This whole industry is yet another example of “fake markets” that were created by just massively subsidizing something with VC cash.
Food delivery is hardly a new idea. By basically just having VC’s pay for everyone’s food delivery you can create this great market and app ecosystem that people use. Is this a remotely sustainable business model that could stand on its own? That appears very unlikely at scale.
Hyper-local collaboration between restaurants in delivery that kicks out the app company “middle man” could become a thing. I’ve already seen this sort of thing work well in local markets that basically out-competed Uber etc by just getting their act together and hiring a few developers to build a basic app.
Subsidized not only by VCs, but also by gig economy workers who genuinely don’t understand how little they’re being paid because their liabilities are complicated and often hidden/deferred.
This seems to happen a lot especially with food service startups, because of how price-sensitive that market is. Selling anything below cost or undercutting the competition by even a little bit in that industry will give you exponential growth for as long as you can sustain it, but the instant you want to turn a profit the market will turn their back on you and go somewhere else.
>This whole industry is yet another example of “fake markets” that were created by just massively subsidizing something with VC cash.
How do you reconcile this narrative with the fact that Grubhub turned a net profit every available year until 2019 per their SEC filings. [1] All told, they only took about 85 million between founding in 2004 and IPO in 2014, and they were already net profitable when they took the last 50.[2]
Apparently Chipotle has white-labeled delivery through their app. You just choose order for delivery in the app and it looks like ordering off Pizza Hut or something. But once the order is placed and you get into tracking, you do see a thing that says it's "Powered By Door Dash."
It will be interesting to see if any of the big chains can force the delivery suppliers to allow multiple integrations, and Chipotle lets the lowest bidder deliver your food. Ultimately I think that's the next step. It doesn't make sense that there's a super special delivery driver who works for Pizza Hut. A better solution is to have multiple delivery providers delivering food and other goods for everyone. I think people would be surprised to find out how much generic delivery work there is to be done. Like every car garage has one or more parts delivery services. And these are mostly people in regular cars delivering your particular car's brake pads from a warehouse to the auto shop. Why can't Uber, or Door Dash, or whatever deliver that too?
Even when PCs were new (we're talking late 80s), and not really networked there were a ton of small businesses that would buy a business system like TakeOutTaxi and make a go at delivering local restaurant food to homes and businesses. You called a dispatch center on the phone, put in your order, and 20-30 minutes, and greasy magic... BIG MAC! These businesses would often do well if the operator/owner/manager was a 10x hustler. I helped a couple of these get started in the late 80s, and they both did well until the hustler slowed down. Two-sided markets are hard, and two-sided hyperlocal markets are uber-difficult.
Exactly. There is a small dev outfit in my second-tier US city that caters to precisely this market and is doing quite well considering many restaurants added this to their website or replaced their website outright. They assume their customer is the average mom-and-pop restaurant and set up their business accordingly.
I am curious why Shopify doesn't lateral into this market. They already have the majority of the infrastructure for retail.
Not only that, but honestly, most taxi companies, at least in my area, will go pick up food, liquor or other things and make deliveries. There's also a couple local delivery services that specialize in just that.
They've been doing well here during the lockdown, especially with liquor deliveries, or so i've heard. Things like uber and just eat aren't really that popular or used here though. Just the few chain restaurants use them.
One thing I don't understand with these "fake markets" (ride-sharing and food delivery) is what's the end game? It seems like there is no path to profitability.
I'm curious as to how a basic app could replace the on demand delivery logistics / handle the volume that a platform like UberEats sends to restaurants ?
Maybe my urban area is different but restaurants here are doing 10+ orders per hour across all delivery channels. The bottleneck becomes the # of delivery couriers available and smartly assigning them to deliveries.
I was going to say that its nice to live in a dense city that always get the latest tech offerings, compared to the suburbs anywhere
but then I remembered how many of the scooter offerings have already disappeared
these food delivery courier services can disappear just as quick, to be replaced by smaller local networks and restuarant specific services just like they used to be
Where I live we have had a local delivery service that coordinated with places that normally deliver, but was still pretty extensive beyond just pizza. It started mostly geared towards late night food for college kids, but has expanded significantly. It was around long before GrubHub, Doordash, Uber Eats, etc. came to our area.
The service is now a part of "LoDel". LoDel seems to run a multitude of delivery services in different locations under different names. I don't know how this business model plays with restaurants, but it seems to be a bit of a halfway house between calling up your local pizza place for delivery or ordering through UberEats and the like.
It seems like another aspect of this is some combination of "aiming at regular customers, being willing/able to scale, educating consumers".
The VC model is like a lot of models. They're aiming for the section of consumers that will give them a 25% cut for picture-delivery to the door.
The opposite scaling model is a truck that delivers soup and vegetables from a central production facility to every house on a street once a week on a schedule flexible enough to keep costs low.
The restaurant model has been selling prepared food at a premium in exchange for the experience (not that they don't have ultra-low margins but they are automatically following a model that doesn't scale).
> This whole industry is yet another example of “fake markets” that were created by just massively subsidizing something with VC cash.
