DoorDash loses money on almost every meal it serves.
Uh oh.
We're headed for a big crash in "just in time services that lose money". Remember Webvan and Kosmo. The business model of all these guys, including Uber, is "achieve monopoly, crank up prices". Probably not going to happen.
The experience of Austin, where Uber and Lyft pulled out over the driver fingerprinting issue, is instructive. Within a month, six competitors were up and running. The barriers to entry in this area are low. Even if someone does get market dominance, they can't raise prices much.
Uber is particularly vulnerable because their latest capital infusion of $1.5Bn is high-interest debt, not equity. That's an axe hanging over the head of a money-losing company.
Someone on HN explained this very well recently: that food delivery is the perfect business for duping gullible investors, because you can book the entire cost of a meal as top-line revenue, even though it passes straight through you to the restaurant. So if someone orders $80 worth of food, that's $80 that you can show off on your Series B pitch deck even though your profit after delivery might be -$5. It's not even like the Uber theory of "we're spending to grow", it's "we're spending to make more money that isn't ours look like ours", with the losses expanding in lockstep. I agree that a major bust is incoming.
Edit: "gullible" may not be the right word. It's more like this is a clever hack to exploit how tech investors are complacent about huge losses, as long as revenues are growing too. That's not inherently a bad thing, sometimes this approach is a good way to build out a healthy business. But the food delivery outfits are carefully exploiting this and hoping they get pattern-matched to other business models where it's OK, even though their situation is not the same at all.
> Uber is particularly vulnerable because their latest capital infusion of $1.5Bn is high-interest debt, not equity
Pardon my ignorance, can someone explain this? What is high-interest debt and what is equity and how do they determine risk?
Also I would expect that Uber is profitable since they take a cut per ride, and their overheads should be low (just a bunch of super smart software engineers and cloud hosting, right?). What am I missing? I am young, might be stupid. Bear with me.
DoorDash can't seem to get my simple order correct when picking up from a restaurant. They have < 10% order accuracy after ~100 orders. Either special instructions weren't followed or entire parts of the meal were missing. At one point, we had ordered 5 entrees from the same restaurant and the delivered 2. They don't train their delivery drivers to do any accuracy checks on the order. Are they really qualified to move into being a delivery platform? I wouldn't trust them with anything important.
Reflects my limited experience with them as well. We ordered, and waited, and waited, and waited. Eventually I called them and was told someone had messed up the order and the restaurant needs at least another hour to deliver. I gave up.
I love the idea of quickly ordering lunch for our employees on the app - DoorDash just needs to ensure they meet expectations. Just do what Dominos does already. If they do that well - I'd love a reminder at 11 am with our favorites listed where we can check out in 3 taps. And they need to really ensure Uber quality execution.
Given the current state, I feel like they're missing out on a massive opportunity by not fixing genuine customer issues.
Not my experience. They tend to get the orders almost 100% correct, but the special instructions are either simply not relayed to the restaurants or ignored by the restaurant (mainly for me this is indicating mild spice or low-salt as I'm ordering for a family).
It's an decent experience, though not "delightful", it's dependable. Take-out is always less tasty than dine-in.
Not my experience at all. I've ordered via Doordash in San Diego maybe 20 times and have only had 1 order wrong (where they actually brought me more food than I ordered, at no additional cost).
"Everyone, shockingly, wants convenience. And as a result, it's our job to find the ways to fulfill that." - said every consumer internet company ever.
Long story short: DoorDash moving to 3PL B2B services to catch larger ASPO, therefore higher margins to pay the $7 fixed driver fees.
1. Dominos does 2.5MM deliveries sure, but Dominos is a marketing company first, a delivery company second, and a food company third. Their products are purposely made to be sold enough to cover labor and ads with barely enough left over, but combined works with a franchise network.
Which means...
2. Most providers on the platform are really bad, if your restaurant is working with DoorDash it's because your food is bad and delivery is the only value add, see regards to In 'N Out vs Jack In the Box.
So that means they have to ditch their current form since...
3. Churn of drivers is insanely high since they're viewed as disposable. The pay is low after considerations, limited job security, limited upper movement, limited support for drivers. All because the margins are just not there at the level they're at.
Obvi, since people's habit of spending $20 on a $8 burrito isn't sustainable.
So Postmates and DoorDash all running faster towards being USPS before more down rounds to tackle last mile problem--with UPS/FedEx just chuckling on the side playing with their plane and ships and Uber playing with their trucks.
It will be interesting to see what happens in the next economic down turn. I'd imagine that lunch delivery is one of the first things companies and individuals would cut back on.
