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Food delivery in its current form will be short-lived. It is a 4 party system where the company controlling the money is the only one that wins. Restaurants a

Food delivery in its current form will be short-lived. It is a 4 party system where the company controlling the money is the only one that wins. Restaurants are asked to pay 30% of the ticket. The customer is asked to pay more than expected for their meal, a delivery fee, and a tip. For the customer, this can be nearly double for a simple $10 lunch. The driver that has to deliver it gets stuck with fuel, automatic, and typically much less than $15 an hour. All of this is happening while Doordash has a 10billion dollar valuation.

walrus01 7y ago
Food delivery by car should actually be way more expensive than it is, if you consider the standard IRS mileage reimbursement rate for driving.
- michaelt 7y ago
  In my country, business mileage rates are based on the depreciation of a car that is quite nice, and quite new. The kind of car a professional salesperson might drive to visit clients. For a delivery driver to show up in a BMW would be... very unusual.
  - hansvm 7y ago
    I delivered pizza for a couple years before getting my life together, and I can definitely confirm that vehicle costs can be much lower than the IRS standard mileage deduction. I averaged $0.16/mi in insurance, depreciation, repairs, maintenance, tires, gas, washes, and every other cost put together. You can't pull that off as an Uber driver because you need to make a good impression, but food delivery costs can be pretty low.
AlexandrB 7y ago
> Restaurants are asked to pay 30% of the ticket. I was not aware of that. I can see the logic (“we’re providing a service for your business”, etc.) but it feels like double dipping. Especially since it seems as though that cost is passed straight onto the customer anyhow.
- gallamine 7y ago
  The reasoning is that restaurants are using this money for advertising - either they pay to mail out fliers or they pay for listing in the online aggregator. It's a very similar model to paid ads in search engines.
- Jommi 7y ago
  It is doubledipping. But the phrase. "your margin is my opportunity" should ring true here meaning that soon a competitor should show up that goes by list price. It already happens in Europe with the Finnish company Wolt AFAIK.
anonsivalley652 7y ago
And it's not a defensible business model because anyone can start such a company with very little expenses. I remember using waitersonwheels.com in the mid 90's and it wasn't any better than what's available now. Also, I know waiter.com has been around a long time and makes very good money. Perhaps the SF Bay Area is a unicorn where there are so many people with disposable income that their time is worth more than overpaying for things that it can sustain many delivery services? I don't think the business model would work in rural Michigan but it would work anywhere with high property values and/or high incomes.
- ghaff 7y ago
  In general, food delivery doesn't work well well in rural areas. Where I live is more ex-urban than rural and I'm just 40 miles from a major city and almost next door to a couple minor cities. But I have very few delivery options. I apparently have a few more these days through a couple of the online delivery apps although I haven't used them yet.
  - sjg007 7y ago
    I find pizza shows up reliably! We have 5 pizza delivery options and only 2 stop lights in town.
- jfengel 7y ago
  You can start such a company, but there's an overhead in getting on the minds of users and restaurant owners. Users don't want to have to keep multiple apps on their phone, or remember that the local Olive Garden uses OnlineFood but that the Greek place uses FoodNGo. We can have them order through the restaurant's web site and let them make the decision, but they're going to get frustrated if the drivers are fragmented across the different services. If every driver has every app, then it's really just adding overhead. All people and restaurants want is somebody to get the food from point A to point B, without a lot of differentiation. Much like ride share services replacing taxis: people don't really care what they get, and multiple taxi services don't provide useful differentiators. I really think that taxis might have survived better if they had come together to develop an app instead of letting somebody else take that space. As for prices... people are willing to pay to save time. If they really wanted to save money, they'd cook. People go to restaurants so they don't have to cook, but they still pay the time to go and sit and wait. Faced with a choice of $20 Olive Garden + $20 delivery fee, and wait at home playing video games, or $40 at the steakhouse sitting at a table waiting for their food, it might be a tossup. Lots of people do that today. If all they wanted was calories, they'd spent $5 at McDs.
morrbo 7y ago
Don't forget the "service charge" (different to a tip, akin to Ticketmaster) I've started seeing on deliveroo in the UK
- Symbiote 7y ago
