussing the economics of owning a small business with them.

And when you know your local business owners by name, opportunities like this emerge.

That's capitalism as its finest.

Saudi money (via SoftBank) is paying for poor people's food (and also subsidizing their transportation, via Uber).

Frankly, after all these years I still don't get it. Are the Saudis that gullible? How much more they need to lose to understand they're being duped?

They've only really known oil for 3 generations, so yes.

And they're also desperate. The future where the world doesn't need their oil (or they've run out) isn't a distant future anymore. It's coming, and coming faster and faster. They need to diversify anyway they can if they want to avoid going back to just being a desert. And so they're jumping at pretty much any deal they see

It's not coming and coming -- it's here. Prices are negative, and they need at least something like ~$60/barrel to keep their government running and closer to $80/barrel to keep their whole country running.

But yeah, I agree with your main point: they're jumping at deals and chasing big wins, a la Dubai. Cuz they don't really have any other choice.

Sheikh Rashid's quote [1] kind of sums up the desperation of several countries in the Middle East to somehow diversify out of oil: "My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel"

1: https://en.wikipedia.org/wiki/Rashid_bin_Saeed_Al_Maktoum

Sheikh Rashid was born in 1912. The quote talks about his great-grandson. That generation has been alive for a while and comfortably drives Land Rovers.

>The future where the world doesn't need their oil

We'll need oil for plastics even if we stop using it for transportation, and Saudi oil is just about the easiest/cheapest to extract, so we'll be using their oil for a long time, but it won't be as grotesquely profitable for them as in the past.

Yes. Though we don't really "need" oil for that. You can make plastics out of any source of carbon and hydrogen.

Oil is just convenient, because you need less energy to make the plastic than if you start with eg water and CO2.

That the whole shooting match right there. "just convenient" is meaningless - we don't make anything unless the cost/benefit works out. If we didn't have oil, it'd be safe to say we'd never have adopted ubiquitous plastic at all.

Matt Levine's column Money Stuff touches on these questions every once in a while.

Until WeWork really blew up, it wasn't too hard as an investor to keep up the impression that the track record of Softbank was good enough.

(That's not to say that you couldn't re-interpret the track record in a negative way, even before WeWork. But nothing really forced you to.)

Some people can make a profit playing at casinos (more so in the past than now).

Does that make casinos dumb? No, just imperfect.

It's funny when this happens in our industry. It's called a security vulnerability. And if someone were to write a blog article about finding it, but also exploiting the fault several times over for their own financial gain, we'd be all up in arms over it, right?

Even if the exploited party itself it shady as hell. Say they were a credit card scammer, someone found a way of conning them for money, does that for a while to make some $$$, and then proudly writes a blog article exposing them.

Maybe I'm missing something though. That's looking at it rationally (?), but part of me also feels like, screw Doordash.

Nobody intentionally includes security vulnerabilities in a product. This is something that Doordash knows they are doing and have decided to do, not something they are doing accidentally.

Even taking a negligent security posture is not the same as intentionally including a flaw.

The place where these companies intend to make their profit is on charging for the credit card transaction.

I don't understand how this works.

If your order to doordash cost $5000, why did they pay the restaurant $20,000? That would suggest their prices are 4 times cheaper to the customer. But I thought everyone complained they were more expensive.

Surely DD are still keeping their commission from your order?

What have I misunderstood?

Did you read the article? This was covered there, though as a less extreme price difference.

Doordash seems to provide two different services.

1) Doordash has some deal with the restaurant, gets a commission on sales, fees, whatever.

2) Doordash has no deal with the restaurant, charges customer $x+y, buys food from restaurant at $x.

In the second case, Doordash may be charging much more than the menu price, if it things it can find customers who will pay it.

I think the trick here is that Doordash isn't charging the customer $x + $y, but $x - $y. X minus Y. That is, they're subsidizing the delivery - in order to generate demand, and then come to the restaurant with the data to convince them to sign up for 1). This was actually mentioned at the bottom of the article.

So in this story, 'JumpCrisscross paid $x-$y = 5k for an order to a homeless shelter, but the real, restaurant price for that order $x=20k, which means DoorDash has just subsidized the transaction for $y=15k. The restaurant got an extra $20k of business that day, and 'JumpCrisscross bought $20k worth of food for a shelter at 1/4 the price.

And the best part, they could probably do it again :).

EDIT: Reading the article again, it seems to me Doordash is supposed to be charging the customer $x in the lead generation phase; so perhaps the -$y part is a scrapper error.

Or the -$y is marketing costs.

DD says to Pasta House, see? Look, with DD we facilitated an additional $20k of revenue for you on this day. You should enter into an agreement with us so that we can make this a more seamless process.

