I know, for example, that Sidecar pays drivers up to $20 for a single delivery and just can't see how this is viable outside of rare exceptions. At least Instacart prices the item being delivered (and I suspect never gives you the yellow ticket price which pretty much every Safeway item gets nowadays).
Once drones or autonomous cars become widespread, this business becomes a commodity and anyone without a legacy business they have to migrate will be at an advantage. So I have no idea why these companies are getting funded other than it's a problem that's simple enough for a really smart university student to tackle.
This is the direct byproduct of strong network effects on both the supply/demand side, paired with operational excellence on their part.
Self driving cars would bring the marginal cost down even further, but they have built a stunningly good business with or without a quantum leap in automation.
The same probably isn't true for many other Uber-for-X companies, particularly those with underwater unit economics.
Uber is profitable in many of its mature markets. This is
while charging less than half what you would pay a legacy
taxi service, while paying drivers more than they would
make at the same.
Uber briefly entered the market using licensed limousine drivers. They were pushed out because we have a crazy rule that limousine rides can't cost less than $80-90 - the only reason for that rule is so that limousines don't compete with taxis.
It's insane.
These companies rent the medallion for 12 hour blocks to drivers and would charge them between $175-250 per block. Before Uber there were many more drivers than medallions and drivers would bid the price of renting the medallion for 12 hours up!
Drivers who worked full time and took a few weeks off would spend around $40,000.00/year on renting the medallion. A cab that was rented for 24 hours/day all year would easily generate $90,000.00/year for the owner of the medallion.
With Uber the companies that own the medallions (and more so those that took massive loans to acquire them) are the ones hurting. The drivers are just fine, if not better. And even taxi drivers I've spoken with like Uber because medallion owners are desperate for drivers now and are charging $100-$150/12 hours. They just want to get the cars out of the garage.
Uber drivers expenses that are different from cab drivers include a car mainly. Something that costs far less than the money they gave medallion owners and something they can write off big parts of on their taxes. And they can use it on their free time.
Wouldn't renting a medallion be 100% deductible?
License cost is 154 GBP (200 bucks) annually in London. Not a million. I maybe misunderstanding a lot of the cost issues in taxi services but it seems the medallion cost is a huge racket - but that's hardly a global issue?
Becoming a Black Cab driver is much harder than renting a medallion, though. You have to pass "The Knowledge" which is considered at least as hard as passing a university degree. You have to have an encyclopaedic knowledge of London roads, and generally spend at least a couple of years (often longer) driving around those roads on a scooter so you can demonstrate that knowledge in a series of tests.
I'm not sure if the problem is similar in other major cities, but I expect there is some form of cartel in force in most of the major cities.
However, even if there isn't, there is still a real advantage to profitability from something like uber: if there are enough customers using a passenger exchange, then the likelihood of having passengers near to you is significantly higher. So less of your time is spent in unbillable transit to your next customer. In London there are hundreds of taxi firms; each of them gets some share of the passengers calling them up, so they have to take what they can get. With a central exchange, they get the passengers most suitably located for them from all possible passengers.
The taxi-industry is overregulated and corrupt, so Uber created a "car service" that works exactly like a taxicab.
But routine same-day delivery even in relatively dense urban areas is still pretty clearly a premium service (and pretty much unavailable if you go 15 miles out of the urban core). Grocery delivery for $10 isn't that interesting to most people if they're in a position to hop in a car or walk 5 blocks. And single items like something from the hardware store don't work at all.
I'm sure the basic answer is very low labor costs. There are lots of personal services available in countries with low labor costs that aren't nearly as affordable in the US.
1. Do I need it right this minute ( example pizza)
2. Is it purchased in advance or planned? Like weekly groceries
3. Are you just doing delivery, and that is your only revenue?
4. Will your earn a commission, transaction fee or add a markup? (i.e Instacart)
4. Are you going to follow an uber type model or integrated by hiring staff?
5. Can you group customers orders together and do delivery runs using optimization algorithms (tsp, vrp). Lowering your cost?
Here is an example (Using ZAR values / 10 for approx USD values):
Say you start a diaper delivery business. On average a parents will need it once a month. To make it simple we will assume 1 customer initially, and then scale up to 10. We will compare 2 scenerios.
Here is the example in Google Docs:
https://docs.google.com/spreadsheets/d/1fpdh9BPWJMqWXV-wWRl2...
Cost of diaper pack: $30
Avg cost of delivery per KM: $ 0.40
Distance to Deliver: 20 KM
Time to deliver & return to Hub: 1 Hour
Cost Per Hour for Driver (South Africa): $5
Delivery Fee: $3
Retail of Diaper with Margin: $35
Total Cost: 30 + (20 * 0.4) + ( 1 * 5) = 43
Total Revenue: 30 + 3 = 33
Loss: $10
For simplicity: Driver will drive to furthest point, and each point is 1KM away in direction of the hub.
No change in distance driven. 1 Additional hour as more stops.
Total Cost: (30 * 10) + (0.4 * 20) + (5 * 2) = 318
Total Revenue: (30 * 10) + (0.4 * 20) + (10 *3) = 330
GP: $ 12
GP %: 3.64
Total Cost: 30 + (20 * 0.4) + ( 1 * 5) = 43
Total Revenue: 35 + 3 = 38
Loss: $5
For simplicity: Driver will drive to furthest point, and each point is 1KM away in direction of the hub.
No change in distance driven. 1 Additional hour as more stops.
Total Cost: (30 * 10) + (0.4 * 20) + (5 * 2) = 318
Total Revenue: (35 * 10) + (0.4 * 20) + (10 *3) = 380
GP: $ 62
GP %: 16.32 %