6 ms·

The foodoo economics of meal delivery

89 points by sien 7y ago

neonate 7y ago
https://outline.com/Ucz9Tm https://outline.com/Ucz9Tm
Zenst 7y ago
One of those rare times in which the title of the article sums up the article, and in a way that is just brilliant.
- jankyxenon 7y ago
  Especially if you're punjabi
  - harryVic 7y ago
    Took me a while to get it!
  - statguy 7y ago
    https://www.google.com/amp/s/www.urbandictionary.com/define.php%3fterm=Fuddu&amp=true https://www.google.com/amp/s/www.urbandictionary.com/define....
Rothnargoth 7y ago
"The restaurants in particular are restive, not least because food is already a low-margin business." Coupled with the recent survey from US Foods that 28 percent of food couriers admit to eating food from their deliveries(1) are some of the reasons for the consolidation in the food delivery industry. (1) https://www.usfoods.com/our-services/business-trends/2019-food-delivery-statistics.html https://www.usfoods.com/our-services/business-trends/2019-fo...
- p1necone 7y ago
  Dear delivery drivers: have a chip - I don't mind.
  - TylerE 7y ago
    I do. Cars (or worse... bikes/mopeds) don't have hand wash sinks.
  - luckydata 7y ago
    yeah, best way to get epidemics, good idea.
- Rebelgecko 7y ago
  If that's how the survey was worded, it's not super useful. At least with Ubereats, its supposedly not rare for someone to order and then pass out drunk/stoned/unable to go pick up food from driver. In those cases, Uber tells the drivers to do whatever they want with the food.
quickthrower2 7y ago
Shame. The article seems a bit weak - nothing on the actual costs and margins involved. Homejoy is the poster child of why these "middle man for the gig-working class" type businesses are going to struggle (in general) with perhaps the occasional winner takes all. If borrowing money becomes more expensive most of these kind of businesses will die as funding dries up.
- rolltiide 7y ago
  But if we make more companies at high valuations fast enough, foreign demand for dollars to buy into these companies will force the central bank to keep pushing the yield curve down in the process of creating more dollars to meet demand! I’m being facetious.... or am I
- dmix 7y ago
  I've never understood how you could create a company that operates on the economies of scale by faking the scale part with VC. That seems like an expensive and high speed runway that has tons of risk for failure. I presume the private equity industry has proven (repeatedly) what you can accomplish with plenty of Wall St capital and confidence alone, regardless of traditional business strategy. Now VCs want to do the same, but almost inverted. The big question is why can't we just transition from actual operational cleaning/maid companies today, combining the old business + technology, until it goes into a 100% technology based market? It seems Uber's business model is that the entire taxi industry missed the boat on using smartphones. Many city's taxi companies already had mostly contractors via 'broker' arrangements where drivers own the cars and the taxi companies do the phones/marketing (which most people don't know). I'm sure many of Homejoy's cleaners were independent or semi-independent already too, where it was a gig economy already, just not an efficient one. So most of the innovation was just the technology part, so why not underpin the new businesses with some actual scale by buying up some traditional market businesses? I understand why old entrenched industries completely fail to adapt, especially those protected by regulatory agencies and city governments. I guess it doesn't make much sense to buy those companies with so much baggage included - or expect the innovation to come from within. So we're only left with the option of x entrenched market + y technology market, until x doesn't exist anymore. Not some transition between x->y.
anguswithgusto 7y ago
IMO, this is a more sophisticated article on the unit economics of food delivery. (However, it is a little older): The Food Delivery Death Star (2016) https://medium.com/@review/the-food-delivery-death-star-85f9a121313 https://medium.com/@review/the-food-delivery-death-star-85f9...
- cookie_monsta 7y ago