In most cases, Pasta House isn’t aware that those orders were drastically under cost and don’t represent actual demand.

It is exactly the opposite of your #2, check out the article.

I wish I could vote a hundred times. What a great thing to do.

How much do you pay for pasta?

5,000$ of pasta would last me and my family until the end of my days.

At ~1-1.2 euros for half a kilo it's around 90 years worth of pasta (based on an average of 28 kilos per person per year in Italy)

I doubt he ordered dry pasta. Most likely he ordered 10 or so of every pasta dish on the menu.

What restaurants let you order dry pasta beside the ones in food halls?

Home Room in Oakland is delivering TP and dry pasta with delivery orders right now.

I predict we'll see a lot more of that kind of thing with reduced occupancy at restaurants. Come in for a meal, leave with a week's groceries.

Shrimp scampi at the deli by me is like $16. Ordering for a family of 4 with just 2-3 meals a week would easily cost $5k+

shrimps are way more costly than pasta

And even eating shrimps 3 times a week, with 5,000$ of shrimps a family of 4 could eat shrimps for a year.

> texted the owner about being miffed they hadn’t told me they were on DoorDash.

Why would someone do this?

If you knew the owner well enough to have their number, it doesn't seem totally crazy.

"Had no idea you did delivery! Boss just put in an order for a work event! See you Friday?"

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

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

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

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

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

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

Well, since DoorDash is listed as the copyright holder on the bottom of www trycaviar com it looks like DoorDash is just bleeding their $400mm series F out under a different name.

Maybe have them try the arbitrage themselves per the article and put the profit _and_ the booze directly in their pockets... (/s?)

DoorDash purchased Caviar from Square last August: https://techcrunch.com/2019/08/01/doordash-is-buying-caviar-...

I assume DoorDash doesn't want to alienate loyal Caviar customers and so is continuing to operate it independently, similar to how Grubhub and Seamless merged seven years ago but still run two different websites (albeit with identical design).

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

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

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

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


Appears likely that someone that has access to the hotel’s customer CC data might be behind this and the local police are aware of it too...

“Not only is this hotel horrible, our guests had their credit card stolen and $500 worth of purchases made on it!!! Reporting this place to the police. Do not even go near this hotel. Total crooks, denied everything when confronted but they were caught red handed” [1]

...makes you wonder what is really going on.

[1] https://www.tripadvisor.ca/Hotel_Review-g60763-d267183-Revie...

So money laundering

Clearly the hotel business is a thin cover. One reviewer mentions dust as though the room hadn't been used recently.

The reviews are incredible.


So that's where the Bowery King is in hiding.

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

Cops aren’t ever eager to take on cases.

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

Appears local law enforcement already knows about it:


Or, it is the age of social distancing. Just order it to a random address and steal it off the porch/lobby area.

Majority of the liquor ordered using a phished account goes here – so sketchy: https://www.google.com/maps/place/101+bowery+st/@40.7176021,...

How do you know that?

There are fences (shady stores) in shady locations that will buy booze, baby formula/diapers, and over the counter medicine like daily Anti-acids. If you order liquor or wines that people sing/rap about you can find a place to sell it.

The scammers just need to find a fence which is pretty easy if you know where to look. They’ll even tell you what is the best stuff to get.

Yeah, the scammers ordering their stuff are only getting the good stuff. Don Julio, 1942, Johnny Walker Blue, high-end wines, etc.

Last week I noticed that my credit card number had been stolen. But only for UberEats, I had tons of UberEats transaction of $30-$50. It's not my UberEats account that was stolen because I logged in in my account and I had not ordered anything. So looks like there's a market to get those stolen CC and use it to order a bunch of stuff from restaurants. Perhaps you're right, it's to order things that can be resold (wine, etc).

And because it's the pandemic, i'm sure lots of people wouldn't notice those extra charges to their credit card right away because they already order through those apps. I haven't used UberEats in a year so it was easy for me to notice.

Consumers often don't realize the charge, I believe, until it's too late. Tech-illiterate old folk getting hit by the latest leak of information from <take your pick of large company>.

I love this story, especially about ordering dough pizzas.

It reminded me of this twitter thread: https://twitter.com/meslin/status/1225834920611848192?lang=e...

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

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

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

> Works fairly reliably in supermarkets

No it doesn’t.

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

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

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

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

I hated the weight check at Tesco when I lived in the UK. It unnecessarily locked up my self service checkout a few times per week and in general made things slower.

Compared the AH in the Netherlands where you just scan the barcode on all your things and they really don't care about the weight or where you put them after scanning.

I'm sure there will be a tiny percentage extra fraud that Tesco may catch with this, but given the choice I don't shop there due to the shitty user experience. That's got to cost them more in lost revenue than the fraud they stop.