  Presumably that's because it's not common to tip the delivery driver in the UK -- and if there is a tip, it's a token £1 or so.
mantap 7y ago
The business model is strong and is hugely successful in Asia. But the fees will decrease with competitive pressure.
- 9nGQluzmnq3M 7y ago
  That's because food is cheap, wages are low and cities are dense enough to cover by motorbike, PMD (hoverboards etc) or even bicycle.
  - mantap 7y ago
    The food is cheap but not necessarily cheaper after adjusting for income because, as you said, wages are low.
pcurve 7y ago
Compared to South Korea, the company's take is insane. SK's minimum wage is $7+ and it's not unusual for delivery person to make $3000+/month. Customers pay reasonable fee of a few dollars and no tip.
- JCharante 7y ago
  And in Vietnam, Grab drivers can make the same as young professionals, leading some to start deliverying food or chauffering people around full time after graduating from post-secondary education. (~$600/mo, less than $1/hour from working at a cafe is normal).
vector_spaces 7y ago
I do consulting work in the grocery business and serve as a point of contact for software and tech purchasing for a handful of retailers and producers. Uber Eats has been calling me every year to sell their platform to some of the stores I work with. Grocery product margins are about 30 percent in the happy case (specialty foods), usually much lower. Uber Eats wants 30 percent of the basket on each sale they make. The last salesperson who called, after I gave him that context, suggested this would be a new revenue stream. I remarked that we would lose money on each sale. He clarified that Uber Eats would only take 30 percent of what we sold through their platform, not all of the sales made by the store (how generous of them). I thanked him for clarifying and said I understood that. He then suggested to me that customers who buy from us on Uber Eats might do so only once, and make the rest of their purchases in store. I asked him why they would do that, and he uncomfortably said a few words about how Uber is working on something for grocery stores and said they would try back later. They have reached out to me about once a year since 2016, and pretty much every conversation goes the same, and their pricing is the same. It's ridiculous to me how they don't bother to understand the customers they engage, and that they train their sales people to continue goad businesses into working with them even after they've made clear they would lose money. Either way, it's very clear to me that this model is indeed going to be short lived. It depends primarily on weaknesses in labor laws and operators being swayed by their bizarre sales pitches enough to act against their own bottom line. In any case I certainly won't be sad to see it crash and burn
- AgloeDreams 7y ago
  What is bizzare about all of this is that I honestly do think that when Amazon figures Drone Delivery all out they will basically eat everyone alive in the food delivery business. They totally will automate the storage and picking systems, do it in warehouses (that also do normal delivery and act as Go/ Whole Foods distribution networks) and the Drone systems will be AI piloted possibly with human oversight. (one human, 10 drones, they may also use fleets to ease air clearance) Once they solve all of this you chop distribution to the store, shelf stocking, checkout staffing, picker payment, driver payment, property and lease fees, the margin will be higher, the experience faster, the costs lower. I bet Amazon will mass produce the drones at a rather low cost over time, maybe produce UWB tracking devices (like Apple's Tags will use) so you can be hand delivered products without the landing pad they currently use. It's a real infinite game and that's okay if it all takes 10+ years. I'm not saying this is a good thing for mankind, but might be a reality.
bluetidepro 7y ago
I think you under estimate how many people are lazy and willing to eat all those costs to not leave their house, and have the food delivered right to their door. Even more so in big cities where most of the population doesn't have a car.
deminature 7y ago
Suggesting this model is short-lived is ignoring history. Grubhub has been running this model in the US since 1999 (originally as Seamless in NYC) [1]. It's very unlikely that its going anywhere. [1] https://en.wikipedia.org/wiki/Grubhub https://en.wikipedia.org/wiki/Grubhub
tmpz22 7y ago
As a former power user in SF I have to agree. Prices have doubled and quality has plummeted. Riders are making deliveries with other apps while they are “supposed” to be delivering mine (can’t blame them). Food is always cold and items are constantly missing. Aggressive tipping and feedback modals (especially for Postmates) are a big turn off - I always tried to tip generously in cash but they tried to force tips through the app for unscrupulous reasons. The whole thing is just absurd. $25 for a cold $8 hamburger?
aabbcc1241 7y ago
Can we improve the situation? Well known "platform app" are evil, while non-evil alternative feel tough to reach the critical mass, because they don't have as much budget to promote.

