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The Future of Food Delivery [slides]
- amelius 7y agoThis is another instance where investors step in and ruin small businesses in an attempt to achieve a monopoly position by building a platform for an existing type of service. As illustrated by the following snippets from the article: > Restaurants are struggling to adapt as they are aggregated by DSPs and > No DSP has been able to prove consistent profitability with their existing business model.
- yhoiseth 7y agoAn alternative take is that investors are subsidizing the industry, benefitting both consumers and restaurants, at least in the short run.
- TeMPOraL 7y agoNah, this is investors destroying an industry through subsidies. If subsidies make all sustainable businesses get outcompeted, then what happens when subsidies end?
- _jal 7y agoI think those snippets demonstrate that asking teenagers to take things over to the neighbor's place does not require a global logistics network. If you insert one, you're just handing another slice of a thin pie out while losing control over that part of your business. And yeah, it is rather annoying to see too much money chasing bad ideas screwing up local businesses. Uber is a cautionary lesson; apps are not magic pixie dust and the cut has to come from somewhere.
- deleted 7y ago[deleted]
- petra 7y ago>> investors step in and ruin small businesses Food delivery platforms will get centralized. If not by investors, By Amazon. By someone. Why ? Because consumers want that. It's more convenient. And probably network effects apply here. With food delivery centralized, Dark, big centralized kitchens will win over restaurants(for most popular meals). They're just cheaper. It's just specialization and higher volume. Long term, making delivered food isn't a good place for a small business. And that'll happen with subsidies or without. BTW: in the future, in most industries, a small business will only survive by making rare and unique things.
- perpetualpatzer 7y agoI'm not quite as pessimistic on the food delivery market as you are and would be interested to hear your/others' reactions. >Food delivery platforms will get centralized. [...] Because consumers want that. It's more convenient. And probably network effects apply here. I agree consumers want all restaurants in the same place. I'm less convinced that that implies platform consolidation because every party has incentives towards multi-tenanting to ensure access. Both restaurants and end customers have incentives towards multi-tenanting to reach each other and for a market-making DSP to demand exclusivity, they have to undermine the core thing both sides of the market want (access to supply/demand). A16Z has a good discussion of multi-tenanting as a limit to the economic value of network effects here [0]. > With food delivery centralized, Dark, big centralized kitchens will win over restaurants(for most popular meals). They're just cheaper. I agree there are cost efficiencies to dark kitchens and the delivery market is likely to trend that direction (cheaper real estate, leaner front of house, less decoration work, etc). It's not clear to me, though, that there are worthwhile economies of SCALE to be had here (at least in the core urban market), or that they're necessarily winning. * Ingredients are low-margin, with prices dominated by transportation, so bargaining power over suppliers is limited. * Delivery time matters. That's a small pro for large kitchens because you can more accurately forecast demand/staffing, but also a medium-sized con because 5 locations spread out in a city with 20 units of capacity each are more likely to be close to demand than 1 location with 100 units of capacity. * Cooks aren't fungible, which makes it hard to capitalize on scale without consolidating similar restaurants. The guy who makes my favorite lamb vindaloo is a TERRIBLE sushi chef (in fact, he doesn't even make a very good a saag paneer, imho). If he were trained, he could probably learn to make a mediocre pad thai, but I'd probably still be happier ordering from a known thai restaurant. With 70% annual turnover in the restaurant industry[1], you're going to need to pay for a lot of training to capitalize on the more predictable staffing by supporting a large (i.e. multirestaurant) menu without sacrificing quality. If you plan to support a small menu at scale (e.g. combining a NY borough's worth of Indian restaurants into one giant Indian kitchen), the demand you'll need to support it will be spread out over a borough, so you're likely to have difficulty maintaining service levels. * People have different tastes in food and there's value in variety. I probably have a neighbor who really likes my restaurant's saag. If you merged the two Indian restaurants near me, had an expert pick the best recipe for each dish on their menus, then taught those to the combined kitchen staff, either my neighbor or I would be disappointed in the saag. >Long term, making delivered food isn't a good place for a small business. And that'll happen with subsidies or without. Without subsidies, this ultimately depends on whether it's harder to make good food or to build awareness of said food. A restaurant can hire a delivery driver to transport food, which puts a cap on the cut a DSP can demand from them for the delivery portion of their service. It's slightly less efficient, but trivial to implement. The expensive/hard part is getting people to place orders before your lease runs out. If there are multiple DSPs willing to list your food in order to sell their own delivery services, that seems like a recipe for lower start-up costs, which would tend to favor pop-up restaurants/Kitchen Incubators/iteration at small scale relative to the classic sit-down storefront restaurant model. [0] https://a16z.com/2019/05/09/data-network-effects-moats/ https://a16z.com/2019/05/09/data-network-effects-moats/ [1] https://guide.michelin.com/us/en/illinois/chicago/article/features/restaurant-employee-turnover https://guide.michelin.com/us/en/illinois/chicago/article/fe...
