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The problem with Uber Eats is exactly the same as the problem with Uber's rideshare: there's no difficult-to-copy element of it. It's been clear for at least s

The problem with Uber Eats is exactly the same as the problem with Uber's rideshare: there's no difficult-to-copy element of it. It's been clear for at least seven years that it's easy to spin up a food delivery service, just the same way it's easy to spin up a rideshare service. The basic technology is something a small team can conjure up out of nowhere in a few months, the two sided marketplace is heavily incented to abandon a given platform if another platform gives a better deal, and all the bells and whistles that a large development team can add to it don't really move the needle in terms of value, enough to make the marketplace sticky.

Jistern 4y ago
You are missing something important. Uber is like a bit like Walmart or Costco. They all enjoy economies of scale; Uber simply has bad management.
- aetherson 4y ago
  I'm really not. "Economies of scale" isn't a magical spell. There has to be a function by which a large companies turns its scale into an economy. Walmart and Costco both negotiate much more attractive deals with their suppliers than their competitors can, because they can place larger orders with those suppliers, due to their scale. Because Uber connects one rider with one driver (or one meal-eater with one driver for Eats), its ability to create a useful economy of scale is sharply limited. Uber has some mild advantages against an up-and-coming rival in terms of constancy of demand, but since drivers will happily turn on multiple gig services at a time, that's not a very big deal for it. Things like Uber Pool are an attempt to turn its scale into an economy, but (predictably) not enough people actually want a ride service that puts them in close proximity with strangers and also takes a vastly unknown amount of time to finish the ride to make Uber Pool a major differentiator. Things like Uber's car loans problem comes face to face with the fact that there it's competing against other, larger entities that have better scale (like, you know, actual banks).
  - jiggawatts 4y ago
    Ironically, Uber Pool is the only reason I kept using Uber, but their scale wasn't big enough for it to work properly. In peak hour to or from the central business district it was great. Anywhere else it was hit and miss. I noticed that in the past, you'd get the pool discount even if you travelled by yourself. They've changed the terms to "up to 30% discount if someone rides with you". As a customer, the benefit of using Uber was that they would absorb the risks, spreading it out across millions of customers. Now, I have to individually wear the risk of a pool trip not having multiple customers, while simultaneously being enormously disadvantaged in my ability to estimate the chances of other people joining. Uber has billions of times more information at hand for their estimates than me as an individual. When I saw this change, I realised that it's a sign of the beginning of the end...
- RL_Quine 4y ago
  What economies of scale? Their primary expenses, workers, are fixed cost.
  - Jistern 4y ago
    - aetherson 4y ago
      People care a lot more about timeliness for their hot food and their own person than they do for a box that UPS delivers. Uber has been trying to make that particular economy work for nearly a decade now, and it turns out it's niche.
    - wwalexander 4y ago
      If that makes you weary, you should try explaining engineering to business people!
      - Jistern 4y ago
    - kareemsabri 4y ago
      Engineer here. Despite your condescension it doesn't appear you understand economies of scale. Economies of scale means the cost goes down when volume goes up. An Uber driver can only drive one passenger at a time (put aside pool, which requires a price discount to get people to use it). So the number of drivers required to serve N passengers simultaneously is N. Costs scale linearly with rides per hour. UPS has economies of scale because one driver puts 500 packages in a single truck, so the driver's wage is fixed and the revenue increases with the number of packages in the truck.
      - Jistern 4y ago
- michaelt 4y ago
  I'm not sure I agree. I mean, it's not like Uber is buying cars in bulk at a discount smaller operators can't match, or anything like that. And it's not like they're running a lean technology operation, with just 50 engineers globally, to get economies of scale on tech expenses. The only economies of scale Uber has on their side is marketing.
  - hotpotamus 4y ago
    There's also maintenance on that fleet of cars to consider and ride-share gets no economies of scale there. You know who does? Taxi companies.
    - astrange 4y ago
      Taxi companies don’t like owning their cars either; they have the same abusive system of making the drivers be contractors who own the cars. Except Uber doesn’t let the drivers rip you off so is safer to use.
bamboozled 4y ago
Which wouldn't have been a problem if they hadn't spent such an obscene amount of money building it? If it was a small team of good engineers, designers humbly building a product, then keeping it attractive to investment would've been a lot easier. Now as you said, there's so much competition, it's not really sustainable at it's current size.
addicted 4y ago
Let’s say there was just 1 delivery service. Could they charge enough delivery fees to actually build a sustainable business? How much fees would you need to charge? $4/delivery means having to make a delivery in 15 mins to be able to pay the delivery person minimum wage. Plus Uber’s profit, plus the cost of the car and maintenance expenses + tickets, accidents, etc, It’s hard to see how a monopoly can also make money, without charging so much that people would rather pick up and restaurants would rather offer their own delivery.
- sveme 4y ago
  Though they also get a 30% cut of the food price, so that considerably changes the economics.
  - nobody9999 4y ago
    >Though they also get a 30% cut of the food price, so that considerably changes the economics. IIUC, 30% is the top end, with rates ranging from 10-30%. That said, many (most?) restaurants that aren't high-end (which won't be preparing orders for delivery anyway) have gross margins of at most 10-15%. The cut that DoorDash, GrubHub, etc. take has driven many lower cost restaurants (a number of which had provided their own delivery and been in business for decades) where I live (NYC) out of business over the past 10 years. The only choice for these folks is to raise prices enough to cover the extra costs, often killing their business (note that GrubHub requires restaurants to charge the same on their site as on their in-house menu, not sure about other services). The result is fewer independent low-mid priced restaurants. And that's a loss to any community.
- aetherson 4y ago