Agreed.
> Hyper-local collaboration between restaurants in delivery that kicks out the app company “middle man” could become a thing. I’ve already seen this sort of thing work well in local markets that basically out-competed Uber etc by just getting their act together and hiring a few developers to build a basic app.
Also agree, and this model also applies to the Food supply. I hope we see a record breaking year in CSA subscriptions and community gardens are overflowing with plants this year. My local one has already had all of its plots taken.
I still don't understand why there is a single global (or rather, country-wide) app for food delivery. Unlike getting cabs, this is hardly something you do when you're away from your home city.
If you had an app that only served, say, NYC, you can reduce burn drastically, not worry about scale issues too much, and run a business that's profitable without screwing over either the restaurant or the delivery person.
This is absolutely a problem that can and should be solved at a local level. As a consumer, you gain nothing by using an app that serves 100+ cities.
It wasn't so long ago that I was calling up restaurants directly for delivery. I don't do that anymore.
There were difficulties ordering over the phone sometimes. People would mishear you. They would be overwhelmed with orders at busy times. A few places had online ordering directly, mitigating these issues.
But some of the most interesting aspects in contrast to the apps is how they charged for delivery. It was common for, say, a pizza place to hire their own driver. But, and maybe this only works in cities, I ordered from some people who seemed to contract out. It seemed like some of those people were making it ok as a standalone business, though you wouldn't necessarily know that the restaurant wasn't employing them directly or that they did deliveries for multiple places.
A lot of places seemed to eat some of the cost of delivery but not raise the menu prices. So they would only let you deliver above a minimum price or order size. And of course you were expected to tip the driver.
But these apps take a hefty fee on top of the posted price, and they have a charge that goes to the courier, and you can tip above that. It seems like added consumer costs are higher than with the old way.
> just getting their act together and hiring a few developers to build a basic app.
Developing a new app each time sounds like a very expensive way to go. If that allows them to beat Uber then Uber is in trouble in this market. Because the next step is to create a service that any restaurant can join for fixed payment. Even with customization marginal cost for such thing should be quite low, surely lower than everybody building their own apps from scratch and maintaining them over time. And that's pretty much what delivery companies offer? So how developing your own app would be more effective than just using already developed app and adding a couple of menu items to it?
When restaurants where closed some local restaurants started creating food boxes you could order for the weekend with recipes and most of the ingredients based on their menu/style. No app, just send an e-mail and pick up on Friday.
"This whole industry is yet another example of "fake markets" that were created by just massively subsidizing something with VC cash."
To what extent has America (and its followers) been led to believe these types of companies, who always seem to have a non-sensical name, and the narratives they construct ("fake markets") are the future of the American economy. While these middlemen may be a part of the future and play a role, are they receiving a disproportionate amount of attention relative to their true importance.
The reality here is that the VC-backed monstrosities are incapable of showing any price sensitivity because they can massage out local market difference with vast amounts of capital.
Local approaches can work and be sustainable, but they have to be able to charge a price that actually makes sense for the delivery. Right now that simply isn't possible because the VC-funded behemoths are capable of undercutting anything that moves in the space and attempts to be cash-flow positive in any sort of sustainable way.
Their business isn't food delivery but food distribution. The restaurants are paying for a spot on their webpage (some of these companies don't deliver, and charge the same price i.e. Just Eat).
I think this idea does apply to any model where the distribution/search costs are minimal i.e. Uber/Lyft. I think Lyft is a great business btw but their costs are totally wrong (i.e. they don't really need hundreds of software engineers milking the company dry).
> This whole industry is yet another example of “fake markets” that were created by just massively subsidizing something with VC cash.
Yes, we saw this back in the dot com bust when similar delivery companies like Kozmo went under. These companies margins are thin with little room for error or ability to survive recessions.
Some like Instacart may work as a subsidiary of a larger business like Costco with other stable revenue streams, as a value-add. But not independently indefinitely. I hope Instacart, etc. have been searching for a buyer, it may be their only possible exit.
> Hyper-local collaboration between restaurants in delivery that kicks out the app company “middle man” could become a thing. I’ve already seen this sort of thing work well in local markets that basically out-competed Uber etc by just getting their act together and hiring a few developers to build a basic app.
It may be happening in Silicon Valley now. Some food service companies like Coupa Cafe have created their own apps and delivery services to cut out Uber Eats, etc. Not sure if they will merge their apps and delivery services though. Will be interesting to see.
>local markets that basically out-competed Uber etc by just getting their act together and hiring a few developers to build a basic app.
There is the sweet spot. A wix/squarespace style service which offers businesses a boilerplate white-label app which they can use to offer delivery to local customers.
Not only that, but in the 50s through the 70s, it was very common for grocery stores to deliver groceries. This is not a new idea by any stretch of the imagination.
yea I like this idea... tech should be empowering people to cut out the middle man, not create services that rob them with 30% cuts of the profits on delivery
Not only is all the VC subsidization questionable, but Doordash, Caviar, Uber Eats, etc. all strike me as just the shallow veneer of a delivery service. It's just about the leakiest abstraction of any major product that I can think of.