  Agreed, that is a better article, but even so - every time I read about this space I get more confused. I get that very smart people are throwing large sums of money at it, so there's obviously some logic that I'm not getting. For example, the Medium piece says that Uber has a lucrative monopoly, but then goes on to say that it loses 700M per quarter. How is that lucrative? And self-driving cars are held up as the solution to thin margins but to me it seems that the only saving grace for these companies is that they get drivers to bring their own cars, do their own maintenance, pay their own insurance, etc. Considering how expensive driverless cars will inevitably be when they first appear and the sheer number that these companies will require to actually replace their contractors/partners/whatever they call their drivers, 2030 seems a very optimistic target for profitability. But then I'm just some schmuck - surely the VCs have all had those thoughts and are ploughing on regardless because they know something else?
- oska 7y ago
  More detail and more examination of the difficulties but their concluding paragraph is still optimistic: > In the emerging food delivery wars, the stakes are high, the margins are slim, and the competition is vast. Some will fail. Others will quit. But a few of them might just end up delivering the billion-dollar goods. I doubt it. I think food delivery is something that can only work where the food makers are in control, not the food deliverers.
ian0 7y ago
An anecdote from Indonesia. One of the large on-demand companies moved into food delivery a few years back. Originally, the only cost was the (subsidised) price of transport borne by the consumer. There was no contract with restaurants. A driver pulled up and ordered a takeaway just like a consumer would. However after awhile, most businesses began to see a good proportion of their sales (& a lot of new customers) from these drivers. When the on-demand company started contracting restaurants with a mandetory 20% markup to the price of food, it was a no-brainer for the restaurants to go along with it. As a result, this food delivery business now subsidises the core rideshare business. At the end of the day it's eyeballs that matter, to both the restaurant and the on-demand company. And this is where the great divide between the super-apps and the delivery startups come into play. Trying to compete with one of these big apps is like trying to compete with Amazon with some niche e-comm site. Its possible, its just very, very difficult. And of course doesn't have anywhere near the same potential value.
- erulabs 7y ago
  One of the best lessons I’ve learned: a 1% chance of making 10B is worth 100M. This took a disturbing amount of time for me to digest, but it’s absolute truth. Food delivery has a very slim chance of working, but oh baby if it works.
contingencies 7y ago
The Financial Times also did a feature this weekend, see https://www.ft.com/content/af232e7a-b516-11e9-8cb2-799a3a8cf37b https://www.ft.com/content/af232e7a-b516-11e9-8cb2-799a3a8cf... .. international print version was different. Both Economist and FT probably prompted by market research announcement. Here in China, consolidation continues but there remain quite a number of smaller players. It's a brutal space, very high capex, very low USP, thin margins, no return unless you scale. Basically the main players exist through VC and eyeball trading. You have to wonder what security they have against eg. Tencent/WeChat just sidestepping them. Especially as there is a lot of history of nasty backstabbing marketplace-takes-your-model in China, eg. we saw Qunar do this to hotel reservation networks (I used to run one). One area of resistance to commodified last mile delivery seems to be large chains, like KFC/McDonalds, who offer their own delivery drivers in a bid to retain control, customer ownership and margins. A major play right now for delivery operators seems to be ghost kitchen establishment and operator partnerships. We anticipate entering the Chinese consumer food retail market within the next two quarters with closer-to-consumer, robot-produced, personalized cuisine cooked to order in an autonomous kiosk format (wholly owned and operated).
- mc32 7y ago
  Maybe KFC, McD, etc. want to retain control of their product up to the time it delivers the items to the buyer/customer. There was a recent investigation showing s considerable amount of food delivery drivers for hire (door dash, ubereats, etc.) helped themselves to some of their customers’ food. I’m sure the chains want better control over who delivers their food and in what state.
- Godel_unicode 7y ago
  > "resistance to commodified last mile delivery seems to be large chains, like KFC/McDonalds" In many US markets, those national brands are all on Uber Eats.
- toomanybeersies 7y ago
  You might want to put a disclaimer at the bottom of your post that you are working in the automated food space (http://infinite-food.com/ http://infinite-food.com/).