  I think that if there was just one delivery service, they could absolutely make a good business. Now, I mean, would it be a good business that was used by 80% of the population multiple times per week? No. As you point out, it's intractably expensive. But there's nothing wrong with a business that sells a relatively expensive luxury, and it's not sooo expensive to have a meal delivered that only a tiny fraction of the population would ever use it.
seanmcdirmid 4y ago
Food delivery also isn’t very practical in developed country markets without a huge increase in productivity vs labor costs. It’s just too expensive compared to a country like China where it is cheap enough to be ubiquitous. Automation could be disruptive here…someday in the form of food delivery land and/or air drones. It really is the same with ride share: it just isn’t economical considering how much human labor is worth, self driving vehicles are more than likely required to make it economical enough to be ubiquitous.
- xeromal 4y ago
  Here in LA in some areas, little trucks drive around on sidewalks delivering food driving remotely by an assumably low-paid driver.
- martinald 4y ago
  Food delivery is practical, mainstream and has been for 40+ years in the West. It works great "inhouse". They tend to know all their regular customers and area and know exactly how to get there, where to park, which bell to press etc. They will also know if there is bad traffic or an accident closing a major road and adjust wait times and order frequency accordingly. The person that runs the delivery joint can also wait until he knows his/her driver will be making his way back, and only start cooking then, so the next order doesn't get cold waiting for a pickup. It all goes to shit when you put a tech platform which has absolutely no real interaction with the kitchen and outsource the riders entirely, with virtually no quality control and no local knowledge. Plus they also want to take 30-50% commission for the privilege. Ubers margins are comically bad. Uber Eats did $13bn of revenue and they made $30m of EBITDA - 0.2%. The credit card networks are probably making 10x the money that Uber on each order. And that EBITDA will be with them pulling out all the stops now they have realised they need to get profitable fast.
  - gruez 4y ago
    >They tend to know all their regular customers and area and know exactly how to get there >They will also know if there is bad traffic or an accident closing a major road and adjust wait times and order frequency accordingly. irrelevant in the age of GPS navigation with live traffic (ie. google maps) >where to park, which bell to press etc. while I don't doubt delivery drivers accrue such knowledge over time, I doubt that the turnover is low enough for this to actually make a difference. It's certainly not enough to make such a service unviable. >The person that runs the delivery joint can also wait until he knows his/her driver will be making his way back, and only start cooking then, so the next order doesn't get cold waiting for a pickup. This doesn't seem very hard to do. Restaurants can let the delivery platform know how long each dish to prepare, and the delivery platform can tell them ahead of time when to prepare the food (after factoring in driver availability and distance).
friedman23 4y ago
I disagree. Even Lyft has noticeably worse service than Uber. Compare the prices and time it takes to get a ride on both platforms. They are not comparable.
- TheCoelacanth 4y ago
  Definitely not in my experience. I usually check both, and it's a toss-up which one will be cheaper or faster.
winternett 4y ago
It's typical "bait and switch" and that's why it simply doesn't work out in the long run... A company starts a web site and sets pricing on their service at a very low rate, while subsidizing it's financial loss with investment money at a loss. The company gradually increases costs and pricing over time for suppliers, employees, and on users until it finds a sweet spot in hopes that no one will notice, while also protecting itself carefully with PR and legal moves and careful management of overhead costs for operations... Most often the company manages minimal customer support, insurance, lawyers, a web site, marketing teams, and an office of public affairs, and that's the primary focus. Often times, ownership frequently funnels profit out through selling shares, and though executive pay, until eventually the company succeeds or fails miserably. These are not commendable business ventures like the press would have you believe, they're time sharing schemes that victimize almost everyone who invests in them, and they undermine vital services that would normally be regulated like the taxi cab industry, which was doing quite well before Uber came in and scorched it to ashes. Many cities gave ride share companies huge subsidies and concessions to operate, few of which benefits they've passed on to drivers and riders, and surge pricing is about as scandalous and opportunistic as monopolizing a river then selling the water to the villages it used to lead to. I wouldn't be surprised if these companies are also pushing campaigns and lobbies against individual car ownership as well through employees, and brigading in places like reddit, because that only furthers their death grip on monopoly status. The corporate world is wildly toxic these days, I'm skeptical of everything companies tell me because everyone is opportunistically dictating prices and terms, and they've abandoned customer service and all of the principles the present at orientation behind the scenes.
- youngtaff 4y ago
  Exactly! How Uber is a $50bn business is beyond me - they have never made a profit - they’re unlikely to ever make a profit unlikely to ever reduce costs enough - they need to reduce expensive headcount rather than squeeze drivers and restaurants - the early money sole out at a profit while passing their losses onto new punters via IPO
jollybean 4y ago
? "there's no difficult-to-copy element of it" Wow, no, it's a 2-sided market problem (drivers and customers) that's incredibly difficult to reproduce. And then there's brand synergy, economies of scale with regulatory issues etc.. Regular taxis are 'easy to reproduce'. Food delivery is hard because there actually isn't any margin. It's all VC money paying for everything.
mym1990 4y ago
Of course it is easy now that they have been around for over a decade, the problem with the whole space is not technology, but economics. Once you have competitors in the space, it becomes a race to the bottom in regards to cost. Eventually this creates a rift between the service providers and the company, and everything just kind of slowly disintegrates.
stjohnswarts 4y ago
Why aren't there a ton of uber competitors around here then? It's been Uber and Lyft and taxi companies and that's been it... Am I missing something with your argument?
- youngtaff 4y ago
  Maybe Because Uber is a loss making business, that seems little prospect of making a profit? Other options do exist - things like Gett in the U.K. for example, not sure how profitable they are either though and some large taxi companies have their own apps too