You have the restaurant, which is physically optimized for in-person meals. Take-out on its own is already fairly clunky at many sit-down restaurants, there's no waiting area, pick up counter, no easy way to pick up at the curb, etc. Pickup is clearly not the focus of those physical spaces.
Then you have the integration between the app and the restaurant. This is the one thing about the entire flow that is actually integrated in a meaningful way, but still it's only at the single point in time of placing the order. If anything goes wrong, if there's a delay in preparing the food, or anything is sold out, or if they end up giving you the wrong person's order, there's always a runaround of whether you should talk to the delivery support or the restaurant itself. Seeing as at least something goes wrong with probably 1 in every 3 or 4 orders I do, this loss is a probably a really big deal for profitability as I am always getting refunded for something that was missing or went wrong or getting a $10 credit for an unexpected 3 hour delay.
And then you have the delivery handoff itself. I suspect this mostly works well in the suburbs, but living in an apartment building this is yet another opportunity for things to go wrong. I would prefer not to have to come downstairs outside the building to pick it up when I'm paying ~$20 for this delivery to my door, but very often the delivery people complain they can't find the building (it's clearly marked on google maps), or that there's no parking (I live in a very dense area, why are all these apps so car-centered in their delivery crew? Why can't I request someone on a bike that wouldn't have this problem?).
Basically, delivery could be done very efficiently, and profitably if we made some bigger changes. There should clearly be specific restaurants, maybe even some that have no seats at all and are just a pickup kitchen, that are optimized for efficient pick-up and marked as such. Cities need to change their street design to accomodate how many more deliveries are happening today, vs when these streets were designed many years ago (this is not just a problem for food, look how many rideshares drop people off in the middle of the road because there's no space to pull over to a curb, or how many Amazon or UPS trucks block streets and bike lanes because there are no dedicated 5-minute stopping zones).
It reminds me of Marc Andreeson's recent "It's time to build" essay. Our whole world is structured around how things used to work 40 years ago, and nothing significant can ever be changed. So we have to have these crazy, expensive hacks like Doordash to try to shoehorn in new services that people want, instead of making deeper adaptations as residents' needs and preferences change.
Since this week Uber Eats is charging a 10% service fee and distance depending delivery free. That's roughly 25% of my food order. It's getting expensive.
Luckily, I found out the restaurant does delivery by itself too and then it's free instead of the £7 I got charged by Uber so next time :)
It's funny how something that has been working for decades on a small scale with mom and pop restaurants doesn't scale up even when you take 25-30% of each order.
I guess that paying software developers $100,000+ each plus IT infrastructure plus worldwide marketing is just too expensive in comparison to a landline. Who would have guessed.
The endgame has always been to monopolize the market with aggressive marketing and huge discounts for customers, financed by VC. People are not supposed to order at restaurants directly but use delivery services so the restaurants need to fire their delivery drivers due to low demand. I'm happy that this hasn't happened so far and I hope all those services die fast.
American tipping culture ruins it for me - the social anxiety of "do I tip them? how much? what if I don't tip enough? word of mouth is I'm a bad tipper? what if my tip insults them?" and any possible repercussions of getting it wrong loom.
I am not at all against delivery drivers getting their due, but the whole tipping culture is a pressure I can just avoid if I don't have things delivered which I can go get myself. I envy the countries which lack this automatic tipping culture.
The list of companies that have tried and failed to build a sustainable business in this space is large -- from Kozmo.com (1998-2001)[a], Webvan (1996-2001)[b], and UrbanFetch (1999-2000)[c] during the "dotcom bubble" to the likes of Grubhub, Instacart, and Uber Eats in recent years.
So far, it seems that only tightly integrated operations with highly standardized food products for which the source/freshness/ripeness of ingredients is not an issue (e.g., boxed pizzas made from frozen manufactured components) have been able to make local on-demand delivery sustainable at a national or global scale.
The only "exceptions" would appear to be FreshDirect (founded by an owner of NYC's Fairway Market) and Peapod (operated by Giant supermarkets)... BUT both have grown more slowly and deliberately than the latest crop of startups, while maintaining tight/integrated control over all aspects of operations. Moreover, neither allows consumers to order on-demand -- consumers have to choose a predefined delivery window in advance, sometimes days in advance.[d]
My family has been depending on InstaCart for groceries. Two deliveries a week has kept us in fresh food (mostly) and household necessities without us having to venture to the markets. For us, it's been vital. (We're in the risk profile for bad COVID-19 outcomes, so we've been extremely careful).
Having tried (extensively) Instacart, Amazon WF and Freshdirect, Freshdirect is my absolute favorite. The fruit and vegetables are in stock, they're either almost ripe or just ripe, and there's a bunch of organic stuff. Instacart is hit or miss, the shoppers miss a third of the items and you feel guilty making them work harder. Also the constant alerts on the app that (50%+) items aren't available and to accept a substitution or a refund is a huge hassle when you're working and get interrupted once every 5 minutes about 15 to 20 times to make a decision. Amazon WF was the worst for me, items unavailable and the worst part is all the fruit and vegetables were so ripe as to be inedible almost immediately. I'm not sure what happened there. Amazon also screwed up because they were letting people put things in carts while no delivery was available, and auto magically removing items.