- Creationer 7y agoWhen do the DSPs start to vertically integrate - setting up their own dark mega kitchens, with generic styles like 'Pizza', 'Thai', 'Chinese', 'Indian'? These could appear as different restaurants, but in reality operate out of the same facility. In this way the batching could be done even more efficiently, and orders would be coming from one mega-kitchen, with huge economies of scale.
- theriddlr 7y agoThat's what Deliveroo have set up in London. https://www.theguardian.com/business/2017/oct/28/deliveroo-dark-kitchens-pop-up-feeding-the-city-london https://www.theguardian.com/business/2017/oct/28/deliveroo-d... Then you have new delivery-only brands such as Mac Shack – with the food being prepared in the kitchens of Bella Italia chain restaurants.
- Consultant32452 7y agoUber Eats is sort of experimenting in this area with "popup" restaurants, only the cooking is done by their existing suppliers. For example, there is a local Puerto Rican restaurant that has a "pop-up" that offers a few Asian dishes. You can't walk into that restaurant and order the Asian food.
- chrisa 7y agoThere's a service in Indianapolis that does exactly that! https://www.clustertruck.com/ https://www.clustertruck.com/ They actually license the recipes from local well known restaurants, and then cook them in their own kitchen and deliver them.
- ddeokbokki 7y agoThey already do - I wish it was more transparent in the app as it's currently ruining the experience.
- mocha_nate 7y ago“Delivery Service Partner (DSP)” I don't know why but i kept forgetting what that meant and seeing the acronym over and over bothered me. Future looks bright in this area, looking forward to seeing what happens
- plausibilities 7y agoI keep thinking Digital Signals Processing Q__Q
- dqdo 7y agoBest shared content on HN in a long time. I love the thoughtfulness and thorough analysis of the winners and losers of each strategy.
- lvoudour 7y agoI used to live in Dublin until recently and coming from a country (Greece) where food/coffee delivery is free (apart from any tip), fast and ubiquitous, I was taken aback by the fact I had to pay a substantial delivery fee. The upside was that driver safety seemed to be taken more seriously (it's a cutthroat business in Greece and drivers are pushed to their limit, accidents being rather frequent in their line of work).
- chrisseaton 7y agoHow do the Greeks afford to include delivery cost in food prices, a business usually with minuscule margins? How much does a cup of coffee cost if the price includes delivery? And does every food item include enough cost to support delivery independently? How do they amortise the delivery costs across an order?
- harrygeez 7y agoThe margins were small largely because a huge chunk of it goes into prime estate
- lvoudour 7y agoIt's seen as part of the standard business expenses like utilities and rent. Of course it squeezes their profit margin but what can they do? Competition is fierce. What most joints do though is to require a minimum price per order to allow delivery.
- mtrn 7y agoQuestion: How hard would it be to write create open source components to run a DSP collaboratively, e.g. with the power asymmetry created by aggregation > aggregated by DSPs removed?