Yes, it's really annoying. It's that bad that I normally just queue for some personal touch with the cashier :)

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

I haven't heard that phrase in years. There were some growing pains when self-checkout systems were first introduced, but every one I've interacted with in recent memory has been re-calibrated to be much more permissive.

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

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

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

Same. Have to have a clerk unlock the machine 3 times on bad days. It feels like the shop doesn't want me to shop there.

Speaking for France, a lot of supermarket who introduced self-checkouts have further invested in developing scanning apps operated by the client on their phone as a parallel solution. Basically a low-tech amazon-go solution, where the client is its own casher.

Those bring their own set of issues, can be difficult to understand and use from the customer, yet they still felt way easier to deal with than the SCO experience.

We've had this for years with Waitrose, who just give you a scanner that you can take round the store. I think more recently they let you do it on the phone. Then you just pay at a special checkout and leave. They also have no-scale checkouts where you scan and leave (these are still attended). Usually if you buy something very expensive it'll flag up for a "random" check which always happens to be the expensive item.

The handheld scanners are easy to use. All it has is a trigger for scanning (which everyone knows how to do), scroll buttons, and a delete button if you make a mistake.

For vast majority of things amazon sells, a system checking if the weight is within a pound or 25%, whichever is greater, would almost never have a false positive.

So a pound is 453g.

I checked my order history and my last orders are around:

- 350g

- 600g

- 200g

- 500g

- 5kg

- 120g

a box with empty packing would fit within a pound for most of these. I don't intend to nitpick your back of the enveloppe calculation, just that it's not as simple as it seems.

I don't know if I am the typical amazon shopper, but on my 35 orders in the last 6 months the above pattern is repeating with mainly very small items (like cables, dongles etc.) and one big heavy package from time to time.

I think an important part of the equation would be knowing the weight of the boxes you're using as well.

This is called a "tare weight", FYI.

At that level of detail, it also requires the seller to give an exact weight for the goods they are selling, and update it each time it differs by even dozens of grams.

It can be done, just not sure the parties involved are willing to commit to that level of accuracy.

I just had a package from Amazon that literally weighed less than the product that was supposed to be in it. I peeled off the shipping label and found another one underneath that was labeled "weight error". Someone had apparently intercepted it, overridden whatever check was going on, and sent it out anyway.

Weirdly, Amazon still made me mail back the underweight one (I would happily have paid the correct amount for the smaller quantity to save the trouble of remailing) and a few days later sent out the correct one. You'd think in this case they have a record of the actual weight of the package and could sort things out instantly, but apparently not.

A couple of months ago Amazon shipped me a completely empty, sealed envelope labeled as 1 pound. At least Amazon support immediately shipped me the correct item.

Weight can easily be gamed by adding a bag of water.

Verifying shape would be difficult without knowing what to expect beforehand, but can also be gamed.

You won’t get the precision of supermarket weighting if you are dealing with diverse restaurants with a dynamic menu.

Unless I'm missing something, this thread is talking about the automated system making a mistake on its own. No one is trying to game the system.

Not all distribution centers validate weight, don't recall if Amazon does but I would be surprised if they don't. High speed scales are expensive.

A few people got a box of rocks instead of a $4k camera awhile back, one guy got two boxes of rocks after returning the first.

Thinking about this more, I'm surprised this couldn't be caught when the items got delivered to Amazon. I find it extremely unlikely that a picking robot accidentally found an item with the same barcode if they weren't already in the wrong place.

Seems like when the items arrived at the fulfilment centre, they got mis-scanned and ended up comingled. Presumably that's the stage where you can check weight and volume - eg does this item fit with the known dimensions.

This check must be made somewhere otherwise people wouldn't bother returning high value electronics with rocks inside (presumably someone does a cursory check of weight before the inventory gets comingled again).

It's not unusual for warehouses to deal with items with multiple barcodes.

For a technology example, you might get a network card with a UPC barcode, but also a MAC address barcode, and a manufacturer's part number barcode. A wholesaler/ manufacturer sells boxes of 20 items to resellers? The outer box will have a barcode. That box got sent by courier? Three barcodes on some mailing labels.

So at a goods-in station, the usual response to "multiple barcodes, some don't make sense" is "Keep trying until you find one that does make sense"

Those multiple barcodes also confuse the crap out of self-check-out stations. Once it picks up on the wrong one, it throws a fault that the attendant has to come back out of, so you can't just back out scan the right one.

What baffles me is that the store/software can't build a dictionary of "known misdirection" barcodes, like "this is the shipping carton not the product itself, fault and tell the user to rescan, but don't just lock up" when they're seen.

