7 ms·

The Uber Model, It Turns Out, Doesn’t Translate

66 points by blatherard 11y ago

sharemywin 11y ago
Doordash just got a valuation of 700m. May not be billions but it's certainly not a fail.
- smt88 11y ago
  Valuation is meaningless, as we've seen with Webvan, Theranos, Clinkle, and literally tens of thousands of other companies. Tell me it's "not a fail" when the company is cash-flow positive.
  - Apocryphon 11y ago
    When investors wake up to the importance of profits over valuation, this bubble will begin to die.
    - toomuchtodo 11y ago
      Isn't that already happening? Wasn't DoorDash's latest round a down round?
    - smt88 11y ago
      They have woken up to this before. We've seen the bubble start to pop lately, as many unicorns have taken massive hits to their valuations. Eventually, the bubble will rise again because this is a cycle. False sense of security -> bubble -> correction -> caution -> false sense of security ... etc. etc.
      - Apocryphon 11y ago
        But when does the bubble actually burst, Dot Com style?
        smt88 11y ago
        It really depends on your definition of "bubble" and "burst". What is the line between burst and not-burst? How much value has to be lost? How quickly does it have to happen? I think we were/are in danger of a shock, but a large correction could very well happen slowly as well (and therefore not seem like a sudden burst). To me, the important takeaway is to remember the lessons of previous bubbles/bursts and apply them to your own life and the way you vote. People will always forget about dangerous excesses over time (or just stop caring), but regulations don't.
- mkohlmyr 11y ago
  The article isn't questioning their valuation but the unit costs and if working in highly affluent SF translates to mass market. Are they profitable? Do their costs (and prices) go down as they scale? Just because someone invested X for Y implying Z valuation doesn't mean it will turn out to be a wise investment.
klarrimore 11y ago
This guy nails it. "uber for everything" is a plague. I think he could have used some better examples though.
kra34 11y ago
I'm glad somebody finally wrote something on this. I would love to see the incomes for all the delivery workers (drivers / packers etc) broken down revenue and net income minus taxes, gas, vehicle maintenance, benefits, referral fees, and incentives etc. I can't imagine people are really making a solid hourly rate.
- rm_-rf_slash 11y ago
  It depends on the kind of worker. For someone that relies on Uber or the like as a main source of income, it's not pretty. But if you're a stay-at-home spouse and you spend a fair portion of the day running errands, doing a little Uber work on the side can help offset your costs, especially if you're one of those strange people that actually enjoy driving.
  - rconti 11y ago
    I had an Uber driver on the SF Peninsula who works a day job just a few hundred feet from where I live (which is, I suppose, why he got the dispatch). He drove us to SFO. Turns out, he lives in BFE (Tracy) and works 7-4. His commute in to work is fast (okay, as fast as a, what, 70 mile drive can be) because it's off-hours. Then he drives for Uber for a few hours after work, getting PAID to sit in traffic. Then he drives home when there's no traffic! And as a bonus, sometimes he gets paid to drive someone to the East Bay or somewhere that gets him a bit closer to home, 'on the clock' so to speak.
- Brakenshire 11y ago
  I have read that delivery drivers have to make 16 deliveries an hour to make minimum wage in the UK.
rm_-rf_slash 11y ago
This makes sense. Almost everyone needs transportation at least once a week. If you don't have a car and use uber to fill the gaps then it's a great service. But if you do have a car and some free time then it doesn't often make sense to spend extra for convenience services like Instacart. Yes there are people to whom every minute is a lot of money, but they are a very small market of all humans. Uber (with its scale and cash reserves) could make spin offs that can handle those needs more than a dedicated startup could. Another issue is that it's pretty common to have an uber drive you to and from work, and if you like your driver, you two can negotiate on the side, saving money for both. I imagine this kind of thing would happen for personal services like housekeeping. If I'm giving someone keys to my house, I want them to be someone I know and trust. Turning gig economy work into an under-the-table job can be absorbed by uber, but it's harder for unprofitable niche competitors.
- irl_zebra 11y ago
  I agree with Uber being able to take over a lot of these spin offs much more efficiently. And it already has a customer base, so one fewer app I have to download and manage. As I type this, I'm eating my lunch provided by UberEats, actually.
finnh 11y ago
This has all been pretty obvious for awhile. Take Instacart: I pay $100/year for unlimited grocery delivery? Which I'm doing once per week, so that's < $2 per delivery. To deliver this service takes the Instacart shopper/driver at least 30 minutes, probably closer to 60. Assuming a $15/hour wage to the driver, that's $13 of loss per order. Which, again, I'm doing 50+ times per year. And, at the store I order from, prices are exactly the same as in-store so there's not much (if any?) profit they could be extracting on that side. Let's all just enjoy the VC money subsidizing our lives for this (second) brief moment. Just like Kozmo.com back in the day.
- jon-wood 11y ago
  > And, at the store I order from, prices are exactly the same as in-store so there's not much (if any?) profit they could be extracting on that side. They could easily be taking a cut from the shop's profits - margins at some grocery shops are pretty good, and at least in theory Instacart are bringing in custom that they wouldn't otherwise have.
