7 ms·

Love to revisit this piece every few years. Why food delivery will never be profitable: "The Food Delivery Death Star" https://medium.com/@review/the-food-deliv

by fluxic 7y ago

Love to revisit this piece every few years. Why food delivery will never be profitable: "The Food Delivery Death Star" https://medium.com/@review/the-food-delivery-death-star-85f9a121313 https://medium.com/@review/the-food-delivery-death-star-85f9...

mevile 7y ago
Pizza delivery is profitable. Pizza comes in a shape easy for transportation, the size and value of the delivery is economical for a delivery business and there's an established culture around ordering pizza for delivery. The food delivery companies just need to figure out these problems, which a hard, for non-pizza foods.
- Scoundreller 7y ago
  Also helps that pizzas themselves are dirt cheap to make. Anything that makes them expensive is chargeable. Continuous production is easy and cheap, so doubling your volume by adding delivery is achievable with the same kitchen.
  - mritchie712 7y ago
    ...and fucking delicious
  - twoheadedboy 7y ago
    "When it gets down to it — talking trade balances here — once we've brain-drained all our technology into other countries, once things have evened out, they're making cars in Bolivia and microwave ovens in Tadzhikistan and selling them here — once our edge in natural resources has been made irrelevant by giant Hong Kong ships and dirigibles that can ship North Dakota all the way to New Zealand for a nickel — once the Invisible Hand has taken away all those historical inequities and smeared them out into a broad global layer of what a Pakistani brickmaker would consider to be prosperity — y'know what? There's only four things we do better than anyone else: music, movies, microcode (software), high-speed pizza delivery"
    - toomuchtodo 7y ago
      Snow Crash never goes out of style.
- ghaff 7y ago
  Well, Chinese food is also a commonly delivered item in many places--including but not limited to cities. So I'm not sure pizza is all that unique. That said, a lot of food delivery is some high school kid driving his car around mostly working for tips. You start tacking on the costs of a large delivery-as-a-service company and your costs go up a lot without all that much economy of scale.
  - johnpowell 7y ago
    Even at a busy Pizza Hut a lot of the delivery drivers will help with making the pizzas, folding the boxes, and cleaning when not delivering. You can pay them X amount with fixed hours and they can stay busy the entire time. With just delivery services there is a lot of standing around time.
    - jschwartzi 7y ago
      I was recently at an Indian restaurant with my girlfriend, and half to three quarters of the people in the waiting area weren't trying to be seated, they were delivery drivers waiting to pick food up. Most of them sat for upwards of 15 minutes.
- bduerst 7y ago
  Is it though? Most pizza delivery is an ancillary service to the restaurant itself. Are there very many profitable pizza-delivery only businesses? Also you could argue that for the genre of restaurants where delivery is profitable as an ancillary service (pizza, chinese, etc.), they already offer delivery and there isn't any profitable market for the restaurants where they didn't have it before.
  - cosmodisk 7y ago
    It's not profitable because every single restaurant does it for itself only.A post office service would never make a dime if it was only covering a small town.Scale it up to the entire city and it becomes very interesting
    - komali2 7y ago
      Back in frontier west, outside US territory (and therefore not served by the Post Office Department or the Pony Express), people would set up highly profitable transportation companies. These companies would make deliveries for local shops but also carry mail, bringing stuff to somewhere served by the Post Office Department or the Pony Express or the Wells Fargo freight routes. I read all this in a book ages ago but I was skimming through some wikipedia articles that mention some of what I'm talking about if you're interested: https://en.wikipedia.org/wiki/American_frontier https://en.wikipedia.org/wiki/American_frontier https://en.wikipedia.org/wiki/Pony_Express#Stations https://en.wikipedia.org/wiki/Pony_Express#Stations
      - sjg007 7y ago
        I mean this was how Wells Fargo started.
    - bduerst 7y ago
      Yes, I understand economies of scale, but there is a point where the time and resources spent driving take-out around is not profitable. That's what I mean about certain restaurants and cafes not offering delivery, because even with a third party full time delivery service it's not profitable to deliver certain goods.
- bob_theslob646 7y ago
  Lol but what about the person who makes the pizza? Taking 30% is steep.
HaloZero 7y ago
Grubhub makes a profit? https://en.wikipedia.org/wiki/Grubhub https://en.wikipedia.org/wiki/Grubhub
jcims 7y ago
Drone delivery will fix that.
- deleted 7y ago
  [deleted]
golergka 7y ago
Great article, thanks for the link. But I can't help but notice that these numbers are all for US, and US is a very prosperous country with low income inequality and high-paid workers. In other countries, where labor of low-level workers costs less (compared to the purchasing power of those who order delivery) it could be a completely different picture. Here, I earn a salary which would be around middle-class in US, and yet, my Uber ride usually costs around $3-4 (as opposed to $30 in the article).
vmurthy 7y ago
If fund raising is any indication of this prediction (my bet is yes), look no further than the two big players in India - Swiggy and Zomato [0] and [1]. Losses are in the range of 70 million dollars or so for FY17-18 [2] [0] https://www.livemint.com/Companies/9cuyxq0GMXuDWaGuMWYsZL/Swiggy-raises-1-billion-in-largest-funding-round-till-date.html https://www.livemint.com/Companies/9cuyxq0GMXuDWaGuMWYsZL/Sw... [1]https://inc42.com/buzz/zomato-in-talks-for-1bn-war-chest-to-counter-swiggys-latest-funding/ https://inc42.com/buzz/zomato-in-talks-for-1bn-war-chest-to-... [2]https://www.livemint.com/Companies/cjK3T36vZl1easaVBMXVNN/Swiggy-revenue-trebles-but-loss-doubles-too-in-201718.html https://www.livemint.com/Companies/cjK3T36vZl1easaVBMXVNN/Sw...
deminature 7y ago
Grubhub has been profitable literally since the late 90s. This article is terribly researched.

by fluxic 7y ago

mevile 7y ago

Pizza delivery is profitable. Pizza comes in a shape easy for transportation, the size and value of the delivery is economical for a delivery business and there's an established culture around ordering pizza for delivery. The food delivery companies just need to figure out these problems, which a hard, for non-pizza foods.