Scanners in distribution centers contain a barcode hierarchy that filter out unused barcode types. For example, after something has been picked, a UPS label might be applied to it. Subsequent scanners will be programmed to only read either the internal routing label or the UPS label (or both and let the software handle it).

The scanners in supermarkets are made by the same companies and I would assume run on the same software. However, it might be more difficult to ensure a specific type of barcode is used on 100% of products in the store. So if you see the scanner picking up the wrong barcode at the check-out aisle, it is most likely either the scanner is not programmed correctly, or the scanned barcode is the same type as a valid barcode used somewhere else in the building.

As far as handling faults, that would probably be done on the POS system, not the scanner itself. The scanner software is perfectly capable of handling errors in different ways (for example, sending a specific code to indicate two different non-matching barcodes were read in the same pass), but from a functional standpoint, the scanner is 'dumb'.

Hah that box story is hilarious.

The actual automated fix should be during stock intake I assume. We ship international parcels with DHL etc and it's a clear stipulation there are NO BARCODES at all on the box apart from the mailing barcode that we generate. Being Amazon, nothing probably happened because they have more money than they need, but I assume they have similar rules and would be justified to ding the suppliers for this cost.

But Amazon isn't intentionally trying to lose money here.

I hadn't realized that cardboard boxes were that expensive!

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

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

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

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

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

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

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

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

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

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

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

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

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

I gave a lecture in marketing at an university using that story.

To this day it is one of my favorites.

is it actually real though? I imagine it'd be really difficult to pull it off. what if somebody who reviews restaurants would go there on, say, Monday? or at lease, even if they don't get in, just try to check out the place from 'waiting area' or at least outside.

Youtube videos have reputation for being fake, I wonder if this is actually true.

I saw that video a year ago... pretty epic.

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

In the article they say:

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

I'm totally guessing, but I would bet they do an audit of the numbers after the trial period and would have caught it then.

Google tracks outclicks, so setting a lower price at first is a cheap enough SEO tactic.

Anyone know if it would be considered fraud and/or illegal to exploit this? I would consider doordash and grubhubs tactics of falsely representing themselves as restaurants to be more unethical. It would be great if someone could scale a solution that would take those arbitrage opportunities and pass them on to the drivers and the restaurants.

Yes, it's fraud.

In general, knowingly obtaining money, goods or services you know you are not entitled to is fraud/illegal.

Here's an example of someone going to jail for knowingly exploiting a glitch: https://www.inquirer.com/philly/hp/news_update/20071026_N_C_...

Your case is more clear cut because that is a glitch in the website. It seems that in this case Doordash is offering a promotion. Calling that fraud would be like calling taking advantage of reward points fraud.

Meanwhile, door dash never asked for the restaurant to participate in the "promotion," so screw them... They are offering to deliver boxes of dough at deathly inflated prices, with no other agreements with the restaurant. How is taking advantage of that "service" fraud?

Exactly. That's the real problem. Even if it's just a "trial". Somehow getting a delivery number on the restaurant's listing without their knowledge or consent is abuse. Good thing they get punished for it.

It gets dicier when the restaurant starts shipping out plain pizza dough.

This made me wonder: what if a restaurant puts a pain dough "pizza" for $30 on their menu?

Of course, no one would order it. But in this situation, an aggregator could offer it and the restaurant owner could take advantage of that.

It smells like fraud, except that every individual step seems legitimate (albeit weird). I'm pretty sure you're allowed to charge ridiculous prices for common goods if you so choose...

It still requires the aggregator to offer it for less that $30 (at least the cost of dough less). Which, at least in this case, seems to requires a scraping error.

Not if the customer ordered plain pizza dough

That's not how this works. The glitch is that there's a particular menu-item mispriced by Doordash. You can't just order arbitrary things at arbitrary prices, and when the restaurant takes an order for X and delivers Y, it's taking a step towards making a material false statement to obtain something of value.

What restaurant doesn't allow alterations?

"I want a supreme pizza, hold the pepperoni, sausage, peppers, onions, olives, sauce, and cheese".

It seems like it would depend on who's initiating the action.

While the restaurant preparing "partial" pizzas to ship to coordinated orders is obviously fraud, I'm not so sure "Asking the restaurant owner about their costs, then independently ordering a large number of pizzas" qualifies.

It's not your responsibility if Doordash has shit code and auditing. And given VC-onomics, it's not even clear how you would be certain this isn't "operating as intended."

> While the restaurant preparing "partial" pizzas to ship to coordinated orders is obviously fraud

How so? They're making the pizzas the way the customer wants them. The 'objective' tastiness is none of the delivery middleman's business. And there's nothing wrong with offering a bad pizza for $24, as long as the customer knows what they're getting.

Well, if the restaurant reimburses the customer after, it probably would become a problem.