Back to the topic here. Fresh Direct has the most experience and has the best customer experience, so I really really hope they don't go out of business or get bought by Amazon!
I'm not surprised. In my region, delivery companies add on something like $10 (~$5 for the actual delivery, $2 for the company's cut, and another >$2 for the recommended tip). Compare that with "delivery native" companies. I pay like half that for pizza delivery for instance.
I can't afford to get $20-$30 delivery food every week, so I've moved to doing takeout instead.
I've given this a whopping 5 minutes of thought, so maybe someone else who actually knows the economics can weigh in on a thoughtful discussion...
Seems to me like this would be a very hard business to scale quickly. Consumers don't want to pay a delivery charge and don't care about the middle man - their relationship is with the restaurant, not uberGrubCart. The restaurants want to control their costs too... so feels like the only way this whole delivery business can work is if it's a third party, white-label service serving local restaurants, getting paid by the restaurants, and it is then up to the restaurants to figure out how to burry the costs into their pricing so the consumer doesn't see it.
* Restaurant wants to get paid as much as possible
* Platform wants to get paid as much as possible
* Customer wants to pay as little as possible
And the customer's baseline is "pay for the cost of the food only, and 100% goes to the restaurant" like an old fashioned, called-in take-out order. This allows (at baseline) $0 for courier or platform, and every dollar increase in price (for courier & platform) seems unfair, i.e. "why does it cost more." So some platforms hide the extra cost & extract it from the restaurant, which upsets the restaurant, and often upsets the customer when they find out.
Really I see no way "food delivered hot to your door from all over the city, selected & ordered with no human interaction" (and lets not forget "with returns, customer service, refunds" etc.!) can be an "inexpensive" service, unless the costs of the courier or the food itself go way down. Restaurants already charge $14 for a hamburger & $7 for fries, that doesn't leave a lot of wiggle room.
I'm very curious to see how it all shakes out, because this covid situation (which changed delivery from "luxury" to "necessity") is going to be going on for the next 12mo at least.
I am not sure what other people's experiences have been, but of the six food deliveries I've attempted via major food delivery apps, two were cancelled by the restaurant (ordered after 8pm, but before 10pm) and two did not go through because there were no drivers available (middle of day). I am in an urban area here in the bay area which normally has lots of uber drivers so I'm not sure what is going on. Perhaps I am an outlier.
Of the few places in my neighborhood still open for to go, the line is so long that if you order in advance my food is cold before I can pick it up.
We largely aren't ordering food at this point and just cooking at home. I did order a pizza the other day and it was really good and delivered on time piping hot, but it was a time of low demand.
I wasn't sure that Doordash et. al. weren't profitable, but I'm not surprised. When I thought about it, it seemed really hard to figure out a way that the economics of most third-party delivery food services can work over the long run: the restaurant has to make a profit; the delivery company has to make a profit; the delivery driver has to earn enough income to feel like the gig's worthwhile. The delivery company doesn't want to charge the customer so much they feel like the service fees are untenable, so they need to also charge the restaurant, yet there isn't enough margin in the restaurant's normal pricing model to let them pay the delivery fees and turn a profit.
The current system has balanced this in a way that's left a lot of restaurants feeling like they're being charged usurious amounts, yet the delivery company still isn't making money -- and customers who notice that that $16 pulled pork plate at Armadillo Willy's is a $19 plate from Doordash not including any added delivery or "service" fees may be less enthused about making those orders regular things if the restaurant's within comfortable pickup range.
Startup idea: A service for collective food ordering for you and your neighbors.
The night before you all vote on the restaurant to order from and the time, then everyone orders their own favorite dish, then the restaurant delivers it to one of the houses.
Not entirely surprising. We've gotten a bunch of takeout during this time, but never using those services.
We're getting takeout to support our local businesses.
The delivery companies take such a big cut that the local business barely breaks even or loses money on the deal. Most of them have asked people to call in directly and pick up if they possibly can, and some even have re-employed their workers as delivery drivers for direct call-ins.
I go out with my mask and goggles and pick it up. There is so little traffic it doesn't even matter. I get there super quick and park right in front. Then I stand in line with all the poor Grubhub/Ubereats contractors who I know aren't getting a great deal either and we all get our food. I usually let them cut me in line because I know their tip may depend on their speed.
Here in Calgary, Alberta, Canada, we've had these food delivery services competing for the last few years, with their own apps, exclusive agreements with restaurants, and so on:
Anecdotally, for the first few weeks, everyone I knew was all about supporting their local restaurants. Now that it's been over a month, over 2 in some places, with companies laying people off left and right, and the only place you're legitimately supposed to go is the grocery store, as infrequently as possible, I'm getting cooking advice questions from those same friends. People are starting to realize just how extravagant eating out really is. A broke nation isn't one that orders delivery every night.