- pedalpete 7y agoThe same argument was made for an open source Uber, and I think it's a noble idea, but it appears the problems of routing and competition are complex enough that it just doesn't work.
- dpflan 7y agoI'm not aware; are there any examples of super apps in the US? If SnapChat added Dominos delivery, would that be a satisfactory hypothetical?
- jerkstate 7y agoReading between the lines, the only real opportunity for a sustainable moat is the dark kitchens and order batching. This has been tried and failed a few times already, my guess is the secret ingredients are scale and marketing. Delivery from traditional restaurants is just too low margin, historically it was done by only some types of restaurants at break-even or even a slight loss to increase demand, now that people are used to paying $6-10 premium, once the music stops and the VC money stops flowing, the restaurants that stay in business will easily adapt.
- noer 7y agoThe tools required for a marketplace that connects people to existing restaurants and a "marketplace" that connects people to multiple "restaurants" that are in reality all from the same dark kitchen are pretty different. The former only requires staff, the latter requires real estate, equipment and product in addition to staff. It's essentially building a restaurant with a tech component, not building a tech product.
- corey_moncure 7y agoI skimmed through the slides and didn't see a single word allocated to the problem of the waste, pollution, and health effects generated by these services or any costs involved in managing them. Perhaps the figure of $365 billion is a convenient fiction, as is so often the case when modern young "entrepreneurs" see an opportunity to upend the underpinnings of society for profit. Food isn't a problem we solve with megacorporations and apps and technology. Food isn't supposed to be optimized and analyzed and held to KPIs. Food is best when communities of people come together to participate and interact and nourish one another. All these services do is enslave and silo us away from each other so that the individual's essential needs for nutrition and community can become a profit stream in a corporation's ledger. They would build yet another layer in America's enormous neurosis around food. No thanks, Google.
- Shivetya 7y agoOkay, but how is optimization of delivery not going to help address waste, pollution, and health effects. We have so much abundance in Western nations that we fail at times to understand how much optimization through technology, apps, and whatnot, will still provide benefit. From reducing wasted food by ensuring only what is needed is on hand and in the channel. Covering pollution by reducing trips made by many to fewer delivery groups. To health by offering better choices as part of the service, new menu options never considered because they were not previously available. The food abundance did not come way of the government but instead by corporations and individuals trying to improve their position in society all the while providing services and goods with improved the lives of others. If anything tariffs and food regulatory groups make food more expensive by preventing our access to other producers and products.
- deleted 7y ago[deleted]
- seanhandley 7y agoIf you live on takeaway food, yes. I work for a DSP company partnering with Just Eat and I also do a lot of home cooking with local non-intensive produce. Food delivery is way too expensive for most people to cater for every meal. A Friday night treat after a rough week has its rightful place in the world. As for pollution, food is increasingly being delivered by bicycle in many cities here in Europe.
- deleted 7y ago[deleted]
- mitchtbaum 7y ago* [Kitchen incubator - Wikipedia](https://en.wikipedia.org/wiki/Kitchen_incubator https://en.wikipedia.org/wiki/Kitchen_incubator) * [Communal apartment - Wikipedia](https://en.wikipedia.org/wiki/Communal_apartment https://en.wikipedia.org/wiki/Communal_apartment) * [Communal dining - Wikipedia](https://en.wikipedia.org/wiki/Communal_dining https://en.wikipedia.org/wiki/Communal_dining) * [Soup kitchen - Wikipedia](https://en.wikipedia.org/wiki/Soup_kitchen https://en.wikipedia.org/wiki/Soup_kitchen) * [Factory-kitchen - Wikipedia](https://en.wikipedia.org/wiki/Factory-kitchen https://en.wikipedia.org/wiki/Factory-kitchen) * [Perpetual stew - Wikipedia](https://en.wikipedia.org/wiki/Perpetual_stew https://en.wikipedia.org/wiki/Perpetual_stew) * [Bhandara (community kitchen) - Wikipedia](https://en.wikipedia.org/wiki/Bhandara_(community_kitchen) https://en.wikipedia.org/wiki/Bhandara_(community_kitchen)) * [Coliving - Wikipedia](https://en.wikipedia.org/wiki/Coliving https://en.wikipedia.org/wiki/Coliving) * [Campus Kitchen - Wikipedia](https://en.wikipedia.org/wiki/Campus_Kitchen https://en.wikipedia.org/wiki/Campus_Kitchen) * [DC Central Kitchen - Wikipedia](https://en.wikipedia.org/wiki/DC_Central_Kitchen https://en.wikipedia.org/wiki/DC_Central_Kitchen) * [Karma Kitchen: Growing in Generosity](http://www.karmakitchen.org/ http://www.karmakitchen.org/) * ... * ... * ... * ...