Way around this: private owner places his own orders as customer, pockets profits as owner. That might be legitimate - but remember: if you take legal advice from the Internet, you get what you paid for.

Why does it matter if the owner is reimbursing their non-owning customers? Restaurants do that all the time.

(IANAL) My gut says coordination would be be evidence of both (a) premeditated intent & (b) knowledge that actions constituted fraud.

One could place a personal order (or 100) innocently.

One looks substantially less innocent when coordinating with a third party to place orders and transfer money around.

While that speaks to the severity of the crime (if one were proven), as you noted, it doesn't in any way impact whether that behavior is a crime at all.

But who's defrauding who? If the doordash website says I can buy a dough pizza for $19, then doordash has to get me a dough pizza for $19 when I buy one. No fraud is happening, doordash is fulfilling the requirements of the contract they make with all their customers.

If anything, the one who's committing fraud is doordash, because they're putting in "takeout" orders with the restaurant and presenting them as "delivery" orders to the customer.

In the example from TFA, Doordash says you can buy a pizza for $16 and charges you $16. The restaurant menu price is $24, and Doordash pays $24 for the pizza. That's... the starting place. (As screwy as it is)

Now, if I order a dough pizza for $16, in coordination with the restaurant, and Doordash pays $24 to the restaurant, and the restaurant gives me a dough pizza, and then the restaurant makes it worth my while, what do we have?

Doordash has been paid $16, and spent $24 + (cost of delivery) = (-) SoftBank money

The restaurant has been paid $24 and spent ~$1 (cost of dough pizza [1]) = ~$23 profit (minus labor)

I paid $16 (let's ignore tip). The restaurant reimburses me for that (me: $0, restaurant: $7) to make it worth my while, and then splits profits with me (me: $3.50, restaurant: $3.50).

So at the end, Doordash: -$8 - delivery cost, restaurant: $3.50, me: $3.50.

It's the reimbursement of the customer that seems... suspect.

The way to ethically monetize this would be for restaurants to target Doordash misprices, and "sell" coupons (a food box, containing only a paper coupon), good for future food orders directly through the restaurants. Then encourage all their customers to buy as much as possible.

[1] We'll say we return and recycle the boxes, being environmentally conscious citizens

Getting something for cheaper because of marketing-driven pricing, wasting time dealing with empty shells you don't want, reimbursing the customer...

You have all those elements when backblaze was shucking drives en masse, but nobody would say that was fraud in any way. https://www.backblaze.com/blog/backblaze_drive_farming/

If you intentionally sell a product for cheaper than you buy it to build market share (I think it's fair to call this intentional when they process the payment and don't bother changing the listed price), and you're willing to sell a whole lot of that product to someone, you can't cry foul when someone profits off that.

What you're describing isn't fraud, it's arbitrage: buying low, selling high. Just because Doordash are a bunch of idiots for selling stuff for way less than it's worth doesn't make it illegal for me to trade with them in good faith on their own terms and profit.

Nobody's lying to anybody, no price fixing is happening, or anything. Doordash agreed to sell a product at a price to any of their users, and they are fulfilling the promise they made, end of story.

This depends on whether you think the pizza restaurant's customer is doordash.

You could make a good argument that this was the case. The restaurant sells to doordash, who paid for a pizza with toppings.

Doordash is buying it, but I think it makes more sense as "a pizza for Bob" than just "a pizza". I think it would be strange to ignore everything Bob says if he calls in asking for the pepperoni to be on one side.

Though none of this matters if there's a 'special instructions' box. Have a code word for bread pizza.

> While the restaurant preparing "partial" pizzas to ship to coordinated orders is obviously fraud

Does Doordash allow customer menu modification requests? "No cheese, no tomato sauce, no onion" etc. That would also then fall under shit code and auditing :)

It doesn't seem like fraud when they are still delivering an actual pizza; that's basically just leveraging a sale. It becomes more dubious when they aren't delivering the finished good.

The driver pays with a Doordash prepaid-reloadable card. When the driver GPS-checkins at the restaurant they're picking an item up at, the card is loaded with the exact balance the restaurant is "supposed to charge"

At that point door dash still thinks the pizza will cost much less, so if it's only the total the customer paid that's authorized, then how does the full cost of the order get paid?

In the article it makes clear that doordash calls the restaurant from their call center to make the order and gets the correct total verbally. Ostensibly this is what gets loaded to the delivery worker’s card.

Since this was part of a “demand test” door dash is more interested in capturing a large number of orders than per order profitability. Once their digital marketing muscle has doordash originating 10%+ of orders to the restaurant they have the leverage to negotiate a per order fee from the restaurant along with an agreement to force the restaurant to manage their prices on door dash, shifting liability to the restaurant for incorrect pricing online.

