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For a crowd who presumably work in startups, folks on here are always weirdly surprised by how this works. Generate vast revenue, reach scale, cut central costs
by georgespencer 9y ago
For a crowd who presumably work in startups, folks on here are always weirdly surprised by how this works. Generate vast revenue, reach scale, cut central costs. (To be clear, Deliveroo's challenge seems to be cost of sales.)
- martinald 9y agoWell, it's a pretty huge loss (more than revenue! Also, I think people were surprised or amazed that they had no core profitability. Especially when it's likely COGS will go up with more and more regulation around their gig economy employees
- T2_t2 9y agoDepends what you think the lifetime value of a customer is, plus what the ongoing cost to retain them is. I ordered off Deliveroo in Sydney Australia, and they advertise on AdWords against individual restaurant names. If the Diliveroo brand is strong, and that AdWords click made me a Deliveroo customer, that is a win. If I always search and they always pay, this may prove problematic long term. That's the equation - if $X upfront + $y ongoing < lifetime value then you have a chance at profitability, assuming you can get overheads under control / can scale up the offering with minimal growth in overheads (the classic 2X revenue, 1.5X costs model).