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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

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.
- bobthepanda 4y ago
  The question is why restaurants would sign up to a niche boutique service. They are super unhappy about the cut UberEats and friends charge, and the only real impetus to get them on was a pandemic that shut down restaurants totally. Nowadays, I see restaurants charging easily $5-10 above their in-person list price on delivery apps, and some have left entirely now that normalcy has returned and they don’t have to put up with it.
  - aetherson 4y ago
    Restaurants would do it to increase sales, of course. There simply is demand for delivered food; there always has been, and in a world where more and more families are dual-income and have more money than time, there always will be. During the pandemic, there was certainly more pressure on the restaurants. After it, the restaurants may get a better deal -- none of that is a particular reason not to comply with the service, it's just one to negotiate more of the costs onto the end user instead of the restaurant.
    - bobthepanda 4y ago
      Right, but every additional sales channel is also work, and so the sales need to be large enough to actually justify doing this. If they're not, in a world where some mix of users and restaurants get charged the true costs of delivery service, then you're left with a service that gets people to order things for you, which is basically just Postmates, and they're also not doing hot.
      - aetherson 4y ago
        I think some of the actual value of delivery apps has been that they have low start-up costs for restaurants. They aggregate demand for that channel and some of the genius here is that it's pretty simple putting a restaurant's menu online. It seems clear to me that there is plenty of demand to justify the service. Doordash's revenue was about $5B last year (I believe that's revenue and not GTV, which is probably 5x that). Doordash also only has about 50% of the market. Even if you believe that some of that demand is illusory, brought about by subsidized prices, that still seems like there's a pretty straightforward business there if you can charge a sort of "ordinary business profit." And, again, there's been delivery food businesses since time immemorial, it would be weird if we thought that there was no kind of business here. Pizza companies used to be more or less the only ones because pizza delivered so well that pizza restaurants could absorb the fixed cost of entire delivery employees, but a food delivery app lets you pay for just part of a delivery-person. It seems pretty straightforwardly the case to me that the problem in food delivery apps has never been that the fundamental business makes sense, the problem has been that from the very beginning there have been a large number of companies ferociously competing in the space, with nothing to differentiate them, which has squeezed margins to nothing.
potemkin_buster 4y ago
I doubt it, I make a decent amount of money and haven't used their service prices crept up.. $43 usd for $22 usd in fast food burgers is insane
- eclipticplane 4y ago
  And it only takes a few times going through checkout to ask, wait, I got a $10 burger and $4 fries, how is my order $30? Nah, I ain't _that_ hungry for a luke-warm burger and soggy fries. Amazon won online retail, and changed online retail behavior, by getting rid of shipping fees. The price you see on the product is the price you pay (sans sales tax, but at least in the USA no one is used to seeing tax included).
  - nanidin 4y ago
    Don’t have to tip Amazon delivery drivers either!
  - PaulDavisThe1st 4y ago
    > by getting rid of shipping fees. you actually mean "by hiding shipping fees in an annual subscription model carefully tuned to deal with real world customer ordering behavior". Non-Prime customers still see shipping fees for everything.
    - abraham 4y ago
      I'm a non-prime user and I only have to pay shipping on about 20% of orders.
      - PaulDavisThe1st 4y ago
        Thanks for that correction. As a prime user, I was clearly ignorant about this.
    - moneywoes 4y ago
      Uber and DoorDash seem to be doing the same with their annual passes
naravara 4y ago
The only successful version of this business I can imagine is, maybe, the ghost kitchen model that is basically App equivalent of a mall food court. So it's basically a handful of giant kitchens to serve an area that offers several styles of cuisine. You order and their delivery drivers go to the one place and bring it to you. At that point, though, you're not gigging out delivery people. You're just hiring short-term couriers to move stuff to people from the central kitchens. This is, basically, the model that big city Chinese restaurants and pizza places had anyway before the apps muscled in by swamping them with superior SEO. There's also a lot of cuisines that simply don't travel well and these Doordash/uber eats business are indifferent. Pizzas travel well, Chinese travels well. Sushi kind of does too assuming you can be quick. But ramen? French fries? Lots of stuff just isn't meant for it.
- astrange 4y ago
  Ramen travels fine if you separate the ingredients and have people mix them at home. It does use a lot of plastic though.
mdale 4y ago
If it's a monopoly sure ... It's how physical mail "worked"
Ekaros 4y ago
We had an operator here which was essentially marketplace. Mostly pizza and kebab. But basically what they did was offer a marketplace for online food ordering. And the delivery was done by restaurants. To me that looks like most reasonable model, hiring people for delivery on low margin items while marketplace charges massive fees just isn't sustainable.