Jistern 4y ago

You are missing something important. Uber is like a bit like Walmart or Costco. They all enjoy economies of scale; Uber simply has bad management.

aetherson 4y ago
I'm really not. "Economies of scale" isn't a magical spell. There has to be a function by which a large companies turns its scale into an economy. Walmart and Costco both negotiate much more attractive deals with their suppliers than their competitors can, because they can place larger orders with those suppliers, due to their scale. Because Uber connects one rider with one driver (or one meal-eater with one driver for Eats), its ability to create a useful economy of scale is sharply limited. Uber has some mild advantages against an up-and-coming rival in terms of constancy of demand, but since drivers will happily turn on multiple gig services at a time, that's not a very big deal for it. Things like Uber Pool are an attempt to turn its scale into an economy, but (predictably) not enough people actually want a ride service that puts them in close proximity with strangers and also takes a vastly unknown amount of time to finish the ride to make Uber Pool a major differentiator. Things like Uber's car loans problem comes face to face with the fact that there it's competing against other, larger entities that have better scale (like, you know, actual banks).
- jiggawatts 4y ago
  Ironically, Uber Pool is the only reason I kept using Uber, but their scale wasn't big enough for it to work properly. In peak hour to or from the central business district it was great. Anywhere else it was hit and miss. I noticed that in the past, you'd get the pool discount even if you travelled by yourself. They've changed the terms to "up to 30% discount if someone rides with you". As a customer, the benefit of using Uber was that they would absorb the risks, spreading it out across millions of customers. Now, I have to individually wear the risk of a pool trip not having multiple customers, while simultaneously being enormously disadvantaged in my ability to estimate the chances of other people joining. Uber has billions of times more information at hand for their estimates than me as an individual. When I saw this change, I realised that it's a sign of the beginning of the end...
RL_Quine 4y ago
What economies of scale? Their primary expenses, workers, are fixed cost.
- Jistern 4y ago
  - aetherson 4y ago
    People care a lot more about timeliness for their hot food and their own person than they do for a box that UPS delivers. Uber has been trying to make that particular economy work for nearly a decade now, and it turns out it's niche.
  - wwalexander 4y ago
    If that makes you weary, you should try explaining engineering to business people!
    - Jistern 4y ago
  - kareemsabri 4y ago
    Engineer here. Despite your condescension it doesn't appear you understand economies of scale. Economies of scale means the cost goes down when volume goes up. An Uber driver can only drive one passenger at a time (put aside pool, which requires a price discount to get people to use it). So the number of drivers required to serve N passengers simultaneously is N. Costs scale linearly with rides per hour. UPS has economies of scale because one driver puts 500 packages in a single truck, so the driver's wage is fixed and the revenue increases with the number of packages in the truck.
    - Jistern 4y ago
michaelt 4y ago
I'm not sure I agree. I mean, it's not like Uber is buying cars in bulk at a discount smaller operators can't match, or anything like that. And it's not like they're running a lean technology operation, with just 50 engineers globally, to get economies of scale on tech expenses. The only economies of scale Uber has on their side is marketing.
- hotpotamus 4y ago
  There's also maintenance on that fleet of cars to consider and ride-share gets no economies of scale there. You know who does? Taxi companies.
  - astrange 4y ago
    Taxi companies don’t like owning their cars either; they have the same abusive system of making the drivers be contractors who own the cars. Except Uber doesn’t let the drivers rip you off so is safer to use.