> Once their digital marketing muscle has doordash originating 10%+ of orders to the restaurant they have the leverage

How would they know what percentage of orders isc coming through them?

The amount is calculated off of what DD thinks, not based on what the restaurant charges.

Yes, this causes a significant amount of driver support issues where they have to live chat in because their red card is declining.

The driver is instructed to not give the restaurant receipt to the diner.

I wonder to what extent the back end software supporting this is identical to, or similar to, what Moviepass created.

Think of something similar to https://stripe.com/issuing (Postmates apparently uses this, same industry).

Doordash's are debit mastercard, iirc.

This mechanism reminds me of Moviepass.

This is basically the same backing service, corporate-issued "cards"

Yes, it has been exploited exactly like you described. An example that I remember - Foodpanda in India. I guess fraud costs are massive for all the food delivery startups.

source: http://www.livemint.com/Companies/rYKC6HjnShogjE62jO5lpK/The...

That may explain why individual restaurants fare better at delivery; obviously they would catch a fraud immediately and are therefore immune to it.

From the title I expected a story of how Doordash is running a pizza arbitrage scheme. Using an expensive restaurant name, and having the drivers go to a cheap pizza place to get the pie.

Pedantically, that wouldn’t be arbitrage, it’d just be fraud. Arbitrage would involve exploiting differences in price for the same good/commodity, i.e. not substituting a different item...

>If it's trivial to get listed, and potentially with the wrong prices, then it's trivial to launder money this way.

If it's trivial to launder money this way then it is a really good idea to build your own food delivery service and start doing all sorts of money laundering through it.

> Side note, does anyone actually order franchise pizza on an app? They all already deliver for far less

Seen it done a number of times at campuses as the GPS helps the pizza guy find you. Although the pizza guy usually has a very good idea of where the residences are anyway.

>does anyone actually order franchise pizza on an app

I do. I find the app to be a much nicer experience. I see all the available coupons/deals in a list instead of the 1-2 deals the phone person wants to guide me towards. With an app I can start and order and my family/friends can have an extended conversation to figure out exactly what we want on our pizza, what sides/drinks/etc. And in a pinch, we can completely start the order over from scratch if we change our plan mid-way. It would be rude to hold someone on the phone for that. Plus the app gives better real-time update on the status of my order. I know when it leaves the oven, when it gets picked up by the driver, etc.

I imagine the OP meant through the DoorDash app? Recently, I've used the Dominos, Papa Johns, or Pizza Hut apps, which are, you know, fine enough, they get the job done, but critically: there's no surcharge beyond what you'd pay over the phone.

I would be confused why anyone would buy a chain pizza like this through DoorDash (or a similar service). Beyond the one tenuous benefit of not having to install another app; is it really worth the extra surcharge? Are they even listed in these apps?

> I would be confused why anyone would buy a chain pizza like this through DoorDash (or a similar service). Beyond the one tenuous benefit of not having to install another app; is it really worth the extra surcharge? Are they even listed in these apps?

Papa Johns is listed on Deliveroo. I often order PJs through Deliveroo when I'm hungry and don't want to think too much.

It costs more in money, it costs less in cognitive load. I know what I'm getting as far as the food is concerned, PJs is remarkably consistent, and I don't need to bother signing up for a new account with someone, working out payment details, etc.

You'd be surprised how many people like myself exist. Not everyone has every aspect of their financial life fully optimised. This is one area where I definitely have room for improvement.

In the mean time, Deliveroo ensures that when I'm exhausted at the end of a long week, I'm only a few clicks away from repeating my last PJs order and my Friday lunch pizza will arrive with minimal effort.

Not sure how Deliveroo works. But I would think the issue here is you may miss out on coupons, promotions and deals chains like Papa Johns usually have. If we say saving yourself 5 bucks using a promo code on a weekly ordered pizza, on a yearly basis this comes out to almost 300/year of savings.

You may be right, and if so then I agree that it doesn't make sense to order PJ's, Domino's, or Pizza Hut through a generic app. My (perhaps incorrect) interpretation was based on the fact that I've never seen one of the big chains available in the generic delivery apps.

In the UK the three big pizza chains (Dominos, Papa Johns, Pizza Hut) are on the two big delivery apps (Uber Eats, Deliveroo). I’ve never ordered any of them via it for reasons outlined upthread, with the additional reason that not only is delivery more expensive the chain-specific voucher codes are not available.

> In the UK the three big pizza chains (Dominos, Papa Johns, Pizza Hut)

I don't know why but I am saddened by this. I mean, even in the UK they are the biggest?

Yeah, and big chain apps and mobile sites, while not amazing at times, all work pretty well now.

Outside of a few odd situations now and then, most big chain apps (if they typically take mobile type orders) .. offer a competent experience.