  - mathattack 11y ago
    Yes - if they're reducing the costs (real estate, cashiers, etc) of the store, they can get money from that side of the transaction. The same is true for food delivery: restaurants save a lot of money if they're not providing space, servers, dishwashers, etc. This isn't to say that many won't go out of business. Many will, and the market will consolidate.
  - ececconi 11y ago
    Gross margins are probably pretty good for some items at grocery stores, but in general their income percentages are razor thin.
  - saosebastiao 11y ago
    Margins at most grocery stores are abysmal. Not even Whole Foods, which has the highest margins in the industry, could subsidize that delivery model.
  - 11y ago
leroy_masochist 11y ago
I think Manjoo's a bit off the mark here. We're not "witnessing the death of the on-demand dream". The dream was never alive in the first place. It was a zombie that was animated by cheap VC dollars. Is the fact that most of these services are more expensive and less performant than they were two years ago a function of the challenges of maintaining quality while rapidly scaling (Luxe's excuse in the article)? Is it because the cost of expanding into new market segments has exceeded corresponding revenues in the short-term (Instacart's excuse)? Or is it because there are fewer venture capital dollars with which one can buy users? When I hear the paper of record name "not losing money on the bulk of its orders" as an attribute of a startup that is doing well, I start wondering when the music is going to stop.
- Retric 11y ago
  Loss leaders are a very common strategy for successful business. https://en.wikipedia.org/wiki/Loss_leader https://en.wikipedia.org/wiki/Loss_leader IMO, the problem is the web makes customers far less sticky and people still have not caught on.
  - leroy_masochist 11y ago
    Most successful businesses that use loss leaders to gain revenue / market share do so for several specific products among a much larger offering. For example, the supermarket's 50% off charcoal sale ahead of the 4th of July that gets you into the store where you'll buy hot dogs and beer. It's not a loss leader when your entire company is losing money. It's just a loss.
    - sharkweek 11y ago
      I was a buyer for a major grocery chain for a while - If you ever feel like really sticking it to the man, the biggest losses I used to stare at were always the rotisserie chickens, the expectation being customers buy other sides that had insane margins. So buy those without anything else in the cart and slowly run your local grocery store out of business!
    - 11y ago
arprocter 11y ago
Sounds like these services initially under-charge to get popular, and then have to ramp up prices (and lower wages) to stay out of the red.
- jboggan 11y ago
  I've been using Washio for two years and have loved it - 24 hour turn around for fresh clean laundry that is folded for me. It's been a great timesaver and luxury for me. Over the past few months though they've slowly raised the price. I didn't mind, I loved the service. But then they stopped doing morning pickup, and the 24 hour turnaround has now gone to 60 hours and I can't even pay extra to get the same level of service I used to have. I guess the VC money is running out.
bmohlenhoff 11y ago
I've personally never felt that Uber was a particularly innovative business. The ability to temporarily commandeer a vehicle/driver has been a thing since vehicles were invented. The only interesting thing Uber ever did was the replacement of inefficient centralized dispatch of resources with their tech stack that directly connects consumers with suppliers. It does not surprise me in the slightest that it doesn't translate well to other industries. If it did, I would expect to see a greater variety of preexisting businesses utilizing centralized dispatch in a manner similar to how the taxi/black car industry operated pre-Uber. Given that these are few and far between, I can only assume that either nobody thought of doing this before (unlikely) or that it's simply a losing business proposition.
- soperj 11y ago
  I think the surge pricing is something that hasn't been seen before.
- karmacondon 11y ago
  I still think that Uber's biggest innovation was charging 30% less than cab companies. Given a smart phone, I have 0 problem looking up a cab company and calling them (in most cases). And New York City cabs have had apps for years. The Uber app has a lot of details that are nice, but not essential. The minute they no longer have the cheapest fares, I'll use any other solution.
  - prodigal_erik 11y ago
    Uber started with town cars in SF that cost more than taxis. They caught on because they actually show up when you call one, unlike taxis who might find a street hail halfway there and abandon you without notice.
  - Grishnakh 11y ago
    You're forgetting the quality control that Uber imposes on drivers through multiple mechanisms. Maybe it isn't too bad in your particular corner of NYC, but in most other places, taxis are just horrible. They're dirty, nasty vehicles that are falling apart; the drivers won't take credit/debit cards and demand cash; the drivers drive you around in circles to get a bigger fare; the drivers are rude, don't speak English, etc. There's a reason so Uber has become so popular, and it's not just price. With the reputation system, Uber lets you rate drivers, and if a driver gets too many complaints or low ratings, Uber kicks them out. Regular cab companies don't do this. Uber integrates GPS navigation, so your driver doesn't drive you in circles. Cab companies don't do this; they insist their drivers have "valuable local knowledge" (yeah, of the best ways of fleecing you). Uber doesn't let you pay in cash, all payment goes through their app; cab companies have broken (or "broken") card readers in their cars. You should take a flight to San Francisco and take some cabs there. I hear that's a particularly interesting experience.