bamboozled 4y ago

Which wouldn't have been a problem if they hadn't spent such an obscene amount of money building it? If it was a small team of good engineers, designers humbly building a product, then keeping it attractive to investment would've been a lot easier. Now as you said, there's so much competition, it's not really sustainable at it's current size.

addicted 4y ago

Let’s say there was just 1 delivery service. Could they charge enough delivery fees to actually build a sustainable business? How much fees would you need to charge? $4/delivery means having to make a delivery in 15 mins to be able to pay the delivery person minimum wage. Plus Uber’s profit, plus the cost of the car and maintenance expenses + tickets, accidents, etc, It’s hard to see how a monopoly can also make money, without charging so much that people would rather pick up and restaurants would rather offer their own delivery.

sveme 4y ago
Though they also get a 30% cut of the food price, so that considerably changes the economics.
- nobody9999 4y ago
  >Though they also get a 30% cut of the food price, so that considerably changes the economics. IIUC, 30% is the top end, with rates ranging from 10-30%. That said, many (most?) restaurants that aren't high-end (which won't be preparing orders for delivery anyway) have gross margins of at most 10-15%. The cut that DoorDash, GrubHub, etc. take has driven many lower cost restaurants (a number of which had provided their own delivery and been in business for decades) where I live (NYC) out of business over the past 10 years. The only choice for these folks is to raise prices enough to cover the extra costs, often killing their business (note that GrubHub requires restaurants to charge the same on their site as on their in-house menu, not sure about other services). The result is fewer independent low-mid priced restaurants. And that's a loss to any community.
aetherson 4y ago
I think that if there was just one delivery service, they could absolutely make a good business. Now, I mean, would it be a good business that was used by 80% of the population multiple times per week? No. As you point out, it's intractably expensive. But there's nothing wrong with a business that sells a relatively expensive luxury, and it's not sooo expensive to have a meal delivered that only a tiny fraction of the population would ever use it.

seanmcdirmid 4y ago

Food delivery also isn’t very practical in developed country markets without a huge increase in productivity vs labor costs. It’s just too expensive compared to a country like China where it is cheap enough to be ubiquitous. Automation could be disruptive here…someday in the form of food delivery land and/or air drones. It really is the same with ride share: it just isn’t economical considering how much human labor is worth, self driving vehicles are more than likely required to make it economical enough to be ubiquitous.

