4 ms·

The food delivery market at the moment feels a bit like the daily deals market from 10-12 years ago (with Groupon and Living Social). Sure there's a market the

The food delivery market at the moment feels a bit like the daily deals market from 10-12 years ago (with Groupon and Living Social). Sure there's a market there, but is it really big enough to sustain multiple large IPO'd start-ups...

koolba 6y ago
There's always a market for VC subsidized consumer services. What's in dispute is whether there's a market for these services when they reflect their true unsubsidized costs. If food (or grocery) delivery companies cannot turn a profit during a pandemic, there's no way they're going to turn a profit when the majority of people return to in person dining or pickup. Groceries and restaurants have terrible margins already. There's just not enough pie to give a meaningful slice to middle men facilitating payment and delivery.
- boringg 6y ago
  Turn a profit? No these companies are taking all revenues and deploying it back into the company to continue to grow operations. They will be loss taking companies until they get market share and then Extract profits once they have market share or die trying.
ttul 6y ago
It will be a battle to the death until there is some consolidation to empower a price increase.
nipponese 6y ago
Interesting comment but some prelim research can help us understand if it has legs: Look up the S-1 from those companies and compare the numbers.
oramit 6y ago
Yeah, I had the same feeling. None of this feels sustainable and I get the sense that most of these companies are rushing to IPO as soon as they can to unload their terrible businesses on the public. Groupon failed because they were selling full priced items at a discount. This was meant to be a marketing thing for small businesses but in practice you just ended up with cheapskates who never intended to be repeat customers. The only thing I can say in the delivery companies defense is they have normalized large markups on delivery. People are paying more for delivery than they were before(the apps do a good job of obfuscating how much more). Clearly there was an arbitrage opportunity but there are so many companies fighting over the same tiny margin while losing tons of money. This can't end well.
macspoofing 6y ago
There must be a viable market there. For example, pizza franchises have managed to eek out a profit from home delivery for years. Centralized delivery service should be able to find some extra efficiencies to make their business viable. The demand is certainly there.
- umeshunni 6y ago
  Pizza costs $1.50 to make and charging $8-20 for it, you can eek out a great margin. It also transports well and can be easily reheated. Regular restaurants have a lot thinner margins.
- lotsofpulp 6y ago
  Exactly, pizza franchisors eek out a profit. They don’t earn enough profit to also have a tech startup take a piece.
JAlexoid 6y ago
I didn't realize that groupon still exists.

koolba 6y ago

There's always a market for VC subsidized consumer services. What's in dispute is whether there's a market for these services when they reflect their true unsubsidized costs. If food (or grocery) delivery companies cannot turn a profit during a pandemic, there's no way they're going to turn a profit when the majority of people return to in person dining or pickup. Groceries and restaurants have terrible margins already. There's just not enough pie to give a meaningful slice to middle men facilitating payment and delivery.

boringg 6y ago
Turn a profit? No these companies are taking all revenues and deploying it back into the company to continue to grow operations. They will be loss taking companies until they get market share and then Extract profits once they have market share or die trying.

ttul 6y ago

It will be a battle to the death until there is some consolidation to empower a price increase.

nipponese 6y ago

Interesting comment but some prelim research can help us understand if it has legs: Look up the S-1 from those companies and compare the numbers.

oramit 6y ago

Yeah, I had the same feeling. None of this feels sustainable and I get the sense that most of these companies are rushing to IPO as soon as they can to unload their terrible businesses on the public. Groupon failed because they were selling full priced items at a discount. This was meant to be a marketing thing for small businesses but in practice you just ended up with cheapskates who never intended to be repeat customers. The only thing I can say in the delivery companies defense is they have normalized large markups on delivery. People are paying more for delivery than they were before(the apps do a good job of obfuscating how much more). Clearly there was an arbitrage opportunity but there are so many companies fighting over the same tiny margin while losing tons of money. This can't end well.

macspoofing 6y ago

There must be a viable market there. For example, pizza franchises have managed to eek out a profit from home delivery for years. Centralized delivery service should be able to find some extra efficiencies to make their business viable. The demand is certainly there.

umeshunni 6y ago
Pizza costs $1.50 to make and charging $8-20 for it, you can eek out a great margin. It also transports well and can be easily reheated. Regular restaurants have a lot thinner margins.
lotsofpulp 6y ago
Exactly, pizza franchisors eek out a profit. They don’t earn enough profit to also have a tech startup take a piece.

JAlexoid 6y ago

I didn't realize that groupon still exists.