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But aren't there like 2 dozen competing apps trying to do this? Shouldn't that drive prices down? Or is actually legitimately expensive to provide this service?

But aren't there like 2 dozen competing apps trying to do this? Shouldn't that drive prices down? Or is actually legitimately expensive to provide this service? We've been told that evil VCs subsidize service to run at below cost to drive competitors out of business. Uber is often accused of this. Why aren't we seeing that phenomenon here? And Uber is literally one of the competitors.

Jommi 6y ago
I would not be surprised if the US market had some level of collusion going on. It just doesn't make sense to me that they aren't currently competing on price. There are some other possible reasons tho, like food actually not being as "commodity"-like as we think it is (like rides are)
- nerfhammer 6y ago
  That would surprise me. It's unlikely a dozen apps would be able to coordinate like that. The thing about cartels is the first defector can cut prices and capture marketshare, which is what we're supposed to believe evil VC funded cutthroat startups are inclined to do. Raising prices to increase profit but reduce revenue growth is the exact opposite of that. The other hypothesis is that delivery is simply expensive. The driver has to drive to the pickup place, find parking, stand in line potentially for awhile, drive to the delivery, park again, walk to the delivery location to drop off the item. Most of those things an ordinary uber fare would not have to deal with.
  - ethbro 6y ago
    Or, this is more like TicketMaster and less like a free market.
    - esyir 6y ago
      The concert case single monopoly that controls both part of the source as well as basically all sales is now comparable to the pile of separate delivery services that compete against each other. A claim that all of these have formed a cartel requires strong evidence.
      - ethbro 6y ago
        The pile of delivery services is effectively 3, right? And 2 of those are potentially combining.
        esyir 6y ago
        https://www.statista.com/statistics/1080860/market-share-us-food-delivery-companies/ https://www.statista.com/statistics/1080860/market-share-us-... Looks like a split amongst 4 right now, as far as the big ones go. This doesn't include the smaller startups as well.
  - heavyset_go 6y ago
    This is naive. Cartels are a market failure, and your argument against cartels existing is that market forces in an ideal world would prevent them. Reminder that Adobe, Apple, Google, Intel, Intuit, Pixar, Lucasfilm and eBay all colluded to keep engineer compensation below market value[1]. [1] https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_Litigation https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...
    - Jommi 6y ago
      Well that's also just a naive view. Industrial Economics takes a deeper look at this for example.
- loceng 6y ago
  It's possible collusion is a factor, however another observation I've had could explain it: the VC-finance industrial complex - in that there are dominant incumbents who have so much profit that they simply buy any up and coming new competitors in the market, to which the founders and VCs are happy for that payday. Or you have two big companies doing mergers, giving multiple advantages including a bigger pool of profits/revenues to leverage and outbid their other large competitors in the market. This is the main reason that they're all able to continue to charge arguably unreasonable and unnecessary fees to restaurants, because the barrier to entry is heavily having enough funds to build such a platform - and the gatekeepers are in the VC industrial complex where most want unreasonable returns (requiring unreasonable, excessive fees and other grey or dark practices) and an exit event in 10 years.
drone 6y ago
VCs don't subsidize the transaction cost (unit economics), they subsidize the (customer) acquisition cost. That is to say, they don't want you losing money on the execution of the transaction, but if the sum total of net revenue from a customer's transactions don't equal the cost to acquire (market, etc.) the customer -- there's the subsidizing. If you went to a VC with a model for a food service delivery taking less than 30% of the transaction, they'd more than likely pass. 30% is the bar that's been set, and your unit economics have to be as good or better than the existing players. They're not keen on investing in "just a cheaper version of something that already exists." -- If you're marketing yourself as "cheaper," it has to because some innovation has eliminated more cost out of the transaction than you have eliminated in net revenue.

Jommi 6y ago

I would not be surprised if the US market had some level of collusion going on. It just doesn't make sense to me that they aren't currently competing on price. There are some other possible reasons tho, like food actually not being as "commodity"-like as we think it is (like rides are)

nerfhammer 6y ago
That would surprise me. It's unlikely a dozen apps would be able to coordinate like that. The thing about cartels is the first defector can cut prices and capture marketshare, which is what we're supposed to believe evil VC funded cutthroat startups are inclined to do. Raising prices to increase profit but reduce revenue growth is the exact opposite of that. The other hypothesis is that delivery is simply expensive. The driver has to drive to the pickup place, find parking, stand in line potentially for awhile, drive to the delivery, park again, walk to the delivery location to drop off the item. Most of those things an ordinary uber fare would not have to deal with.
- ethbro 6y ago
  Or, this is more like TicketMaster and less like a free market.
  - esyir 6y ago
    The concert case single monopoly that controls both part of the source as well as basically all sales is now comparable to the pile of separate delivery services that compete against each other. A claim that all of these have formed a cartel requires strong evidence.
    - ethbro 6y ago
      The pile of delivery services is effectively 3, right? And 2 of those are potentially combining.
      - esyir 6y ago
        https://www.statista.com/statistics/1080860/market-share-us-food-delivery-companies/ https://www.statista.com/statistics/1080860/market-share-us-... Looks like a split amongst 4 right now, as far as the big ones go. This doesn't include the smaller startups as well.
- heavyset_go 6y ago
  This is naive. Cartels are a market failure, and your argument against cartels existing is that market forces in an ideal world would prevent them. Reminder that Adobe, Apple, Google, Intel, Intuit, Pixar, Lucasfilm and eBay all colluded to keep engineer compensation below market value[1]. [1] https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_Litigation https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...
  - Jommi 6y ago
    Well that's also just a naive view. Industrial Economics takes a deeper look at this for example.
loceng 6y ago
It's possible collusion is a factor, however another observation I've had could explain it: the VC-finance industrial complex - in that there are dominant incumbents who have so much profit that they simply buy any up and coming new competitors in the market, to which the founders and VCs are happy for that payday. Or you have two big companies doing mergers, giving multiple advantages including a bigger pool of profits/revenues to leverage and outbid their other large competitors in the market. This is the main reason that they're all able to continue to charge arguably unreasonable and unnecessary fees to restaurants, because the barrier to entry is heavily having enough funds to build such a platform - and the gatekeepers are in the VC industrial complex where most want unreasonable returns (requiring unreasonable, excessive fees and other grey or dark practices) and an exit event in 10 years.

drone 6y ago

VCs don't subsidize the transaction cost (unit economics), they subsidize the (customer) acquisition cost. That is to say, they don't want you losing money on the execution of the transaction, but if the sum total of net revenue from a customer's transactions don't equal the cost to acquire (market, etc.) the customer -- there's the subsidizing. If you went to a VC with a model for a food service delivery taking less than 30% of the transaction, they'd more than likely pass. 30% is the bar that's been set, and your unit economics have to be as good or better than the existing players. They're not keen on investing in "just a cheaper version of something that already exists." -- If you're marketing yourself as "cheaper," it has to because some innovation has eliminated more cost out of the transaction than you have eliminated in net revenue.