bazqux2 11y ago
How many more years of losing $2B a year until we find out the Uber model doesn't work for Uber either?
FussyZeus 11y ago
It's almost as if having on-demand people to handle the minutiae of everyday life for you instead of you doing it is something that only rich people can have. Who would've thunk it. Edit: To make my point more clear, some things aren't expensive because of an old system or organization that needs to be "disrupted" (I hate that word), some things are just expensive because they're expensive, it's not a conspiracy to keep the common man from having a secretary, it's the fact that said secretary will eventually want to get paid for dealing with all the bullshit you're offloading onto him/her.
- ghaff 11y ago
  "Rich people" is really an overstatement for services like these. But I'm not sure why someone would disagree with your basic point. Any of these services that involve human labor (because they can't be highly automated) have to be premium services and your median income person is probably not going to pay for their groceries to be delivered just like most won't pay to get their lawn cut or their house cleaned.
vonklaus 11y ago
I had a discussion on here about this a while back. The model translates, as it turns out, super super well. The failure is understanding the Uber model. I see uber differently as a company long term. However, this is my attempt at what their current conventional model is: - they are a market maker - the market(service) ois highly variable. E.g All rides are non-standard each ride has a different origin and destination, as well as timeframe. A rake is a standard tool, lot easier to rent that to me than a dynamic ride from downtown boston to southie. Ect. - transparency in cost calculations - convenience - ect. So while Luxe is to some extent trying to replicate this, that isn't totally possible. On top of sort of competing with Uber (i just park in a cheap area and uber to destination) the service is highly limited by inability to calculate randomness of peoples schedules. AirBnB works because tgere is friction, domain specific knowledge, experience, and pricing. Uber for groceries competes with me just getting groceries. A premium payment for a standard service. I am paying for a luxury here. Uber is a market maker in a highly dynamic market. Many "uber for x" are just premium service providers
sna1l 11y ago
These kinds of articles continue to pop on hacker news. At the end of the day won't most delivery companies go under when Google (fill in: whoever) brings the self driving car to a mass market and develops their own delivery service? What will differentiate Postmates from Doordash from Eat24? Google might just sell these cars to these services but I feel like it is too lucrative for them not to develop their own service
- Apocryphon 11y ago
  Self-driving cars are inevitable, but concerning that day and hour no one knows. Not only will the tech have to be foolproof, but the product consumer ready, and the legislation in place as well. Even if it's moving fast now, it'll take at least a decade or half to be ready.
  - sna1l 11y ago
    I don't know about that. Tesla, Mercedes, etc all have some sort of self driving capability already on the market and are expanding the capabilities pretty rapidly. I agree that completely self driving cars won't be ready for over a decade most likely. But plunking a person down to sit in a car that can drive itself for 95% of the time will greatly reduce the amount of money you will have to pay said driver.
    - ghaff 11y ago
      >But plunking a person down to sit in a car that can drive itself for 95% of the time will greatly reduce the amount of money you will have to pay said driver. Really? It's not like you're replacing a high skill/high wage person with a seat warmer. You're replacing a roughly minimum wage driver with... a driver who doesn't need to drive as much (but, for the time being at least, doesn't need to drive as much in a more expensive car). Why on earth would that reduce the amount of money you have to pay?
klarrimore 11y ago
"uber for x" is the new "facebook for dogs"
UVB-76 11y ago
Uber worked because it disrupted and undercut taxi monopolies, and a minicab industry with various usability/availability/safety issues. Uber is not only more convenient, but cheaper than the established players. Few other industries are ripe for such disruption.
exelius 11y ago