- wyldfire 7y agoYeah, markdown or something like it would be a nice flourish. But I guess HN kinda likes to keep it simple instead. shrug (hey -- that's some formatting right there)
- amelius 7y agoI'm wondering how he got the asterisks to work ...
- mitchtbaum 7y agoI use Copy All Urls - Google Chrome extension with this custom format below (with 2 extra new lines) https://chrome.google.com/webstore/detail/copy-all-urls/djdmadneanknadilpjiknlnanaolmbfk?hl=en https://chrome.google.com/webstore/detail/copy-all-urls/djdm... ``` * [$title]($url) ```
- groby_b 7y ago"Ethics aside, they can..."[1] I expected nothing less from somebody who worked for Uber. I mean sure, investors will (pardon the pun) eat the ideas up. There is, after all, money to be made. But the overall state of our industry, where people feel very comfortable discussing business models with a prefix of "Ethics aside" is depressing as hell. Let's not even mention the problem of externalities, of impact on rural communities, of the immense problems that consolidation will bring, or of the exploitive nature of the "gig economy" [1] Slide 25: https://docs.google.com/presentation/d/1v9ifaW1Sxy_oVUtzn63BrqXKGcpMJ_eKrqb59BXjjXA/edit#slide=id.g59095fa191_0_139 https://docs.google.com/presentation/d/1v9ifaW1Sxy_oVUtzn63B...
- itronitron 7y agosort of humorous that they included a cartoon which is mocking a part of their proposal
- not_a_cop75 7y agoForgive me but as someone who has a fridge, microwave, stove and oven, delivery does not appeal to me. There is a whole frozen pizza in the store that sells for 3 dollars, and a slice of pizza from the 7-11 that goes for 2 dollars. Pizza delivery is the one food where delivery has matured, and even today it's a very limited buy. When do people do it? Parties -> Almost any demographic Workload is too high to go out -> Students and younger adults Going outside is extremely uncomfortable and/or dangerous -> Primarily older Unmotivated and lazy -> A small fraction of any demographic The thing that can finally drop prices as we know it is the quadricopter. A self navigating delivery channel has at least reasonable chance to bring the price well into tolerable levels for most americans.
- MlkedChocolate 7y agoYou assume the unmotivated and lazy are a small fraction of any demographic. I have an unqualified feeling that it is a big portion, and that it is growing. I hear too many references to netflix tv shows, and a lack of conversations that spark my curiosity. I hear of people not sleeping to catch the latest episodes that aired in another country first.
- aeternus 7y agoNot everyone enjoys cooking. There are also some very motivated people that simply would rather spend their free time in other ways.
- pedalpete 7y agoEvery time I see a delivery bike out with a huge backpack full of food, I feel as a society we've gone a bit wrong. 1) The delivery rider/driver is making nothing 2) We are packaging every piece of food and sauce in single use plastic 3) The restaurants are losing money (though this is being addressed somewhat) 4) People aren't leaving their homes for the 5 minutes it takes to walk down the street and support a local business. I really hope this is a trend that goes away, but I doubt it will.