walrus01 7y ago

Food delivery by car should actually be way more expensive than it is, if you consider the standard IRS mileage reimbursement rate for driving.

michaelt 7y ago
In my country, business mileage rates are based on the depreciation of a car that is quite nice, and quite new. The kind of car a professional salesperson might drive to visit clients. For a delivery driver to show up in a BMW would be... very unusual.
- hansvm 7y ago
  I delivered pizza for a couple years before getting my life together, and I can definitely confirm that vehicle costs can be much lower than the IRS standard mileage deduction. I averaged $0.16/mi in insurance, depreciation, repairs, maintenance, tires, gas, washes, and every other cost put together. You can't pull that off as an Uber driver because you need to make a good impression, but food delivery costs can be pretty low.

AlexandrB 7y ago

> Restaurants are asked to pay 30% of the ticket. I was not aware of that. I can see the logic (“we’re providing a service for your business”, etc.) but it feels like double dipping. Especially since it seems as though that cost is passed straight onto the customer anyhow.

gallamine 7y ago
The reasoning is that restaurants are using this money for advertising - either they pay to mail out fliers or they pay for listing in the online aggregator. It's a very similar model to paid ads in search engines.
Jommi 7y ago
It is doubledipping. But the phrase. "your margin is my opportunity" should ring true here meaning that soon a competitor should show up that goes by list price. It already happens in Europe with the Finnish company Wolt AFAIK.

anonsivalley652 7y ago

And it's not a defensible business model because anyone can start such a company with very little expenses. I remember using waitersonwheels.com in the mid 90's and it wasn't any better than what's available now. Also, I know waiter.com has been around a long time and makes very good money. Perhaps the SF Bay Area is a unicorn where there are so many people with disposable income that their time is worth more than overpaying for things that it can sustain many delivery services? I don't think the business model would work in rural Michigan but it would work anywhere with high property values and/or high incomes.

ghaff 7y ago
In general, food delivery doesn't work well well in rural areas. Where I live is more ex-urban than rural and I'm just 40 miles from a major city and almost next door to a couple minor cities. But I have very few delivery options. I apparently have a few more these days through a couple of the online delivery apps although I haven't used them yet.
- sjg007 7y ago
  I find pizza shows up reliably! We have 5 pizza delivery options and only 2 stop lights in town.
jfengel 7y ago
You can start such a company, but there's an overhead in getting on the minds of users and restaurant owners. Users don't want to have to keep multiple apps on their phone, or remember that the local Olive Garden uses OnlineFood but that the Greek place uses FoodNGo. We can have them order through the restaurant's web site and let them make the decision, but they're going to get frustrated if the drivers are fragmented across the different services. If every driver has every app, then it's really just adding overhead. All people and restaurants want is somebody to get the food from point A to point B, without a lot of differentiation. Much like ride share services replacing taxis: people don't really care what they get, and multiple taxi services don't provide useful differentiators. I really think that taxis might have survived better if they had come together to develop an app instead of letting somebody else take that space. As for prices... people are willing to pay to save time. If they really wanted to save money, they'd cook. People go to restaurants so they don't have to cook, but they still pay the time to go and sit and wait. Faced with a choice of $20 Olive Garden + $20 delivery fee, and wait at home playing video games, or $40 at the steakhouse sitting at a table waiting for their food, it might be a tossup. Lots of people do that today. If all they wanted was calories, they'd spent $5 at McDs.

morrbo 7y ago

Don't forget the "service charge" (different to a tip, akin to Ticketmaster) I've started seeing on deliveroo in the UK

Symbiote 7y ago
Presumably that's because it's not common to tip the delivery driver in the UK -- and if there is a tip, it's a token £1 or so.

mantap 7y ago

The business model is strong and is hugely successful in Asia. But the fees will decrease with competitive pressure.

