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I wonder if companies like door dash/ instacart are operating at negative margins? Uber tinkering with price too much has not gone down well with uber drivers
by ameyamk 11y ago
I wonder if companies like door dash/ instacart are operating at negative margins?
Uber tinkering with price too much has not gone down well with uber drivers in bay area either.
- sokoloff 11y agoUber is [edit: almost] certainly not operating at negative gross margin.
- kasey_junk 11y agoMy hunch is the same, but why do you say "certainly"?
- sokoloff 11y agoThe only thing of significant value that they give away is $20 credits to new riders and some new driver bonuses. The number of full-fare (no subsidy to either rider or driver) Uber trips surely absorbs these incentives, leaving a positive gross margin. (There's also a miniscule computing, bandwidth, and payment processing cost to a marginal ride, marginal being defined as the nominal X+1th ride after all the costs for X rides are already paid for.) Perhaps absolute certainty is a slight overstatement, but here's one where I'd bet eating my hat on it. I edited to insert an "almost".
- dllthomas 11y agoIn new markets, I have seen Uber guaranteeing "if you work this much of these hours, you will make at least $X or we will make up the difference."
- rahimnathwani 11y agoHere in China Uber has various subsidy programmes for drivers and customers. These eat into margins and make them negative for some (but probably not all) trips. Example: a few weeks ago, I paid ~3USD for a 13km ride that took 90 minutes (due to Beijing traffic). The driver was definitely paid more than that for the ride.
- prostoalex 11y agoThey prefer to open an office and hire support staff within each location they operate. In some markets (LA, SF) the revenue from rides quickly outpaces the cost of supporting those offices, in others (Spokane, Halifax) it remains to be seen.
- kansface 11y agoUber makes a nice profit in mature markets, but that does not mean their current margins are sustainable. Its hard to imagine a future where they don't pay drivers more.
- jonknee 11y agoIt's actually hard to imagine a future where they pay drivers at all. Uber is tailor made for autonomous vehicles.
- jameshart 11y agoThen they will pay vehicle owners to lease their cars short term instead.
- username223 11y agoEvil... And I'm almost certain it's what they'll do. Owner pays for purchase, upkeep, parking, and insurance, covering all the capital outlay, depreciation, and risk, while Uber skims off the profit. It's sort of "insurance in reverse."
- kasey_junk 11y agoAnd almost exactly like the taxi model they replace.
- morgante 11y agoWhat is "evil" about instigating a more efficient use of capital?
- username223 11y agoWhere do you get efficiency out of their plan? People tend to underestimate the true ownership cost of their cars, and Uber uses that to make them believe they're making a lot more per hour than they actually are.
- 7Figures2Commas 11y agoThe even bigger question is what their margins will look like if they're forced to reclassify all or most of their contract workers as employees. Both DoorDash[1] and Instacart[2] are facing class action lawsuits over this. [1] http://www.latimes.com/business/technology/la-fi-tn-grubhub-caviar-lawsuit-20150923-story.html http://www.latimes.com/business/technology/la-fi-tn-grubhub-... [2] http://www.xconomy.com/san-francisco/2015/08/06/instacart-extends-job-offers-to-its-ca-shoppers-but-labor-lawsuit-continues/ http://www.xconomy.com/san-francisco/2015/08/06/instacart-ex...