Other benefit is if you sing up for some "club" or email list you'll often get a coupon or etc.

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

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

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

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

> We need drone deliveries.

Yes, obviously that will solve the problem that family faces.

When my parents brought me to Canada, my dad briefly worked as a pizza delivery driver and me and my mom would often ride with him just to keep him company. Not sure if that's the case here, but they might just be spending time together.

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

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

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

I've seen plenty of couriers with their families inside riding around with them delivering food. Sometimes just a guy and the younger son? who hops out, picks up the food, and the dad drives off to deliver the item. It makes me sad.

Friend of a friend has the same issue, works for Instacart or one of the grocery delivery services. With their kids in the car. And they spend their days waiting in grocery store parking lots as that maximizes their throughput.

Not for nothing, but more than drone deliveries, we need to make sure families like this have access to daycare for their kids.

That's an interesting point. You might be able to argue that subsidizing day care - particularly if you could bring higher standards/efficiency along for the ride - could have a greater economic impact than subsidizing college. It would certainly win out in short term effects. [Although I do think most of a bachelor's degree should be attainable from home for little to no cost.]

Make sure you're calling the right number


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

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

Can you imagine getting that call "Hi, little Pizza place, we've been fraudulently impersonating your business, dragging your brand through the mud and pissing off all your customers selling your pizza at a loss, clearly we're the sort of people you need to do business with"

I think there's a huge grey area between "hire a 3rd-party person to pick up your food and deliver it to you" and "impersonating your business."

Like DD, GrubHub, or whatever aren't pretending to be the restaurant (shady website bullshit notwithstanding). They're just saying that they can buy and drive the food to you on your behalf.

Absolutely they are. They'll set up phone numbers and answer as though they're your restaurant. They'll set up websites (which I think you allude to? "they aren't pretending to be the restaurant... other than setting up a website pretending to be the restaurant"). They'll pretend to be the end customer if they have to.

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

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

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

But they still paid full price to the restaurant! Someone in doordash knew the real price at some point then!

The full price was paid because a door dash card was used to pay for the order on pickup.

Which should have triggered some sanity check indicating that their scraped data is way off.

Maybe there are so many triggers that they can't keep up.

In the end you need someone to look at those alerts, maybe they just got missed.

They wanted high orders for the negotiation when getting a new restaurant signed up.

"Hey in the last month we delivered X amount of your food! If we don't list you then you'll lose those sales."

It could be so easy to game this.

Table Column A, menu items, lowest to highest in cost.

Table Column B, prices, highest to lowest in cost.

Naive scraper associates rows as menu item and cost.

You use CSS, etc., to rearrange things correctly. People looking at your site get info as intended, scrapers have problems, and it's only a dark pattern to them.

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

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

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

But that would that get VC funding? It's not their own money they are spending.

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

Lets them inflate the order count for the pitch.

They are taking a loss on every order, but they are hoping to make up for it with volume.

You can't make up for it in volume if each order makes a loss and you get no benefit from having more orders (they still pay each time the full price to the restaurant!)

(that's the joke)

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

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

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

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

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

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

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

This is like the iPhone SE conversation - there was always a big group of people who would tell you that the reason they buy the iPhone SE is because it's the smallest iPhone. But its very clear that the company making iPhones is certain that people buy the iPhone SE because it's cheap.

It's the same here. Everyone will always tell you that these knew gig economy companies are so much better! Their service is better, they're quicker, you don't have to deal with people, you can order whenever you want etc. etc. But actually, it's probably going to turn out it's just cheap.

It's very likely these services are basically used by 90% of people because they're cheap, and they're cheap because they're losing money to gain market share. The problem is that once they need to turn a profit, they have to drive up margins and now that $16 pizza needs processing fees and costs for the delivery driver - now it's $22. Or more importantly, your $8 starbucks order is now $13. So the second that the prices reflect the true costs these businesses are going to shed customers like you wouldn't believe. Oh and in order to try and curb those costs you're going to see some guy in a broken down car do a tour of the city delivering everyone else's food before yours gets to you.

I think you're both right, there are two separate types of customers making the same choice. One group is more price-conscious, the other is more effort-conscious. I'm personally in the other group - I have less time and patience than money to spend on deliveries, so I'll pick an option based on seamlessness. E.g. I've been ordering food for years on aggregator websites instead of calling the restaurants, because this way I can input my order on a computer (vs. talking to a busy person in a noisy room over crappy cellular connection, which often enough ends in errors), and I can prepay the order. I don't carry much cash on me, and I don't enjoy the hassle of using it. And while some restaurants will allow paying by card on recepit, it usually involves one or two payment terminals shared between a bunch of drivers, which leads to longer delivery times and all sorts of other problems (I've had drivers forget or not be informed about the need to take a terminal with them). I'll gladly accept 10-20% higher price to avoid dealing with any of that.