Uber only worked because they found a market that was heavily regulated at the local level. Most industries with this sort of regulation are extremely difficult to disrupt thanks to regulatory capture. But the taxi industry was almost exclusively regulated at the local level. By starting the service in a city with a real taxi problem (and SF has always had a "unique" black car system in that black cars can answer hails off the street) they were able to prove their system worked and build capital. After they did this in a few friendly cities that just needed a taxi solution, they had enough funding and momentum to simply ignore local taxi regulations, pay off any fines, and let public opinion of the new (and super cheap because it's subsidized by Uber for a while in new markets) taxi service do the work for them. That model works great if your regulators are far-flung and small. Most of these taxi regulatory agencies have pretty limited budgets and simply aren't equipped to deal with a company like Uber that has an army of corporate lawyers. The worst they ever thought they would have to deal with is a couple of local taxi companies with limited resources themselves, so they weren't prepared. Because Uber could drown their agency in paperwork for years, many regulatory agencies have adopted a "wait and see" approach with Uber. Try this "ignore the regulators" approach in an industry with centralized national regulation and you're in for a big surprise. Turns out, the federal government has basically infinite money and is not scared by lawyers the way municipal government agencies are. This is exactly how Theranos and 23andme got in trouble -- you ignore the feds at your own peril.
- rm_-rf_slash 11y ago
  I never thought of how important the distinction between local and federal regulation could be when establishing a market. I think you hit the nail on the head. Regulations made the price high to begin with so there's plenty of profit, even if uber wasn't so expensive. A startup in my town recently launched an app that basically acts as uber for established taxi companies. Interesting to see how that plays out.
  - exelius 11y ago
    > A startup in my town recently launched an app that basically acts as uber for established taxi companies. Interesting to see how that plays out. If it's like any other city, the taxi drivers will cancel the ride as soon as you get in the cab and ask you to pay them in cash (often because it's not really their cab; they're just borrowing their cousin's license/car for the night). Uber works because it's the only option for the cab driver to get paid, and in many cities they fine drivers for canceling fares.
askyourmother 11y ago
Uber got lucky - they banked on millenials being so self-centred, and so naive and myopic on the long-term costs of their actions, that they used them to basically use VC cash (like a billion a year in China alone) to basically buy the cabbie business. Once uber are the only players in town for a cab, and the fares go north, the service drops even further, regulation ignored even more so, those same selfish millenials will be the first to moan (aren't they always...).
- wc- 11y ago
  Uber has lots of non-millenial users. Millenials do make up a large percentage of the userbase, but I would argue that has more to do with the age breakdown of urban workforce populations. There are larger forces at play here: younger workforce is moving to urban areas, not suburbs, and this is impacting car ownership because cars are not needed in many urban environments. For reference, here is a breakdown of Uber's customer base in the US: http://www.globalwebindex.net/blog/the-demographics-of-ubers-us-users http://www.globalwebindex.net/blog/the-demographics-of-ubers... I'm having a hard time justifying the effort spent to respond to this comment, it seems very low quality...
- sushid 11y ago
  So self-centered and naive? What's wrong with paying $5 for an UberPool vs $2 for SF's subpar metro system? It's called paying a slight premium for convenience. Not every millennial is running around massively in student debt, documenting their $30 brunch on Insta/Snap while complaining about boomers and the global economy.
- Grishnakh 11y ago
  I have to agree with the other responder: this is a low-quality comment. The big thing you're missing with your idea about running the cabs out of business is that Uber is not a monopoly; they have a direct competitor in Lyft. Before those two came along, cabs were not cheap at all, and they had terrible quality (crappy, dirty vehicles; rude drivers; taking 60 minutes to show up when you call). Just ask anyone in SanFran about how cabs were before Uber showed up. As long as there's competition, prices will naturally stay low. As for "regulation", are you kidding? How did the "regulation" help anything? All it did was artificially restrict competition, while not providing any value for the customer. Cabs are nasty, drivers are rude, they drive in circles to increase the fares, etc. Regulation never helped with any of that. Uber's reputation system did. Honestly, you sound like a disgruntled taxi driver, mad that you can't get paid to abuse customers any more. Too bad, so sad.
christudor 11y ago
Relevant article from almost a year ago makes almost exactly the same point: https://pando.com/2015/07/28/homejoy-only-uber-is-uber/ https://pando.com/2015/07/28/homejoy-only-uber-is-uber/
dbot 11y ago
So doesn't this extend to "services" like Magic, which are just another layer of abstraction from the core product/service? I've personally never understood Magic. Looking at their homepage, none of those use cases work for me. Flights, flowers, pizzas, whatever...each require enough specific information from me that passing it along to a third party - and paying more to do it - seems pointless.
dantiberian 11y ago
I wrote about this recently: https://danielcompton.net/2016/01/27/a-context-free-grammar https://danielcompton.net/2016/01/27/a-context-free-grammar. The gist is that you can't copy a business model, tweak a few features and expect it to work in your market. The whole context of the business model matters.
billions 11y ago
Every time I ride with an exuberant Uber driver I warn them that wages will erode. Uber's (and competitors') intentions are to monopolize as much marketshare as fast as possible then increase margins. Today's drivers are overqualified for their position and these (already reduced) wages will continue dropping until they are slightly above fast-food wages.