Given their current state, that doesn't bode well.
Honestly: not surprised. The margins on DoorDash were way too slim to ever make the unit economics work. "Customers are used to paying $30 to Uber across the city — but very few will pay $30 to Uber their sandwich." [0]
Here's the new competition for DoorDash - autonomous delivery robots from Starship Technologies.[1] These robots are being deployed in Redwood City, CA, this month. The City Council just voted to allow them to use Redwood City sidewalks for a 9-month test period.
The video shows them delivering from La Tartine. I eat there often, and was there tonight, but haven't seen one of the robots yet.
[+] [-] Animats|9 years ago|reply
Uh oh.
We're headed for a big crash in "just in time services that lose money". Remember Webvan and Kosmo. The business model of all these guys, including Uber, is "achieve monopoly, crank up prices". Probably not going to happen.
The experience of Austin, where Uber and Lyft pulled out over the driver fingerprinting issue, is instructive. Within a month, six competitors were up and running. The barriers to entry in this area are low. Even if someone does get market dominance, they can't raise prices much.
Uber is particularly vulnerable because their latest capital infusion of $1.5Bn is high-interest debt, not equity. That's an axe hanging over the head of a money-losing company.
[+] [-] Analemma_|9 years ago|reply
Edit: "gullible" may not be the right word. It's more like this is a clever hack to exploit how tech investors are complacent about huge losses, as long as revenues are growing too. That's not inherently a bad thing, sometimes this approach is a good way to build out a healthy business. But the food delivery outfits are carefully exploiting this and hoping they get pattern-matched to other business models where it's OK, even though their situation is not the same at all.
[+] [-] sean_patel|9 years ago|reply
Pardon my ignorance, can someone explain this? What is high-interest debt and what is equity and how do they determine risk?
Also I would expect that Uber is profitable since they take a cut per ride, and their overheads should be low (just a bunch of super smart software engineers and cloud hosting, right?). What am I missing? I am young, might be stupid. Bear with me.
[+] [-] PretzelPirate|9 years ago|reply
[+] [-] NeutronBoy|9 years ago|reply
Why do you continue to order through them if they're that inaccurate?
[+] [-] dpandey|9 years ago|reply
I love the idea of quickly ordering lunch for our employees on the app - DoorDash just needs to ensure they meet expectations. Just do what Dominos does already. If they do that well - I'd love a reminder at 11 am with our favorites listed where we can check out in 3 taps. And they need to really ensure Uber quality execution.
Given the current state, I feel like they're missing out on a massive opportunity by not fixing genuine customer issues.
[+] [-] r00fus|9 years ago|reply
It's an decent experience, though not "delightful", it's dependable. Take-out is always less tasty than dine-in.
[+] [-] socalnate1|9 years ago|reply
[+] [-] rosstex|9 years ago|reply
[+] [-] CPLX|9 years ago|reply
[+] [-] arzt|9 years ago|reply
Demand does not beget a sensical business model.
[+] [-] alaskamiller|9 years ago|reply
1. Dominos does 2.5MM deliveries sure, but Dominos is a marketing company first, a delivery company second, and a food company third. Their products are purposely made to be sold enough to cover labor and ads with barely enough left over, but combined works with a franchise network.
Which means...
2. Most providers on the platform are really bad, if your restaurant is working with DoorDash it's because your food is bad and delivery is the only value add, see regards to In 'N Out vs Jack In the Box.
So that means they have to ditch their current form since...
3. Churn of drivers is insanely high since they're viewed as disposable. The pay is low after considerations, limited job security, limited upper movement, limited support for drivers. All because the margins are just not there at the level they're at.
Obvi, since people's habit of spending $20 on a $8 burrito isn't sustainable.
So Postmates and DoorDash all running faster towards being USPS before more down rounds to tackle last mile problem--with UPS/FedEx just chuckling on the side playing with their plane and ships and Uber playing with their trucks.
PS. Analog to this is https://gorickshaw.com, a YC company.
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] shostack|9 years ago|reply
Given their current state, that doesn't bode well.
[+] [-] soared|9 years ago|reply
Also, gorickshaw.com is a yc company?! That is literally garbage.
[+] [-] seibelj|9 years ago|reply
[+] [-] fluxic|9 years ago|reply
[0] https://medium.com/@review/the-food-delivery-death-star-85f9...
[+] [-] Animats|9 years ago|reply
The video shows them delivering from La Tartine. I eat there often, and was there tonight, but haven't seen one of the robots yet.
[1] https://www.youtube.com/watch?v=DW16O6UWtSc
[+] [-] unknown|9 years ago|reply
[deleted]