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Right now, what we have are the first generation of delivery restaurants which is basically "restaurants, only it's delivery". We won't start seeing the real re

Right now, what we have are the first generation of delivery restaurants which is basically "restaurants, only it's delivery". We won't start seeing the real revolution until we start seeing formats built natively around the assumptions of delivery. The second generation of "delivery, only it happens to be restaurants" format is going to look radically different from what we have today. For example, right now, restaurants are naturally incentivized to disperse around the city to take advantage of foot traffic. But this turns logistics into a N x M challenge which is expensive. Delivery restaurants are instead incentivized to cluster together because 1 x M logistics is so much more efficient. Once they cluster, further efficiencies can be unlocked. For example, right now, if there are 10 Asian restaurants in a block, each of them offers steamed rice and each of them owns a rice cooker. If you exist in a cluster and all your orders come from delivery, it no longer makes sense for you to be a "jack of all trades" restaurant, you can just have one restaurant make the 3 - 4 types of rice required for all Asian cuisines and it gets added on as a side for your order. Similar with like, mashed potatoes for Western restaurants, just have one restaurant focus on making the best damn mashed potatoes possible with all sorts of customized mixins and all the other restaurants don't have to deal with mashed potatoes. Prior to delivery restaurants, a "rice and mashed potatoes restaurant" would be totally non-viable. But with the disaggregating effects of delivery, it's now a possibility. Probably the closest analogy I can think of is the Singaporean Hawker centers. Each stall is only responsible for making 2 - 3 things and they make the best damn version of that thing possible. America, for whatever reason, has never managed to produce truly decent food courts so it's a totally different paradigm. On top of that, clustered delivery allows for the sharing of a lot of common infrastructure (HVAC, refrigeration, suppliers, dishwashing services, cleaning services, etc.) in a way that makes the entire enterprise more plug and play. Think AWS instead of dedicated servers. Rather than each kitchen having to hire a cleaning crew or worrying about what happens if the walk in is on the fritz, dedicated teams who specialize in each respective task can deploy it as a service scalably across the entire set of restaurants. Instead of incurring $X00,000 in startup costs, you can instead just lease at $X,000 a month and scale up your spend as you scale up your revenue. All of this requires delivery as a format to get over certain scale humps so that efficiencies can start to be unlocked. But once they do (as they're currently reaching in Asia), we're going to start seeing much more interesting, innovative business models that take delivery as a premise and innovate from there.

YeGoblynQueenne 9y ago
For me the important thing with food is not efficiency, it's quality and hygiene (in preparation, i.e. a clean kitchen). What you describe is a food assembly line optimised for efficiency, but I think if you look around you'll see that the kind of food that comes out of such assembly lines is generally considered second rate and unhealthy. The idea of having one place preparing one type of ingredient is especially troubling. What happens when that enterprise grows successful enough that it just doesn't care about the quality of its product anymore? It's just a monopoly problem, at local level, waiting to happen. In any case, eating the same mashed potatoes all the time, even if they're the best damn mashed potatoes possible (which is impossible, really, because if you ask ten different people what kind of mashed potatoes they like, you'll get ten different answers) you'll get bored of them pretty damn quickly and long for something new. You mention street food; that's the antithesis of what you propose. The whole point of street food is variation. I've never been to Singapore but I literally can't imagine street food prepared centrally. It would be ... bland.
thisisit 9y ago
I completely agree on how it will lead to innovations on the restaurant side. Sharing infrastructure and bringing down costs. The question really is on the app side - today they might be in making say $X from 3-4 places serving steamed rice. But tomorrow as you pointed out this might reduce down to $x/3 because all 3-4 can band together to pay for the same delivery. It will affect the food delivery app's bottom line. So, the question remains is - how do food delivery apps deliver long term profits from this?
- shalmanese 9y ago
  By turning from a service to a platform. Traditionally, companies that have a direct relationship with the customer are able to derive revenue by auctioning off that access to the highest bidder. What we've seen across a range of creative industries is a transformation of incentives from those who are able to run the best business into those who are able to make the best product. Take Youtube for example. Prior to Youtube, creatives had to figure out how to create compelling videos, where to market them to attract the most eyeballs and then how to monetize the ensuing attention. Those are three disparate skillsets that are rarely found in the same person. Now with YouTube, while possessing the skills to market and monetize are beneficial, they're no longer essential. Instead, what you can do is purely focus on producing the best damn videos possible (where "best" is defined by whatever Youtube algorithm of the week is optimizing for) and Youtube will put your videos in front of the right eyeballs, grow your audience for you and monetize that audience (in exchange for taking a hefty cut and locking you into the platform). We're seeing the same thing happen with Medium in blogging, AirBNB in accommodation, Facebook with news etc. Right now, most restaurants fail, not because the food is bad, but because restauranteurs rarely make good businesspeople. There's a compelling value add to chefs to offering them a platform where all they need to focus on is making the best possible dish for a given price point and customers naturally are delivered to them. At the same time, there's a compelling value to consumers where an app can look at my past purchase history, use machine learning, and add a free sample sized portion of a dish it think I will like to any delivery I order in order to expose me to new restaurants. Any app that manages to insert itself into the middle of that transaction is going to redefine the food industry. That's why everyone is so hot for delivery right now. Even though the short term game has horrible unit economics, delivery is a natural choke point by which you can own the customer relationship. In reality, in the US, this is really Yelp's game to lose. Yelp's stranglehold on reviews gives it a natural leverage point to pivot into this space. It's only Yelp's horrible executional ability that has opened up the space to so many well funded competitors.