66 points by blatherard 11y ago

sharemywin 11y ago

Doordash just got a valuation of 700m. May not be billions but it's certainly not a fail.

smt88 11y ago
Valuation is meaningless, as we've seen with Webvan, Theranos, Clinkle, and literally tens of thousands of other companies. Tell me it's "not a fail" when the company is cash-flow positive.
- Apocryphon 11y ago
  When investors wake up to the importance of profits over valuation, this bubble will begin to die.
  - toomuchtodo 11y ago
    Isn't that already happening? Wasn't DoorDash's latest round a down round?
  - smt88 11y ago
    They have woken up to this before. We've seen the bubble start to pop lately, as many unicorns have taken massive hits to their valuations. Eventually, the bubble will rise again because this is a cycle. False sense of security -> bubble -> correction -> caution -> false sense of security ... etc. etc.
    - Apocryphon 11y ago
      But when does the bubble actually burst, Dot Com style?
      - smt88 11y ago
        It really depends on your definition of "bubble" and "burst". What is the line between burst and not-burst? How much value has to be lost? How quickly does it have to happen? I think we were/are in danger of a shock, but a large correction could very well happen slowly as well (and therefore not seem like a sudden burst). To me, the important takeaway is to remember the lessons of previous bubbles/bursts and apply them to your own life and the way you vote. People will always forget about dangerous excesses over time (or just stop caring), but regulations don't.
mkohlmyr 11y ago
The article isn't questioning their valuation but the unit costs and if working in highly affluent SF translates to mass market. Are they profitable? Do their costs (and prices) go down as they scale? Just because someone invested X for Y implying Z valuation doesn't mean it will turn out to be a wise investment.

klarrimore 11y ago

This guy nails it. "uber for everything" is a plague. I think he could have used some better examples though.

kra34 11y ago

I'm glad somebody finally wrote something on this. I would love to see the incomes for all the delivery workers (drivers / packers etc) broken down revenue and net income minus taxes, gas, vehicle maintenance, benefits, referral fees, and incentives etc. I can't imagine people are really making a solid hourly rate.

rm_-rf_slash 11y ago
It depends on the kind of worker. For someone that relies on Uber or the like as a main source of income, it's not pretty. But if you're a stay-at-home spouse and you spend a fair portion of the day running errands, doing a little Uber work on the side can help offset your costs, especially if you're one of those strange people that actually enjoy driving.
- rconti 11y ago
  I had an Uber driver on the SF Peninsula who works a day job just a few hundred feet from where I live (which is, I suppose, why he got the dispatch). He drove us to SFO. Turns out, he lives in BFE (Tracy) and works 7-4. His commute in to work is fast (okay, as fast as a, what, 70 mile drive can be) because it's off-hours. Then he drives for Uber for a few hours after work, getting PAID to sit in traffic. Then he drives home when there's no traffic! And as a bonus, sometimes he gets paid to drive someone to the East Bay or somewhere that gets him a bit closer to home, 'on the clock' so to speak.
Brakenshire 11y ago
I have read that delivery drivers have to make 16 deliveries an hour to make minimum wage in the UK.

rm_-rf_slash 11y ago

This makes sense. Almost everyone needs transportation at least once a week. If you don't have a car and use uber to fill the gaps then it's a great service. But if you do have a car and some free time then it doesn't often make sense to spend extra for convenience services like Instacart. Yes there are people to whom every minute is a lot of money, but they are a very small market of all humans. Uber (with its scale and cash reserves) could make spin offs that can handle those needs more than a dedicated startup could. Another issue is that it's pretty common to have an uber drive you to and from work, and if you like your driver, you two can negotiate on the side, saving money for both. I imagine this kind of thing would happen for personal services like housekeeping. If I'm giving someone keys to my house, I want them to be someone I know and trust. Turning gig economy work into an under-the-table job can be absorbed by uber, but it's harder for unprofitable niche competitors.

irl_zebra 11y ago
I agree with Uber being able to take over a lot of these spin offs much more efficiently. And it already has a customer base, so one fewer app I have to download and manage. As I type this, I'm eating my lunch provided by UberEats, actually.

finnh 11y ago

This has all been pretty obvious for awhile. Take Instacart: I pay $100/year for unlimited grocery delivery? Which I'm doing once per week, so that's < $2 per delivery. To deliver this service takes the Instacart shopper/driver at least 30 minutes, probably closer to 60. Assuming a $15/hour wage to the driver, that's $13 of loss per order. Which, again, I'm doing 50+ times per year. And, at the store I order from, prices are exactly the same as in-store so there's not much (if any?) profit they could be extracting on that side. Let's all just enjoy the VC money subsidizing our lives for this (second) brief moment. Just like Kozmo.com back in the day.