Add that to all of the general "food delivery is a fool's game" arguments, and none of this should be a surprise to anyone.
This is because they are handing out discounts like crazy. I haven't paid for a delivery during this entire crisis and usually get $5 coupon to go with it. DoorDash gave me 30% off the other day and it was on a $100 order. How can that make sense?
I tried instacart for the first time this year because of the stay at home order and while we've had a couple good orders for the most part it has been a frustrating experience and we will change over to a different grocery store which offers their own app and pick up instead of delivery.
A few problems with instacart and other deliveries for me:
- uncertain delivery times. Even when the shopper marks the order as completed it can take up to an hour to get to my door. It seems they bundle orders but this isn't clear and makes me worry about cold or hot food
- inaccurate orders. I have gotten 3 extra ranch dressings which I have never ordered!
- constant changes to orders due to items being out of stock. Not instacarts fault but it is still a bad user experience
- I am tempted to leave a poor review of a shopper but then I think they know where I live! Less than ideal.
Overall I would rather interface directly with the stores and restaurants. There are just too many things which can't be generalized across a platform. New restaurant discovery isn't something I need either.
For me it is one of the more amazing market failures that restaurants can't come up with a food delivery/online order coop. Owned by restaurants and offering services to the owners at cost. (same applies to e.g. hotel booking sites who are able to rack in outrageous fees while producing outright disgusting dark patterns to the end customers)
I guess I'm just not in the demographic here, but I don't get all this food delivery that's going on. I think 5% of the articles here are about restaurant delivery. I can't believe this is such a big thing! Did you people eat at restaurants this much before the coronavirus? Why is it, all of a sudden, that the only way to eat is to get delivery from Chipotle?
I guess I was never much of a restaurant guy before all this stay-at-home, and ever since stay-at-home, I've gotten food delivered exactly zero times. It's not even something I'd consider, given that there is a global pandemic and I have no idea whether anyone in the pipeline between cook and driver is sick. Food delivery is the business I'd have predicted would go to 0% in a viral outbreak, but here we are with it flourishing. Totally astounding. Maybe I'm the only one surprised, I don't know.
[+] [-] code4tee|5 years ago|reply
Food delivery is hardly a new idea. By basically just having VC’s pay for everyone’s food delivery you can create this great market and app ecosystem that people use. Is this a remotely sustainable business model that could stand on its own? That appears very unlikely at scale.
Hyper-local collaboration between restaurants in delivery that kicks out the app company “middle man” could become a thing. I’ve already seen this sort of thing work well in local markets that basically out-competed Uber etc by just getting their act together and hiring a few developers to build a basic app.
[+] [-] Non24Throw|5 years ago|reply
Subsidized not only by VCs, but also by gig economy workers who genuinely don’t understand how little they’re being paid because their liabilities are complicated and often hidden/deferred.
This seems to happen a lot especially with food service startups, because of how price-sensitive that market is. Selling anything below cost or undercutting the competition by even a little bit in that industry will give you exponential growth for as long as you can sustain it, but the instant you want to turn a profit the market will turn their back on you and go somewhere else.
[+] [-] s1artibartfast|5 years ago|reply
How do you reconcile this narrative with the fact that Grubhub turned a net profit every available year until 2019 per their SEC filings. [1] All told, they only took about 85 million between founding in 2004 and IPO in 2014, and they were already net profitable when they took the last 50.[2]
[1] https://investors.grubhub.com/investors/sec-filings/default....
[2] https://en.wikipedia.org/wiki/Grubhub#Grubhub_history
[+] [-] Consultant32452|5 years ago|reply
It will be interesting to see if any of the big chains can force the delivery suppliers to allow multiple integrations, and Chipotle lets the lowest bidder deliver your food. Ultimately I think that's the next step. It doesn't make sense that there's a super special delivery driver who works for Pizza Hut. A better solution is to have multiple delivery providers delivering food and other goods for everyone. I think people would be surprised to find out how much generic delivery work there is to be done. Like every car garage has one or more parts delivery services. And these are mostly people in regular cars delivering your particular car's brake pads from a warehouse to the auto shop. Why can't Uber, or Door Dash, or whatever deliver that too?
[+] [-] indymike|5 years ago|reply
[+] [-] mountainofdeath|5 years ago|reply
I am curious why Shopify doesn't lateral into this market. They already have the majority of the infrastructure for retail.
[+] [-] grawprog|5 years ago|reply
Not only that, but honestly, most taxi companies, at least in my area, will go pick up food, liquor or other things and make deliveries. There's also a couple local delivery services that specialize in just that.
They've been doing well here during the lockdown, especially with liquor deliveries, or so i've heard. Things like uber and just eat aren't really that popular or used here though. Just the few chain restaurants use them.
[+] [-] guevara|5 years ago|reply
[+] [-] WrkInProgress|5 years ago|reply
Maybe my urban area is different but restaurants here are doing 10+ orders per hour across all delivery channels. The bottleneck becomes the # of delivery couriers available and smartly assigning them to deliveries.