YeGoblynQueenne 9y ago

For me the important thing with food is not efficiency, it's quality and hygiene (in preparation, i.e. a clean kitchen). What you describe is a food assembly line optimised for efficiency, but I think if you look around you'll see that the kind of food that comes out of such assembly lines is generally considered second rate and unhealthy. The idea of having one place preparing one type of ingredient is especially troubling. What happens when that enterprise grows successful enough that it just doesn't care about the quality of its product anymore? It's just a monopoly problem, at local level, waiting to happen. In any case, eating the same mashed potatoes all the time, even if they're the best damn mashed potatoes possible (which is impossible, really, because if you ask ten different people what kind of mashed potatoes they like, you'll get ten different answers) you'll get bored of them pretty damn quickly and long for something new. You mention street food; that's the antithesis of what you propose. The whole point of street food is variation. I've never been to Singapore but I literally can't imagine street food prepared centrally. It would be ... bland.

thisisit 9y ago

I completely agree on how it will lead to innovations on the restaurant side. Sharing infrastructure and bringing down costs. The question really is on the app side - today they might be in making say $X from 3-4 places serving steamed rice. But tomorrow as you pointed out this might reduce down to $x/3 because all 3-4 can band together to pay for the same delivery. It will affect the food delivery app's bottom line. So, the question remains is - how do food delivery apps deliver long term profits from this?

shalmanese 9y ago
By turning from a service to a platform. Traditionally, companies that have a direct relationship with the customer are able to derive revenue by auctioning off that access to the highest bidder. What we've seen across a range of creative industries is a transformation of incentives from those who are able to run the best business into those who are able to make the best product. Take Youtube for example. Prior to Youtube, creatives had to figure out how to create compelling videos, where to market them to attract the most eyeballs and then how to monetize the ensuing attention. Those are three disparate skillsets that are rarely found in the same person. Now with YouTube, while possessing the skills to market and monetize are beneficial, they're no longer essential. Instead, what you can do is purely focus on producing the best damn videos possible (where "best" is defined by whatever Youtube algorithm of the week is optimizing for) and Youtube will put your videos in front of the right eyeballs, grow your audience for you and monetize that audience (in exchange for taking a hefty cut and locking you into the platform). We're seeing the same thing happen with Medium in blogging, AirBNB in accommodation, Facebook with news etc. Right now, most restaurants fail, not because the food is bad, but because restauranteurs rarely make good businesspeople. There's a compelling value add to chefs to offering them a platform where all they need to focus on is making the best possible dish for a given price point and customers naturally are delivered to them. At the same time, there's a compelling value to consumers where an app can look at my past purchase history, use machine learning, and add a free sample sized portion of a dish it think I will like to any delivery I order in order to expose me to new restaurants. Any app that manages to insert itself into the middle of that transaction is going to redefine the food industry. That's why everyone is so hot for delivery right now. Even though the short term game has horrible unit economics, delivery is a natural choke point by which you can own the customer relationship. In reality, in the US, this is really Yelp's game to lose. Yelp's stranglehold on reviews gives it a natural leverage point to pivot into this space. It's only Yelp's horrible executional ability that has opened up the space to so many well funded competitors.