jon-wood 11y ago
> And, at the store I order from, prices are exactly the same as in-store so there's not much (if any?) profit they could be extracting on that side. They could easily be taking a cut from the shop's profits - margins at some grocery shops are pretty good, and at least in theory Instacart are bringing in custom that they wouldn't otherwise have.
- mathattack 11y ago
  Yes - if they're reducing the costs (real estate, cashiers, etc) of the store, they can get money from that side of the transaction. The same is true for food delivery: restaurants save a lot of money if they're not providing space, servers, dishwashers, etc. This isn't to say that many won't go out of business. Many will, and the market will consolidate.
- ececconi 11y ago
  Gross margins are probably pretty good for some items at grocery stores, but in general their income percentages are razor thin.
- saosebastiao 11y ago
  Margins at most grocery stores are abysmal. Not even Whole Foods, which has the highest margins in the industry, could subsidize that delivery model.
- 11y ago

leroy_masochist 11y ago

I think Manjoo's a bit off the mark here. We're not "witnessing the death of the on-demand dream". The dream was never alive in the first place. It was a zombie that was animated by cheap VC dollars. Is the fact that most of these services are more expensive and less performant than they were two years ago a function of the challenges of maintaining quality while rapidly scaling (Luxe's excuse in the article)? Is it because the cost of expanding into new market segments has exceeded corresponding revenues in the short-term (Instacart's excuse)? Or is it because there are fewer venture capital dollars with which one can buy users? When I hear the paper of record name "not losing money on the bulk of its orders" as an attribute of a startup that is doing well, I start wondering when the music is going to stop.

Retric 11y ago
Loss leaders are a very common strategy for successful business. https://en.wikipedia.org/wiki/Loss_leader https://en.wikipedia.org/wiki/Loss_leader IMO, the problem is the web makes customers far less sticky and people still have not caught on.
- leroy_masochist 11y ago
  Most successful businesses that use loss leaders to gain revenue / market share do so for several specific products among a much larger offering. For example, the supermarket's 50% off charcoal sale ahead of the 4th of July that gets you into the store where you'll buy hot dogs and beer. It's not a loss leader when your entire company is losing money. It's just a loss.
  - sharkweek 11y ago
    I was a buyer for a major grocery chain for a while - If you ever feel like really sticking it to the man, the biggest losses I used to stare at were always the rotisserie chickens, the expectation being customers buy other sides that had insane margins. So buy those without anything else in the cart and slowly run your local grocery store out of business!
  - 11y ago

arprocter 11y ago

Sounds like these services initially under-charge to get popular, and then have to ramp up prices (and lower wages) to stay out of the red.

jboggan 11y ago
I've been using Washio for two years and have loved it - 24 hour turn around for fresh clean laundry that is folded for me. It's been a great timesaver and luxury for me. Over the past few months though they've slowly raised the price. I didn't mind, I loved the service. But then they stopped doing morning pickup, and the 24 hour turnaround has now gone to 60 hours and I can't even pay extra to get the same level of service I used to have. I guess the VC money is running out.

bmohlenhoff 11y ago

I've personally never felt that Uber was a particularly innovative business. The ability to temporarily commandeer a vehicle/driver has been a thing since vehicles were invented. The only interesting thing Uber ever did was the replacement of inefficient centralized dispatch of resources with their tech stack that directly connects consumers with suppliers. It does not surprise me in the slightest that it doesn't translate well to other industries. If it did, I would expect to see a greater variety of preexisting businesses utilizing centralized dispatch in a manner similar to how the taxi/black car industry operated pre-Uber. Given that these are few and far between, I can only assume that either nobody thought of doing this before (unlikely) or that it's simply a losing business proposition.

soperj 11y ago
I think the surge pricing is something that hasn't been seen before.
karmacondon 11y ago
I still think that Uber's biggest innovation was charging 30% less than cab companies. Given a smart phone, I have 0 problem looking up a cab company and calling them (in most cases). And New York City cabs have had apps for years. The Uber app has a lot of details that are nice, but not essential. The minute they no longer have the cheapest fares, I'll use any other solution.
- prodigal_erik 11y ago
  Uber started with town cars in SF that cost more than taxis. They caught on because they actually show up when you call one, unlike taxis who might find a street hail halfway there and abandon you without notice.
- Grishnakh 11y ago
  You're forgetting the quality control that Uber imposes on drivers through multiple mechanisms. Maybe it isn't too bad in your particular corner of NYC, but in most other places, taxis are just horrible. They're dirty, nasty vehicles that are falling apart; the drivers won't take credit/debit cards and demand cash; the drivers drive you around in circles to get a bigger fare; the drivers are rude, don't speak English, etc. There's a reason so Uber has become so popular, and it's not just price. With the reputation system, Uber lets you rate drivers, and if a driver gets too many complaints or low ratings, Uber kicks them out. Regular cab companies don't do this. Uber integrates GPS navigation, so your driver doesn't drive you in circles. Cab companies don't do this; they insist their drivers have "valuable local knowledge" (yeah, of the best ways of fleecing you). Uber doesn't let you pay in cash, all payment goes through their app; cab companies have broken (or "broken") card readers in their cars. You should take a flight to San Francisco and take some cabs there. I hear that's a particularly interesting experience.