89 points by sien 7y ago

neonate 7y ago

https://outline.com/Ucz9Tm https://outline.com/Ucz9Tm

Zenst 7y ago

One of those rare times in which the title of the article sums up the article, and in a way that is just brilliant.

jankyxenon 7y ago
Especially if you're punjabi
- harryVic 7y ago
  Took me a while to get it!
- statguy 7y ago
  https://www.google.com/amp/s/www.urbandictionary.com/define.php%3fterm=Fuddu&amp=true https://www.google.com/amp/s/www.urbandictionary.com/define....

Rothnargoth 7y ago

"The restaurants in particular are restive, not least because food is already a low-margin business." Coupled with the recent survey from US Foods that 28 percent of food couriers admit to eating food from their deliveries(1) are some of the reasons for the consolidation in the food delivery industry. (1) https://www.usfoods.com/our-services/business-trends/2019-food-delivery-statistics.html https://www.usfoods.com/our-services/business-trends/2019-fo...

p1necone 7y ago
Dear delivery drivers: have a chip - I don't mind.
- TylerE 7y ago
  I do. Cars (or worse... bikes/mopeds) don't have hand wash sinks.
- luckydata 7y ago
  yeah, best way to get epidemics, good idea.
Rebelgecko 7y ago
If that's how the survey was worded, it's not super useful. At least with Ubereats, its supposedly not rare for someone to order and then pass out drunk/stoned/unable to go pick up food from driver. In those cases, Uber tells the drivers to do whatever they want with the food.

quickthrower2 7y ago

Shame. The article seems a bit weak - nothing on the actual costs and margins involved. Homejoy is the poster child of why these "middle man for the gig-working class" type businesses are going to struggle (in general) with perhaps the occasional winner takes all. If borrowing money becomes more expensive most of these kind of businesses will die as funding dries up.

rolltiide 7y ago
But if we make more companies at high valuations fast enough, foreign demand for dollars to buy into these companies will force the central bank to keep pushing the yield curve down in the process of creating more dollars to meet demand! I’m being facetious.... or am I
dmix 7y ago
I've never understood how you could create a company that operates on the economies of scale by faking the scale part with VC. That seems like an expensive and high speed runway that has tons of risk for failure. I presume the private equity industry has proven (repeatedly) what you can accomplish with plenty of Wall St capital and confidence alone, regardless of traditional business strategy. Now VCs want to do the same, but almost inverted. The big question is why can't we just transition from actual operational cleaning/maid companies today, combining the old business + technology, until it goes into a 100% technology based market? It seems Uber's business model is that the entire taxi industry missed the boat on using smartphones. Many city's taxi companies already had mostly contractors via 'broker' arrangements where drivers own the cars and the taxi companies do the phones/marketing (which most people don't know). I'm sure many of Homejoy's cleaners were independent or semi-independent already too, where it was a gig economy already, just not an efficient one. So most of the innovation was just the technology part, so why not underpin the new businesses with some actual scale by buying up some traditional market businesses? I understand why old entrenched industries completely fail to adapt, especially those protected by regulatory agencies and city governments. I guess it doesn't make much sense to buy those companies with so much baggage included - or expect the innovation to come from within. So we're only left with the option of x entrenched market + y technology market, until x doesn't exist anymore. Not some transition between x->y.

anguswithgusto 7y ago

IMO, this is a more sophisticated article on the unit economics of food delivery. (However, it is a little older): The Food Delivery Death Star (2016) https://medium.com/@review/the-food-delivery-death-star-85f9a121313 https://medium.com/@review/the-food-delivery-death-star-85f9...