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.

bobthepanda 4y ago
The question is why restaurants would sign up to a niche boutique service. They are super unhappy about the cut UberEats and friends charge, and the only real impetus to get them on was a pandemic that shut down restaurants totally. Nowadays, I see restaurants charging easily $5-10 above their in-person list price on delivery apps, and some have left entirely now that normalcy has returned and they don’t have to put up with it.
- aetherson 4y ago
  Restaurants would do it to increase sales, of course. There simply is demand for delivered food; there always has been, and in a world where more and more families are dual-income and have more money than time, there always will be. During the pandemic, there was certainly more pressure on the restaurants. After it, the restaurants may get a better deal -- none of that is a particular reason not to comply with the service, it's just one to negotiate more of the costs onto the end user instead of the restaurant.
  - bobthepanda 4y ago
    Right, but every additional sales channel is also work, and so the sales need to be large enough to actually justify doing this. If they're not, in a world where some mix of users and restaurants get charged the true costs of delivery service, then you're left with a service that gets people to order things for you, which is basically just Postmates, and they're also not doing hot.
    - aetherson 4y ago
      I think some of the actual value of delivery apps has been that they have low start-up costs for restaurants. They aggregate demand for that channel and some of the genius here is that it's pretty simple putting a restaurant's menu online. It seems clear to me that there is plenty of demand to justify the service. Doordash's revenue was about $5B last year (I believe that's revenue and not GTV, which is probably 5x that). Doordash also only has about 50% of the market. Even if you believe that some of that demand is illusory, brought about by subsidized prices, that still seems like there's a pretty straightforward business there if you can charge a sort of "ordinary business profit." And, again, there's been delivery food businesses since time immemorial, it would be weird if we thought that there was no kind of business here. Pizza companies used to be more or less the only ones because pizza delivered so well that pizza restaurants could absorb the fixed cost of entire delivery employees, but a food delivery app lets you pay for just part of a delivery-person. It seems pretty straightforwardly the case to me that the problem in food delivery apps has never been that the fundamental business makes sense, the problem has been that from the very beginning there have been a large number of companies ferociously competing in the space, with nothing to differentiate them, which has squeezed margins to nothing.

potemkin_buster 4y ago

I doubt it, I make a decent amount of money and haven't used their service prices crept up.. $43 usd for $22 usd in fast food burgers is insane

eclipticplane 4y ago
And it only takes a few times going through checkout to ask, wait, I got a $10 burger and $4 fries, how is my order $30? Nah, I ain't _that_ hungry for a luke-warm burger and soggy fries. Amazon won online retail, and changed online retail behavior, by getting rid of shipping fees. The price you see on the product is the price you pay (sans sales tax, but at least in the USA no one is used to seeing tax included).
- nanidin 4y ago
  Don’t have to tip Amazon delivery drivers either!
- PaulDavisThe1st 4y ago
  > by getting rid of shipping fees. you actually mean "by hiding shipping fees in an annual subscription model carefully tuned to deal with real world customer ordering behavior". Non-Prime customers still see shipping fees for everything.
  - abraham 4y ago
    I'm a non-prime user and I only have to pay shipping on about 20% of orders.
    - PaulDavisThe1st 4y ago
      Thanks for that correction. As a prime user, I was clearly ignorant about this.
  - moneywoes 4y ago
    Uber and DoorDash seem to be doing the same with their annual passes

naravara 4y ago

The only successful version of this business I can imagine is, maybe, the ghost kitchen model that is basically App equivalent of a mall food court. So it's basically a handful of giant kitchens to serve an area that offers several styles of cuisine. You order and their delivery drivers go to the one place and bring it to you. At that point, though, you're not gigging out delivery people. You're just hiring short-term couriers to move stuff to people from the central kitchens. This is, basically, the model that big city Chinese restaurants and pizza places had anyway before the apps muscled in by swamping them with superior SEO. There's also a lot of cuisines that simply don't travel well and these Doordash/uber eats business are indifferent. Pizzas travel well, Chinese travels well. Sushi kind of does too assuming you can be quick. But ramen? French fries? Lots of stuff just isn't meant for it.

astrange 4y ago
Ramen travels fine if you separate the ingredients and have people mix them at home. It does use a lot of plastic though.

mdale 4y ago

If it's a monopoly sure ... It's how physical mail "worked"

Ekaros 4y ago

We had an operator here which was essentially marketplace. Mostly pizza and kebab. But basically what they did was offer a marketplace for online food ordering. And the delivery was done by restaurants. To me that looks like most reasonable model, hiring people for delivery on low margin items while marketplace charges massive fees just isn't sustainable.