Scoundreller 7y ago
Also helps that pizzas themselves are dirt cheap to make. Anything that makes them expensive is chargeable. Continuous production is easy and cheap, so doubling your volume by adding delivery is achievable with the same kitchen.
- mritchie712 7y ago
  ...and fucking delicious
- twoheadedboy 7y ago
  "When it gets down to it — talking trade balances here — once we've brain-drained all our technology into other countries, once things have evened out, they're making cars in Bolivia and microwave ovens in Tadzhikistan and selling them here — once our edge in natural resources has been made irrelevant by giant Hong Kong ships and dirigibles that can ship North Dakota all the way to New Zealand for a nickel — once the Invisible Hand has taken away all those historical inequities and smeared them out into a broad global layer of what a Pakistani brickmaker would consider to be prosperity — y'know what? There's only four things we do better than anyone else: music, movies, microcode (software), high-speed pizza delivery"
  - toomuchtodo 7y ago
    Snow Crash never goes out of style.
ghaff 7y ago
Well, Chinese food is also a commonly delivered item in many places--including but not limited to cities. So I'm not sure pizza is all that unique. That said, a lot of food delivery is some high school kid driving his car around mostly working for tips. You start tacking on the costs of a large delivery-as-a-service company and your costs go up a lot without all that much economy of scale.
- johnpowell 7y ago
  Even at a busy Pizza Hut a lot of the delivery drivers will help with making the pizzas, folding the boxes, and cleaning when not delivering. You can pay them X amount with fixed hours and they can stay busy the entire time. With just delivery services there is a lot of standing around time.
  - jschwartzi 7y ago
    I was recently at an Indian restaurant with my girlfriend, and half to three quarters of the people in the waiting area weren't trying to be seated, they were delivery drivers waiting to pick food up. Most of them sat for upwards of 15 minutes.
bduerst 7y ago
Is it though? Most pizza delivery is an ancillary service to the restaurant itself. Are there very many profitable pizza-delivery only businesses? Also you could argue that for the genre of restaurants where delivery is profitable as an ancillary service (pizza, chinese, etc.), they already offer delivery and there isn't any profitable market for the restaurants where they didn't have it before.
- cosmodisk 7y ago
  It's not profitable because every single restaurant does it for itself only.A post office service would never make a dime if it was only covering a small town.Scale it up to the entire city and it becomes very interesting
  - komali2 7y ago
    Back in frontier west, outside US territory (and therefore not served by the Post Office Department or the Pony Express), people would set up highly profitable transportation companies. These companies would make deliveries for local shops but also carry mail, bringing stuff to somewhere served by the Post Office Department or the Pony Express or the Wells Fargo freight routes. I read all this in a book ages ago but I was skimming through some wikipedia articles that mention some of what I'm talking about if you're interested: https://en.wikipedia.org/wiki/American_frontier https://en.wikipedia.org/wiki/American_frontier https://en.wikipedia.org/wiki/Pony_Express#Stations https://en.wikipedia.org/wiki/Pony_Express#Stations
    - sjg007 7y ago
      I mean this was how Wells Fargo started.
  - bduerst 7y ago
    Yes, I understand economies of scale, but there is a point where the time and resources spent driving take-out around is not profitable. That's what I mean about certain restaurants and cafes not offering delivery, because even with a third party full time delivery service it's not profitable to deliver certain goods.
bob_theslob646 7y ago
Lol but what about the person who makes the pizza? Taking 30% is steep.

HaloZero 7y ago

Grubhub makes a profit? https://en.wikipedia.org/wiki/Grubhub https://en.wikipedia.org/wiki/Grubhub

jcims 7y ago

Drone delivery will fix that.

deleted 7y ago
[deleted]

golergka 7y ago

Great article, thanks for the link. But I can't help but notice that these numbers are all for US, and US is a very prosperous country with low income inequality and high-paid workers. In other countries, where labor of low-level workers costs less (compared to the purchasing power of those who order delivery) it could be a completely different picture. Here, I earn a salary which would be around middle-class in US, and yet, my Uber ride usually costs around $3-4 (as opposed to $30 in the article).

vmurthy 7y ago

If fund raising is any indication of this prediction (my bet is yes), look no further than the two big players in India - Swiggy and Zomato [0] and [1]. Losses are in the range of 70 million dollars or so for FY17-18 [2] [0] https://www.livemint.com/Companies/9cuyxq0GMXuDWaGuMWYsZL/Swiggy-raises-1-billion-in-largest-funding-round-till-date.html https://www.livemint.com/Companies/9cuyxq0GMXuDWaGuMWYsZL/Sw... [1]https://inc42.com/buzz/zomato-in-talks-for-1bn-war-chest-to-counter-swiggys-latest-funding/ https://inc42.com/buzz/zomato-in-talks-for-1bn-war-chest-to-... [2]https://www.livemint.com/Companies/cjK3T36vZl1easaVBMXVNN/Swiggy-revenue-trebles-but-loss-doubles-too-in-201718.html https://www.livemint.com/Companies/cjK3T36vZl1easaVBMXVNN/Sw...

deminature 7y ago

Grubhub has been profitable literally since the late 90s. This article is terribly researched.