It's a similar story for rideshares; I think the major benefit they offer over regular taxi is seamless payment that (almost) always works, and is always available.

People here (UK) use these apps even though they're more expensive than when the restaurant handles the delivery. I never paid for a delivery in my life before Deliveroo/UE, but the user experience is so much better with them that it's hard not to.

For example, it's a little bit confusing how to find my place, so something as simple as not having to explain it every time I call up (and inevitably have it transcribed incorrectly) makes a huge difference in friction.

I'm happy to pay delivery fees to the restaurant. I'm less happy to pay fees to drive returns for growth-obsessed venture funds.

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

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

I bet you have the same accent as most of the people you deal with. I do not, having moved halfway around the world, and doing things over the phone is often surprisingly painful.

I dunno, even at physical restaurants or cafes I often have issues where they didn't hear my order correctly. Just today I had a guy repeat my order (thank you to people who do this, it's the only way) and he'd forgotten the cheese. Phone calls to ethnic restaurants (as with GP, no offense intended) are another layer of trouble. With my local noisy Indonesian restaurant we had a 50% miss rate on our orders so usually just go in person now.

Written text is just so much nicer. And I can send the link to family still in the office or whatever and co-ordinate.

I almost never have problems making custom food orders in the USA, even when the order taker is not a native English speaker.

"I'd like a cheeseburger, only lettuce and ketchup."

But when I visited Australia, I had a much harder time placing the same order. Most of the order takers there were not native English speakers, and I learned pretty quickly that the difference between American English and Australian English was bigger than I realized.

Language is interesting.

Growing up as a kid in a small town I thought I knew what Chinese people sounded like, but they were mostly Australian born (China wasn't really "open" at the time). Going to France and the USA and hearing their accents was confusing. It was close enough to be familiar yet very different at the same time since the same base accent got mixed up in different ways.

Anyway, yeah. I'm also a soft speaker which is my problem, but it doesn't mean that's not a valid reason to prefer text! I don't avoid speaking to people, I just prefer not to and I find it simpler and more certain I'll get what I need that way. Others want to pick up a phone.

DD, UberEats and the like screw up orders too. I've had a few errors even though "i didnt have to talk to anyone"

At least you get an audit trail ;)

I think it's only happened a couple of times in my few decades but dealing with "Where is the X?" "You didn't order that!" is annoying.

Also a fan of the Chinese restaurants like Din Tai Fung with the menu that you pass around and everyone ticks off what they want. It's so easy to coordinate a group of 10 that way.

> taking cabs

It all depends on where you're hailing and where you're going to. Also on what you look like. Drivers don't like some locations and appearances.

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

For us introverts it is.

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

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

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

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

But are you stealing money for a middleman? From what I can tell, the delivery is paid from a mix of an extra fee for the customer and some cash from investors, not from the restaurants.

I'm an introvert and please don't include me in the tiny subset of introverts who consider this a perk.

There's a spectrum within introversion, and this sounds more on the edge of that spectrum.

Full disclaimer: I too originally had trouble with calling to order pizza. But in retrospect it wasn't introversion: I just wasn't used to initiating conversations with strangers on the phone. The solution was trivial: Script the "opening lines" before calling. After a few of these, it all became natural.

If the vendor can just get it right with minimal interaction on my part, I usually prefer not to interact.

In my experience, though, this is rarely true of restaurants, especially the less expensive ones. I usually won't even do drive-through, under the experience-informed observation that they're less likely to mess it up if they know I'll be standing at the counter checking their work.

This is a misunderstanding of what it means to be an introvert. Introverts are capable of talking to people. The inability or disinclination to place an order for food delivery is a sign that you are disabled, not introverted.

Yeah, it seems like you didn't grow up in a big city?

"Not having to talk to someone" is generally a perk for introverts.

Being able to get food delivered from places that don't deliver.

I don't think the apps really add anything substantial for restaurants that have their own delivery network.

Not even being able to talk to somebody is a negative feature if you have dietary restrictions. A friend is vegan, and she often skips over items which could be vegan with a slight substitution which is not offered via the app, but which would be easy to ask for if she could just talk to a human.

Yes. I used Yandex Taxi in Kazakhstan. I don't speak Kazakh nor Russian, but was able to get around in Almaty that way.

I have done the same with Uber in Poland, and with countless services in Germany before I learned German.

I really appreciate consuming a service at my pace, especially when there is a language barrier, a large order or alcohol involved.

My Uber experience in London is never seamless you always end up calling them as they can't find you or wait on the wrong side of the road. Suddenly cancel when they are nearly where you are waiting. Black cabs is seamless with the right app

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