[+] [-] vmception|5 years ago|reply
but then I remembered how many of the scooter offerings have already disappeared
these food delivery courier services can disappear just as quick, to be replaced by smaller local networks and restuarant specific services just like they used to be
[+] [-] dr_orpheus|5 years ago|reply
The service is now a part of "LoDel". LoDel seems to run a multitude of delivery services in different locations under different names. I don't know how this business model plays with restaurants, but it seems to be a bit of a halfway house between calling up your local pizza place for delivery or ordering through UberEats and the like.
[+] [-] joe_the_user|5 years ago|reply
The VC model is like a lot of models. They're aiming for the section of consumers that will give them a 25% cut for picture-delivery to the door.
The opposite scaling model is a truck that delivers soup and vegetables from a central production facility to every house on a street once a week on a schedule flexible enough to keep costs low.
The restaurant model has been selling prepared food at a premium in exchange for the experience (not that they don't have ultra-low margins but they are automatically following a model that doesn't scale).
[+] [-] Melting_Harps|5 years ago|reply
Agreed.
> Hyper-local collaboration between restaurants in delivery that kicks out the app company “middle man” could become a thing. I’ve already seen this sort of thing work well in local markets that basically out-competed Uber etc by just getting their act together and hiring a few developers to build a basic app.
Also agree, and this model also applies to the Food supply. I hope we see a record breaking year in CSA subscriptions and community gardens are overflowing with plants this year. My local one has already had all of its plots taken.
[+] [-] puranjay|5 years ago|reply
If you had an app that only served, say, NYC, you can reduce burn drastically, not worry about scale issues too much, and run a business that's profitable without screwing over either the restaurant or the delivery person.
This is absolutely a problem that can and should be solved at a local level. As a consumer, you gain nothing by using an app that serves 100+ cities.
[+] [-] asveikau|5 years ago|reply
There were difficulties ordering over the phone sometimes. People would mishear you. They would be overwhelmed with orders at busy times. A few places had online ordering directly, mitigating these issues.
But some of the most interesting aspects in contrast to the apps is how they charged for delivery. It was common for, say, a pizza place to hire their own driver. But, and maybe this only works in cities, I ordered from some people who seemed to contract out. It seemed like some of those people were making it ok as a standalone business, though you wouldn't necessarily know that the restaurant wasn't employing them directly or that they did deliveries for multiple places.
A lot of places seemed to eat some of the cost of delivery but not raise the menu prices. So they would only let you deliver above a minimum price or order size. And of course you were expected to tip the driver.
But these apps take a hefty fee on top of the posted price, and they have a charge that goes to the courier, and you can tip above that. It seems like added consumer costs are higher than with the old way.
[+] [-] smsm42|5 years ago|reply
Developing a new app each time sounds like a very expensive way to go. If that allows them to beat Uber then Uber is in trouble in this market. Because the next step is to create a service that any restaurant can join for fixed payment. Even with customization marginal cost for such thing should be quite low, surely lower than everybody building their own apps from scratch and maintaining them over time. And that's pretty much what delivery companies offer? So how developing your own app would be more effective than just using already developed app and adding a couple of menu items to it?
[+] [-] Thlom|5 years ago|reply
[+] [-] x3blah|5 years ago|reply
To what extent has America (and its followers) been led to believe these types of companies, who always seem to have a non-sensical name, and the narratives they construct ("fake markets") are the future of the American economy. While these middlemen may be a part of the future and play a role, are they receiving a disproportionate amount of attention relative to their true importance.
[+] [-] andrewla|5 years ago|reply
Local approaches can work and be sustainable, but they have to be able to charge a price that actually makes sense for the delivery. Right now that simply isn't possible because the VC-funded behemoths are capable of undercutting anything that moves in the space and attempts to be cash-flow positive in any sort of sustainable way.
[+] [-] hogFeast|5 years ago|reply
I think this idea does apply to any model where the distribution/search costs are minimal i.e. Uber/Lyft. I think Lyft is a great business btw but their costs are totally wrong (i.e. they don't really need hundreds of software engineers milking the company dry).
[+] [-] SkyMarshal|5 years ago|reply
Yes, we saw this back in the dot com bust when similar delivery companies like Kozmo went under. These companies margins are thin with little room for error or ability to survive recessions.
Some like Instacart may work as a subsidiary of a larger business like Costco with other stable revenue streams, as a value-add. But not independently indefinitely. I hope Instacart, etc. have been searching for a buyer, it may be their only possible exit.
> Hyper-local collaboration between restaurants in delivery that kicks out the app company “middle man” could become a thing. I’ve already seen this sort of thing work well in local markets that basically out-competed Uber etc by just getting their act together and hiring a few developers to build a basic app.
It may be happening in Silicon Valley now. Some food service companies like Coupa Cafe have created their own apps and delivery services to cut out Uber Eats, etc. Not sure if they will merge their apps and delivery services though. Will be interesting to see.