cookie_monsta 7y ago
Agreed, that is a better article, but even so - every time I read about this space I get more confused. I get that very smart people are throwing large sums of money at it, so there's obviously some logic that I'm not getting. For example, the Medium piece says that Uber has a lucrative monopoly, but then goes on to say that it loses 700M per quarter. How is that lucrative? And self-driving cars are held up as the solution to thin margins but to me it seems that the only saving grace for these companies is that they get drivers to bring their own cars, do their own maintenance, pay their own insurance, etc. Considering how expensive driverless cars will inevitably be when they first appear and the sheer number that these companies will require to actually replace their contractors/partners/whatever they call their drivers, 2030 seems a very optimistic target for profitability. But then I'm just some schmuck - surely the VCs have all had those thoughts and are ploughing on regardless because they know something else?
oska 7y ago
More detail and more examination of the difficulties but their concluding paragraph is still optimistic: > In the emerging food delivery wars, the stakes are high, the margins are slim, and the competition is vast. Some will fail. Others will quit. But a few of them might just end up delivering the billion-dollar goods. I doubt it. I think food delivery is something that can only work where the food makers are in control, not the food deliverers.

ian0 7y ago

An anecdote from Indonesia. One of the large on-demand companies moved into food delivery a few years back. Originally, the only cost was the (subsidised) price of transport borne by the consumer. There was no contract with restaurants. A driver pulled up and ordered a takeaway just like a consumer would. However after awhile, most businesses began to see a good proportion of their sales (& a lot of new customers) from these drivers. When the on-demand company started contracting restaurants with a mandetory 20% markup to the price of food, it was a no-brainer for the restaurants to go along with it. As a result, this food delivery business now subsidises the core rideshare business. At the end of the day it's eyeballs that matter, to both the restaurant and the on-demand company. And this is where the great divide between the super-apps and the delivery startups come into play. Trying to compete with one of these big apps is like trying to compete with Amazon with some niche e-comm site. Its possible, its just very, very difficult. And of course doesn't have anywhere near the same potential value.

erulabs 7y ago
One of the best lessons I’ve learned: a 1% chance of making 10B is worth 100M. This took a disturbing amount of time for me to digest, but it’s absolute truth. Food delivery has a very slim chance of working, but oh baby if it works.

contingencies 7y ago

The Financial Times also did a feature this weekend, see https://www.ft.com/content/af232e7a-b516-11e9-8cb2-799a3a8cf37b https://www.ft.com/content/af232e7a-b516-11e9-8cb2-799a3a8cf... .. international print version was different. Both Economist and FT probably prompted by market research announcement. Here in China, consolidation continues but there remain quite a number of smaller players. It's a brutal space, very high capex, very low USP, thin margins, no return unless you scale. Basically the main players exist through VC and eyeball trading. You have to wonder what security they have against eg. Tencent/WeChat just sidestepping them. Especially as there is a lot of history of nasty backstabbing marketplace-takes-your-model in China, eg. we saw Qunar do this to hotel reservation networks (I used to run one). One area of resistance to commodified last mile delivery seems to be large chains, like KFC/McDonalds, who offer their own delivery drivers in a bid to retain control, customer ownership and margins. A major play right now for delivery operators seems to be ghost kitchen establishment and operator partnerships. We anticipate entering the Chinese consumer food retail market within the next two quarters with closer-to-consumer, robot-produced, personalized cuisine cooked to order in an autonomous kiosk format (wholly owned and operated).

mc32 7y ago
Maybe KFC, McD, etc. want to retain control of their product up to the time it delivers the items to the buyer/customer. There was a recent investigation showing s considerable amount of food delivery drivers for hire (door dash, ubereats, etc.) helped themselves to some of their customers’ food. I’m sure the chains want better control over who delivers their food and in what state.
Godel_unicode 7y ago
> "resistance to commodified last mile delivery seems to be large chains, like KFC/McDonalds" In many US markets, those national brands are all on Uber Eats.
toomanybeersies 7y ago
You might want to put a disclaimer at the bottom of your post that you are working in the automated food space (http://infinite-food.com/ http://infinite-food.com/).