bazqux2 11y ago

How many more years of losing $2B a year until we find out the Uber model doesn't work for Uber either?

FussyZeus 11y ago

It's almost as if having on-demand people to handle the minutiae of everyday life for you instead of you doing it is something that only rich people can have. Who would've thunk it. Edit: To make my point more clear, some things aren't expensive because of an old system or organization that needs to be "disrupted" (I hate that word), some things are just expensive because they're expensive, it's not a conspiracy to keep the common man from having a secretary, it's the fact that said secretary will eventually want to get paid for dealing with all the bullshit you're offloading onto him/her.

ghaff 11y ago
"Rich people" is really an overstatement for services like these. But I'm not sure why someone would disagree with your basic point. Any of these services that involve human labor (because they can't be highly automated) have to be premium services and your median income person is probably not going to pay for their groceries to be delivered just like most won't pay to get their lawn cut or their house cleaned.

vonklaus 11y ago

I had a discussion on here about this a while back. The model translates, as it turns out, super super well. The failure is understanding the Uber model. I see uber differently as a company long term. However, this is my attempt at what their current conventional model is: - they are a market maker - the market(service) ois highly variable. E.g All rides are non-standard each ride has a different origin and destination, as well as timeframe. A rake is a standard tool, lot easier to rent that to me than a dynamic ride from downtown boston to southie. Ect. - transparency in cost calculations - convenience - ect. So while Luxe is to some extent trying to replicate this, that isn't totally possible. On top of sort of competing with Uber (i just park in a cheap area and uber to destination) the service is highly limited by inability to calculate randomness of peoples schedules. AirBnB works because tgere is friction, domain specific knowledge, experience, and pricing. Uber for groceries competes with me just getting groceries. A premium payment for a standard service. I am paying for a luxury here. Uber is a market maker in a highly dynamic market. Many "uber for x" are just premium service providers

sna1l 11y ago

These kinds of articles continue to pop on hacker news. At the end of the day won't most delivery companies go under when Google (fill in: whoever) brings the self driving car to a mass market and develops their own delivery service? What will differentiate Postmates from Doordash from Eat24? Google might just sell these cars to these services but I feel like it is too lucrative for them not to develop their own service

Apocryphon 11y ago
Self-driving cars are inevitable, but concerning that day and hour no one knows. Not only will the tech have to be foolproof, but the product consumer ready, and the legislation in place as well. Even if it's moving fast now, it'll take at least a decade or half to be ready.
- sna1l 11y ago
  I don't know about that. Tesla, Mercedes, etc all have some sort of self driving capability already on the market and are expanding the capabilities pretty rapidly. I agree that completely self driving cars won't be ready for over a decade most likely. But plunking a person down to sit in a car that can drive itself for 95% of the time will greatly reduce the amount of money you will have to pay said driver.
  - ghaff 11y ago
    >But plunking a person down to sit in a car that can drive itself for 95% of the time will greatly reduce the amount of money you will have to pay said driver. Really? It's not like you're replacing a high skill/high wage person with a seat warmer. You're replacing a roughly minimum wage driver with... a driver who doesn't need to drive as much (but, for the time being at least, doesn't need to drive as much in a more expensive car). Why on earth would that reduce the amount of money you have to pay?

klarrimore 11y ago

"uber for x" is the new "facebook for dogs"

UVB-76 11y ago

Uber worked because it disrupted and undercut taxi monopolies, and a minicab industry with various usability/availability/safety issues. Uber is not only more convenient, but cheaper than the established players. Few other industries are ripe for such disruption.