[+] [-] neighbour|5 years ago|reply
There is the sweet spot. A wix/squarespace style service which offers businesses a boilerplate white-label app which they can use to offer delivery to local customers.
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] joncrane|5 years ago|reply
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] Apocryphon|5 years ago|reply
[+] [-] darepublic|5 years ago|reply
[+] [-] cactus2093|5 years ago|reply
You have the restaurant, which is physically optimized for in-person meals. Take-out on its own is already fairly clunky at many sit-down restaurants, there's no waiting area, pick up counter, no easy way to pick up at the curb, etc. Pickup is clearly not the focus of those physical spaces.
Then you have the integration between the app and the restaurant. This is the one thing about the entire flow that is actually integrated in a meaningful way, but still it's only at the single point in time of placing the order. If anything goes wrong, if there's a delay in preparing the food, or anything is sold out, or if they end up giving you the wrong person's order, there's always a runaround of whether you should talk to the delivery support or the restaurant itself. Seeing as at least something goes wrong with probably 1 in every 3 or 4 orders I do, this loss is a probably a really big deal for profitability as I am always getting refunded for something that was missing or went wrong or getting a $10 credit for an unexpected 3 hour delay.
And then you have the delivery handoff itself. I suspect this mostly works well in the suburbs, but living in an apartment building this is yet another opportunity for things to go wrong. I would prefer not to have to come downstairs outside the building to pick it up when I'm paying ~$20 for this delivery to my door, but very often the delivery people complain they can't find the building (it's clearly marked on google maps), or that there's no parking (I live in a very dense area, why are all these apps so car-centered in their delivery crew? Why can't I request someone on a bike that wouldn't have this problem?).
Basically, delivery could be done very efficiently, and profitably if we made some bigger changes. There should clearly be specific restaurants, maybe even some that have no seats at all and are just a pickup kitchen, that are optimized for efficient pick-up and marked as such. Cities need to change their street design to accomodate how many more deliveries are happening today, vs when these streets were designed many years ago (this is not just a problem for food, look how many rideshares drop people off in the middle of the road because there's no space to pull over to a curb, or how many Amazon or UPS trucks block streets and bike lanes because there are no dedicated 5-minute stopping zones).
It reminds me of Marc Andreeson's recent "It's time to build" essay. Our whole world is structured around how things used to work 40 years ago, and nothing significant can ever be changed. So we have to have these crazy, expensive hacks like Doordash to try to shoehorn in new services that people want, instead of making deeper adaptations as residents' needs and preferences change.
[+] [-] ryuukk_|5 years ago|reply
[deleted]
[+] [-] wdb|5 years ago|reply
Luckily, I found out the restaurant does delivery by itself too and then it's free instead of the £7 I got charged by Uber so next time :)
[+] [-] foepys|5 years ago|reply
I guess that paying software developers $100,000+ each plus IT infrastructure plus worldwide marketing is just too expensive in comparison to a landline. Who would have guessed.
The endgame has always been to monopolize the market with aggressive marketing and huge discounts for customers, financed by VC. People are not supposed to order at restaurants directly but use delivery services so the restaurants need to fire their delivery drivers due to low demand. I'm happy that this hasn't happened so far and I hope all those services die fast.
[+] [-] gravitas|5 years ago|reply
I am not at all against delivery drivers getting their due, but the whole tipping culture is a pressure I can just avoid if I don't have things delivered which I can go get myself. I envy the countries which lack this automatic tipping culture.
[+] [-] cs702|5 years ago|reply
So far, it seems that only tightly integrated operations with highly standardized food products for which the source/freshness/ripeness of ingredients is not an issue (e.g., boxed pizzas made from frozen manufactured components) have been able to make local on-demand delivery sustainable at a national or global scale.
The only "exceptions" would appear to be FreshDirect (founded by an owner of NYC's Fairway Market) and Peapod (operated by Giant supermarkets)... BUT both have grown more slowly and deliberately than the latest crop of startups, while maintaining tight/integrated control over all aspects of operations. Moreover, neither allows consumers to order on-demand -- consumers have to choose a predefined delivery window in advance, sometimes days in advance.[d]
[a] https://en.wikipedia.org/wiki/Kozmo.com
[b] https://en.wikipedia.org/wiki/Webvan
[c] https://en.wikipedia.org/wiki/Urbanfetch
[d] https://nypost.com/2020/03/15/nyc-freshdirect-delivery-times...
[+] [-] slowmovintarget|5 years ago|reply
[+] [-] mancerayder|5 years ago|reply
Back to the topic here. Fresh Direct has the most experience and has the best customer experience, so I really really hope they don't go out of business or get bought by Amazon!
[+] [-] djaque|5 years ago|reply
I can't afford to get $20-$30 delivery food every week, so I've moved to doing takeout instead.
[+] [-] poulsbohemian|5 years ago|reply
Seems to me like this would be a very hard business to scale quickly. Consumers don't want to pay a delivery charge and don't care about the middle man - their relationship is with the restaurant, not uberGrubCart. The restaurants want to control their costs too... so feels like the only way this whole delivery business can work is if it's a third party, white-label service serving local restaurants, getting paid by the restaurants, and it is then up to the restaurants to figure out how to burry the costs into their pricing so the consumer doesn't see it.