xeromal 4y ago
Here in LA in some areas, little trucks drive around on sidewalks delivering food driving remotely by an assumably low-paid driver.
martinald 4y ago
Food delivery is practical, mainstream and has been for 40+ years in the West. It works great "inhouse". They tend to know all their regular customers and area and know exactly how to get there, where to park, which bell to press etc. They will also know if there is bad traffic or an accident closing a major road and adjust wait times and order frequency accordingly. The person that runs the delivery joint can also wait until he knows his/her driver will be making his way back, and only start cooking then, so the next order doesn't get cold waiting for a pickup. It all goes to shit when you put a tech platform which has absolutely no real interaction with the kitchen and outsource the riders entirely, with virtually no quality control and no local knowledge. Plus they also want to take 30-50% commission for the privilege. Ubers margins are comically bad. Uber Eats did $13bn of revenue and they made $30m of EBITDA - 0.2%. The credit card networks are probably making 10x the money that Uber on each order. And that EBITDA will be with them pulling out all the stops now they have realised they need to get profitable fast.
- gruez 4y ago
  >They tend to know all their regular customers and area and know exactly how to get there >They will also know if there is bad traffic or an accident closing a major road and adjust wait times and order frequency accordingly. irrelevant in the age of GPS navigation with live traffic (ie. google maps) >where to park, which bell to press etc. while I don't doubt delivery drivers accrue such knowledge over time, I doubt that the turnover is low enough for this to actually make a difference. It's certainly not enough to make such a service unviable. >The person that runs the delivery joint can also wait until he knows his/her driver will be making his way back, and only start cooking then, so the next order doesn't get cold waiting for a pickup. This doesn't seem very hard to do. Restaurants can let the delivery platform know how long each dish to prepare, and the delivery platform can tell them ahead of time when to prepare the food (after factoring in driver availability and distance).

friedman23 4y ago

I disagree. Even Lyft has noticeably worse service than Uber. Compare the prices and time it takes to get a ride on both platforms. They are not comparable.

TheCoelacanth 4y ago
Definitely not in my experience. I usually check both, and it's a toss-up which one will be cheaper or faster.

winternett 4y ago

It's typical "bait and switch" and that's why it simply doesn't work out in the long run... A company starts a web site and sets pricing on their service at a very low rate, while subsidizing it's financial loss with investment money at a loss. The company gradually increases costs and pricing over time for suppliers, employees, and on users until it finds a sweet spot in hopes that no one will notice, while also protecting itself carefully with PR and legal moves and careful management of overhead costs for operations... Most often the company manages minimal customer support, insurance, lawyers, a web site, marketing teams, and an office of public affairs, and that's the primary focus. Often times, ownership frequently funnels profit out through selling shares, and though executive pay, until eventually the company succeeds or fails miserably. These are not commendable business ventures like the press would have you believe, they're time sharing schemes that victimize almost everyone who invests in them, and they undermine vital services that would normally be regulated like the taxi cab industry, which was doing quite well before Uber came in and scorched it to ashes. Many cities gave ride share companies huge subsidies and concessions to operate, few of which benefits they've passed on to drivers and riders, and surge pricing is about as scandalous and opportunistic as monopolizing a river then selling the water to the villages it used to lead to. I wouldn't be surprised if these companies are also pushing campaigns and lobbies against individual car ownership as well through employees, and brigading in places like reddit, because that only furthers their death grip on monopoly status. The corporate world is wildly toxic these days, I'm skeptical of everything companies tell me because everyone is opportunistically dictating prices and terms, and they've abandoned customer service and all of the principles the present at orientation behind the scenes.

youngtaff 4y ago
Exactly! How Uber is a $50bn business is beyond me - they have never made a profit - they’re unlikely to ever make a profit unlikely to ever reduce costs enough - they need to reduce expensive headcount rather than squeeze drivers and restaurants - the early money sole out at a profit while passing their losses onto new punters via IPO

jollybean 4y ago

? "there's no difficult-to-copy element of it" Wow, no, it's a 2-sided market problem (drivers and customers) that's incredibly difficult to reproduce. And then there's brand synergy, economies of scale with regulatory issues etc.. Regular taxis are 'easy to reproduce'. Food delivery is hard because there actually isn't any margin. It's all VC money paying for everything.

mym1990 4y ago

Of course it is easy now that they have been around for over a decade, the problem with the whole space is not technology, but economics. Once you have competitors in the space, it becomes a race to the bottom in regards to cost. Eventually this creates a rift between the service providers and the company, and everything just kind of slowly disintegrates.

stjohnswarts 4y ago

Why aren't there a ton of uber competitors around here then? It's been Uber and Lyft and taxi companies and that's been it... Am I missing something with your argument?

youngtaff 4y ago
Maybe Because Uber is a loss making business, that seems little prospect of making a profit? Other options do exist - things like Gett in the U.K. for example, not sure how profitable they are either though and some large taxi companies have their own apps too