9nGQluzmnq3M 7y ago
That's because food is cheap, wages are low and cities are dense enough to cover by motorbike, PMD (hoverboards etc) or even bicycle.
- mantap 7y ago
  The food is cheap but not necessarily cheaper after adjusting for income because, as you said, wages are low.

pcurve 7y ago

Compared to South Korea, the company's take is insane. SK's minimum wage is $7+ and it's not unusual for delivery person to make $3000+/month. Customers pay reasonable fee of a few dollars and no tip.

JCharante 7y ago
And in Vietnam, Grab drivers can make the same as young professionals, leading some to start deliverying food or chauffering people around full time after graduating from post-secondary education. (~$600/mo, less than $1/hour from working at a cafe is normal).

vector_spaces 7y ago

I do consulting work in the grocery business and serve as a point of contact for software and tech purchasing for a handful of retailers and producers. Uber Eats has been calling me every year to sell their platform to some of the stores I work with. Grocery product margins are about 30 percent in the happy case (specialty foods), usually much lower. Uber Eats wants 30 percent of the basket on each sale they make. The last salesperson who called, after I gave him that context, suggested this would be a new revenue stream. I remarked that we would lose money on each sale. He clarified that Uber Eats would only take 30 percent of what we sold through their platform, not all of the sales made by the store (how generous of them). I thanked him for clarifying and said I understood that. He then suggested to me that customers who buy from us on Uber Eats might do so only once, and make the rest of their purchases in store. I asked him why they would do that, and he uncomfortably said a few words about how Uber is working on something for grocery stores and said they would try back later. They have reached out to me about once a year since 2016, and pretty much every conversation goes the same, and their pricing is the same. It's ridiculous to me how they don't bother to understand the customers they engage, and that they train their sales people to continue goad businesses into working with them even after they've made clear they would lose money. Either way, it's very clear to me that this model is indeed going to be short lived. It depends primarily on weaknesses in labor laws and operators being swayed by their bizarre sales pitches enough to act against their own bottom line. In any case I certainly won't be sad to see it crash and burn

AgloeDreams 7y ago
What is bizzare about all of this is that I honestly do think that when Amazon figures Drone Delivery all out they will basically eat everyone alive in the food delivery business. They totally will automate the storage and picking systems, do it in warehouses (that also do normal delivery and act as Go/ Whole Foods distribution networks) and the Drone systems will be AI piloted possibly with human oversight. (one human, 10 drones, they may also use fleets to ease air clearance) Once they solve all of this you chop distribution to the store, shelf stocking, checkout staffing, picker payment, driver payment, property and lease fees, the margin will be higher, the experience faster, the costs lower. I bet Amazon will mass produce the drones at a rather low cost over time, maybe produce UWB tracking devices (like Apple's Tags will use) so you can be hand delivered products without the landing pad they currently use. It's a real infinite game and that's okay if it all takes 10+ years. I'm not saying this is a good thing for mankind, but might be a reality.

bluetidepro 7y ago

I think you under estimate how many people are lazy and willing to eat all those costs to not leave their house, and have the food delivered right to their door. Even more so in big cities where most of the population doesn't have a car.

deminature 7y ago

Suggesting this model is short-lived is ignoring history. Grubhub has been running this model in the US since 1999 (originally as Seamless in NYC) [1]. It's very unlikely that its going anywhere. [1] https://en.wikipedia.org/wiki/Grubhub https://en.wikipedia.org/wiki/Grubhub

tmpz22 7y ago

As a former power user in SF I have to agree. Prices have doubled and quality has plummeted. Riders are making deliveries with other apps while they are “supposed” to be delivering mine (can’t blame them). Food is always cold and items are constantly missing. Aggressive tipping and feedback modals (especially for Postmates) are a big turn off - I always tried to tip generously in cash but they tried to force tips through the app for unscrupulous reasons. The whole thing is just absurd. $25 for a cold $8 hamburger?

aabbcc1241 7y ago

Can we improve the situation? Well known "platform app" are evil, while non-evil alternative feel tough to reach the critical mass, because they don't have as much budget to promote.