[+] [-] sequoia|5 years ago|reply
* Restaurant wants to get paid as much as possible
* Platform wants to get paid as much as possible
* Customer wants to pay as little as possible
And the customer's baseline is "pay for the cost of the food only, and 100% goes to the restaurant" like an old fashioned, called-in take-out order. This allows (at baseline) $0 for courier or platform, and every dollar increase in price (for courier & platform) seems unfair, i.e. "why does it cost more." So some platforms hide the extra cost & extract it from the restaurant, which upsets the restaurant, and often upsets the customer when they find out.
Really I see no way "food delivered hot to your door from all over the city, selected & ordered with no human interaction" (and lets not forget "with returns, customer service, refunds" etc.!) can be an "inexpensive" service, unless the costs of the courier or the food itself go way down. Restaurants already charge $14 for a hamburger & $7 for fries, that doesn't leave a lot of wiggle room.
I'm very curious to see how it all shakes out, because this covid situation (which changed delivery from "luxury" to "necessity") is going to be going on for the next 12mo at least.
[+] [-] hadlock|5 years ago|reply
Of the few places in my neighborhood still open for to go, the line is so long that if you order in advance my food is cold before I can pick it up.
We largely aren't ordering food at this point and just cooking at home. I did order a pizza the other day and it was really good and delivered on time piping hot, but it was a time of low demand.
[+] [-] chipotle_coyote|5 years ago|reply
The current system has balanced this in a way that's left a lot of restaurants feeling like they're being charged usurious amounts, yet the delivery company still isn't making money -- and customers who notice that that $16 pulled pork plate at Armadillo Willy's is a $19 plate from Doordash not including any added delivery or "service" fees may be less enthused about making those orders regular things if the restaurant's within comfortable pickup range.
[+] [-] DenisM|5 years ago|reply
The night before you all vote on the restaurant to order from and the time, then everyone orders their own favorite dish, then the restaurant delivers it to one of the houses.
Benefits: Cheap food! Meet your neighbors!
Downsides: Cheap food... Meet your neighbors...
EDIT: some prior art https://www.restaurantdive.com/news/uber-eats-launches-group...
[+] [-] jedberg|5 years ago|reply
We're getting takeout to support our local businesses.
The delivery companies take such a big cut that the local business barely breaks even or loses money on the deal. Most of them have asked people to call in directly and pick up if they possibly can, and some even have re-employed their workers as delivery drivers for direct call-ins.
I go out with my mask and goggles and pick it up. There is so little traffic it doesn't even matter. I get there super quick and park right in front. Then I stand in line with all the poor Grubhub/Ubereats contractors who I know aren't getting a great deal either and we all get our food. I usually let them cut me in line because I know their tip may depend on their speed.
[+] [-] Deimorz|5 years ago|reply
- Uber Eats
- DoorDash
- SkipTheDishes
- Foodora
- Fantuan
- HungryEats
Foodora just shut down two days ago: https://www.globenewswire.com/news-release/2020/04/27/202270...
And there were at least two more that were previously available but seem to have been acquired: Just Eat (by SkipTheDishes), and Nomme (by DoorDash).
It's ridiculous how many companies are fighting over a market that doesn't even seem to be close to profitable for anyone.
[+] [-] bbarn|5 years ago|reply
Add that to all of the general "food delivery is a fool's game" arguments, and none of this should be a surprise to anyone.
[+] [-] neonate|5 years ago|reply
[+] [-] MattGaiser|5 years ago|reply
[+] [-] tibbydudeza|5 years ago|reply
The prices as listed in the app was definitely more than the in store price and there was admin fee and a 10% driver tip (not mandatory).
[+] [-] roland35|5 years ago|reply
A few problems with instacart and other deliveries for me:
- uncertain delivery times. Even when the shopper marks the order as completed it can take up to an hour to get to my door. It seems they bundle orders but this isn't clear and makes me worry about cold or hot food
- inaccurate orders. I have gotten 3 extra ranch dressings which I have never ordered!
- constant changes to orders due to items being out of stock. Not instacarts fault but it is still a bad user experience
- I am tempted to leave a poor review of a shopper but then I think they know where I live! Less than ideal.
Overall I would rather interface directly with the stores and restaurants. There are just too many things which can't be generalized across a platform. New restaurant discovery isn't something I need either.
[+] [-] beefield|5 years ago|reply
[+] [-] ryandrake|5 years ago|reply
I guess I was never much of a restaurant guy before all this stay-at-home, and ever since stay-at-home, I've gotten food delivered exactly zero times. It's not even something I'd consider, given that there is a global pandemic and I have no idea whether anyone in the pipeline between cook and driver is sick. Food delivery is the business I'd have predicted would go to 0% in a viral outbreak, but here we are with it flourishing. Totally astounding. Maybe I'm the only one surprised, I don't know.