exelius 11y ago

Uber only worked because they found a market that was heavily regulated at the local level. Most industries with this sort of regulation are extremely difficult to disrupt thanks to regulatory capture. But the taxi industry was almost exclusively regulated at the local level. By starting the service in a city with a real taxi problem (and SF has always had a "unique" black car system in that black cars can answer hails off the street) they were able to prove their system worked and build capital. After they did this in a few friendly cities that just needed a taxi solution, they had enough funding and momentum to simply ignore local taxi regulations, pay off any fines, and let public opinion of the new (and super cheap because it's subsidized by Uber for a while in new markets) taxi service do the work for them. That model works great if your regulators are far-flung and small. Most of these taxi regulatory agencies have pretty limited budgets and simply aren't equipped to deal with a company like Uber that has an army of corporate lawyers. The worst they ever thought they would have to deal with is a couple of local taxi companies with limited resources themselves, so they weren't prepared. Because Uber could drown their agency in paperwork for years, many regulatory agencies have adopted a "wait and see" approach with Uber. Try this "ignore the regulators" approach in an industry with centralized national regulation and you're in for a big surprise. Turns out, the federal government has basically infinite money and is not scared by lawyers the way municipal government agencies are. This is exactly how Theranos and 23andme got in trouble -- you ignore the feds at your own peril.

rm_-rf_slash 11y ago
I never thought of how important the distinction between local and federal regulation could be when establishing a market. I think you hit the nail on the head. Regulations made the price high to begin with so there's plenty of profit, even if uber wasn't so expensive. A startup in my town recently launched an app that basically acts as uber for established taxi companies. Interesting to see how that plays out.
- exelius 11y ago
  > A startup in my town recently launched an app that basically acts as uber for established taxi companies. Interesting to see how that plays out. If it's like any other city, the taxi drivers will cancel the ride as soon as you get in the cab and ask you to pay them in cash (often because it's not really their cab; they're just borrowing their cousin's license/car for the night). Uber works because it's the only option for the cab driver to get paid, and in many cities they fine drivers for canceling fares.

askyourmother 11y ago

Uber got lucky - they banked on millenials being so self-centred, and so naive and myopic on the long-term costs of their actions, that they used them to basically use VC cash (like a billion a year in China alone) to basically buy the cabbie business. Once uber are the only players in town for a cab, and the fares go north, the service drops even further, regulation ignored even more so, those same selfish millenials will be the first to moan (aren't they always...).

wc- 11y ago
Uber has lots of non-millenial users. Millenials do make up a large percentage of the userbase, but I would argue that has more to do with the age breakdown of urban workforce populations. There are larger forces at play here: younger workforce is moving to urban areas, not suburbs, and this is impacting car ownership because cars are not needed in many urban environments. For reference, here is a breakdown of Uber's customer base in the US: http://www.globalwebindex.net/blog/the-demographics-of-ubers-us-users http://www.globalwebindex.net/blog/the-demographics-of-ubers... I'm having a hard time justifying the effort spent to respond to this comment, it seems very low quality...
sushid 11y ago
So self-centered and naive? What's wrong with paying $5 for an UberPool vs $2 for SF's subpar metro system? It's called paying a slight premium for convenience. Not every millennial is running around massively in student debt, documenting their $30 brunch on Insta/Snap while complaining about boomers and the global economy.
Grishnakh 11y ago
I have to agree with the other responder: this is a low-quality comment. The big thing you're missing with your idea about running the cabs out of business is that Uber is not a monopoly; they have a direct competitor in Lyft. Before those two came along, cabs were not cheap at all, and they had terrible quality (crappy, dirty vehicles; rude drivers; taking 60 minutes to show up when you call). Just ask anyone in SanFran about how cabs were before Uber showed up. As long as there's competition, prices will naturally stay low. As for "regulation", are you kidding? How did the "regulation" help anything? All it did was artificially restrict competition, while not providing any value for the customer. Cabs are nasty, drivers are rude, they drive in circles to increase the fares, etc. Regulation never helped with any of that. Uber's reputation system did. Honestly, you sound like a disgruntled taxi driver, mad that you can't get paid to abuse customers any more. Too bad, so sad.

christudor 11y ago

Relevant article from almost a year ago makes almost exactly the same point: https://pando.com/2015/07/28/homejoy-only-uber-is-uber/ https://pando.com/2015/07/28/homejoy-only-uber-is-uber/

dbot 11y ago

So doesn't this extend to "services" like Magic, which are just another layer of abstraction from the core product/service? I've personally never understood Magic. Looking at their homepage, none of those use cases work for me. Flights, flowers, pizzas, whatever...each require enough specific information from me that passing it along to a third party - and paying more to do it - seems pointless.

dantiberian 11y ago

I wrote about this recently: https://danielcompton.net/2016/01/27/a-context-free-grammar https://danielcompton.net/2016/01/27/a-context-free-grammar. The gist is that you can't copy a business model, tweak a few features and expect it to work in your market. The whole context of the business model matters.

billions 11y ago

Every time I ride with an exuberant Uber driver I warn them that wages will erode. Uber's (and competitors') intentions are to monopolize as much marketshare as fast as possible then increase margins. Today's drivers are overqualified for their position and these (already reduced) wages will continue dropping until they are slightly above fast-food wages.