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Comment by spiderPig | Hacker News Reader

Wow, so they've raised close to $1bn so far! Wonder how many of these delivery services like Doordash, Postmates, Grubhub, Caviar, Uber eats etc will survive the next economic downturn.

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As a former restaurateur, I would like to tell you, contrary to popular opinion, during the last major economic downturn in 2008 (2009 for me since I was in a southern state, and the downturn hit us a bit later than most), spending money out to eat actually went up.

The theory goes a little something like this -- people actually spend more money on themselves to cheer themselves up when life gets shittier. So folks, too depressed to cook, would go out and at least try to eat, drink, and be merry.

Now how this correlates to these dining services has yet to be determined.

Surprisingly, most poor people order takeaways the most around here, as well.

It's not surprising to me, it all ties back to the reality that it is more expensive to be poor than not. If you are poor, you most likely don't have the ability to keep a kitchen stocked with cooking essentials (spices are expensive), pots, pans, the increased water and heating cost to run a dishwasher and oven. Never mind the fact that most people living paycheck to paycheck are going from job to job and are physically exhausted at the end of the day. And that's for the people who were able to afford housing, then you have poor people stuck in shitty motels because they can't afford first month's rent and a security deposit. Those usually only have microwaves and a mini fridge.

Often times, going to McDonalds is your best option. The Government also subsidizes Big Food, so that factors. Getting 4 McDoubles for 4 dollars in 5 minutes driving through the drive thru next to your house so you can get back home to your kids and see them for the couple hours you have in between jobs versus spending 30 min to an hour buying a pound of ground beef, buns, cheese, lettuce, tomatos, the energy and utilities cost and the lost opportunity cost of the time spent cooking and cleaning when you could be working, it isn't hard to see why poor people choose the fast food.

The energy and other utilities for 1 meal will be like $0.30.

So that barely registers compared to time and ingredients.

Bad credit affects utility costs. Most impoverished people have bad credit. Again, being poor costs more in almost all areas of life in America. Contrary to popular belief, utilities are not a right. Utility companies have the right to refuse you if you have enough delinquent payments, can't front the deposit (if you have bad credit) or even outright refuse you (if you have terrible credit). Even on the FTC's website, their advice if you have trouble paying your utilities is basically to "budget harder"

Wow, I didn't know it was that bad. Being denied utilities based on credit score... damn. Do you have prepaid meters by any chance?

It's the standard option for those who fail to pay their bills on time here.

With a prepaid, you load up money and it turns off your gas/electrical once the prepaid amount is exhausted.

Water is exempt, no one can turn off the water at a residential address, no matter how long you haven't paid...

It’s because low paid work is the hardest, physically and mentally, so poor people don’t have the energy to cook, and with McDonalds available, they don’t really need to when you can get a dinner for $2.

It's call the Lipstick Effect, aka Lipstick Recession Indicator.

https://www.investopedia.com/terms/l/lipstick-effect.asp

And just as a somewhat tangential but related story to the phenomenon, British soldiers distributed lipstick tp the liberated but gravely ill women of the Bergen-Belsen concetration camp in WWII, it lifted their moral just enough in some cases to help save their lives.

I love this. Never knew it had a name. Thanks for showing me that. I also love all history related to WWII, so thanks for giving me Wikipedia food for 3 hours tonight.

I'd like to posit an alternative argument. That the increase in business was more due to demographic shifts than to the "lipstick effect". Around 2007 the entire generation of millennials was finally of age to go out and spend money eating. This is the largest demographic group of Americans. Even if people 16-30 were spending less money per person eating out, the volume of individuals spending money on eating out was sufficiently high to increase business.

UberEats will likely win in the long run... On-demand is just a long-term game of leading and losing money... Uber has the distribution and the money that will allow them to lead and lose for longer than anyone else.

How much money can all these companies lose before finding themselves in a dead-end? (no positive cash-flow, no more investors willing to invest, no more local market first mover advantage).

People who deliver for these companies will do it for the ones that can give them more business and larger commissions. People who order from these companies will do it from the ones with the largest selection and the lowest fees... Only Uber can pull-off the economies of scale to arbitrate those two sides without running out of money.

UberEats will struggle unless they didn’t service issues. They are slaves to the whims of drivers who can cancel orders at any time.

That may not matter, necessarily. If 3 of these fail but one becomes a £10bn company, that's ok. Some investors win, others lose, it averages out to normal returns.

VC is supposed to be risky.

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