DoorDash and Societal Arbitrage
themargins.substack.com
themargins.substack.com
This is not a genuine partnership, it’s extractive.
Is DoorDash extracting money from its users, the restaurants and the delivery drivers? Or is it actually providing something of value?
To me, the delivery apps like DoorDash and Uber Eats just work a lot better than calling up restaurants for delivery did in the pre-app era. Maybe the drivers are underpaid, maybe the restaurants are underpaid, maybe the food costs too much, but even if they end up charging more money, are they really going to go away like Groupon did? I don't think so, the underlying product is just too valuable. So, I don't agree with this claim. There's a real partnership here. It just hasn't settled down.
As long as the business space is real, DoorDash and Uber Eats and the others are just going to fight tooth and claw to win it. That means discounting the real price, that means raising money at whatever valuation they can get, that means turning the screws on all partners to squeeze out more money. All of this seems like craziness, and it is, but it's craziness in pursuit of winning a prize that really does exist.
Some industries, like the music industry, once they settle down it turns out that one of the players has very little pricing power. I think that might happen here for drivers and for the sort of restaurant that isn't differentiated. But like music, it won't just go away, it'll be a new business structure that perhaps dominates the industry.
It was big enough in tier-1 cities when it required someone at the restaurant writing down the order, hiring a delivery person and dealing with disgruntled customers. They have at least that market with economies of scale.
I know it's not a short term solution, but the US seems to have painted itself into a bit of a corner by separating commercial and residential areas so much...?
There is this corrosive process of these gig-economy companies, they end up making life just a little bit more shit for everyone. You'll turn a blind eye to the desperate delivery drivers, to the stress of the restaurant owner as he struggles to make payroll (it's a hard enough business already) as the delivery company pushes him to lower prices with the threat of being dropped. Then you'll notice that the quality of the food starts to drop, or one day that restaurant falls off the app, huh, you'll think, wonder what happened to them, never mind. And the deliveries will start to take a bit longer and make more mistakes as the company squeezes the drivers harder and harder...
Try paying a fair price for fair value and taking pleasure in seeing businesses owned by your neighbours thrive. It really is a better way to live than spending your time on earth with your face buried in an app exploiting the poorest.
If you can make better food than your competitors, you'll thrive - the delivery services make that more true, not less. Stick to your USP and outsource everything else.
I have a couple of friends who have opened and run their own restaurants - there is an awful lot more to it than that and most restaurants fail for reasons that are nothing to do with the capabilities of the chef.
> If you can make better food than your competitors, you'll thrive - the delivery services make that more true, not less. Stick to your USP and outsource everything else.
I'm not convinced this is true. IME, delivery-wise, most restaurants are pretty interchangeable, and people make the decision on price. So "stick to your USP and outsource everything else" means that you should outsource cooking to a ghost kitchen and just focus on maintaining a brand. Which is something we start to see happening.
I fear the end game is still going to be DoorDash & friends just contracting or operating their own ghost kitchens, and creating hundreds of fake "brands" that are all sourced from the same kitchens. Recently the online retail sector has demonstrated it's a very viable business model. See the countless noname brands on Amazon, et al.
I don't think buying stuff from someone who sells to the public is abusive. I don't think scraping is abusive. I do think workers' rights are important, but the restaurant industry (especially the mon-and-pop end of it) hardly has a great reputation on that front, so I don't think ordering directly rather than DoorDash sends a message there.
> IME, delivery-wise, most restaurants are pretty interchangeable, and people make the decision on price.
Well, if that's true then why care which of those interchangeable restaurants succeed and which fail?
> So "stick to your USP and outsource everything else" means that you should outsource cooking to a ghost kitchen and just focus on maintaining a brand. Which is something we start to see happening.
> I fear the end game is still going to be DoorDash & friends just contracting or operating their own ghost kitchens, and creating hundreds of fake "brands" that are all sourced from the same kitchens.
Am I supposed to think there's something bad about "ghost kitchens"? If it means better, cheaper food, then surely it's a good thing.
If everything's being sourced from the same kitchens then that's a monoculture that's easy to compete with by offering something better. If those centrally sourced kitchens end up being so high quality that no-one can compete, well, mission accomplished.
I guess if that story works for you, you better stick with it as long as you can.
Some software developers it seems go to work each day thinking how can I put other, poorer, people out of work, and erode the pay and conditions of those that I can't?
What's the fallacy called of thinking everyone in the world can just retrain as a webdev?
The jobs of food preparation and delivery still need to exist, but we don't need to grind them into the ground, that's a free choice to do so made by VC-backed startups.
I have no clue what the jobs of the future will be. Just as people in the past scarcely had a clue about the jobs of our present.
Which means automating people away pushes some of these people into poverty, and the only hope they have is that their children will start a profitable career in a sector that doesn't get eaten by software in the next few decades.
That's not to say I'm against automation and improvement. Just that not much thought is being given to individuals who find themselves automated away. That there will likely be a job for them is not much of a consolation prize over no job at all; hell, in civilized countries with developed social security, a job may be a worse option than no job at all.
But they already have jobs. Working in the restaurant or catering or hospitality or whatever industry is a job, and one it's possible (or it was) to earn a reasonable living in without a slew of academic qualifications.
Then one day, billionaires who can't think of anything better to do show up and say, we're going to insert ourselves into the relationships you had with your customers and your profits are now our profits and you can survive a little while longer by working harder for less, but you will go under eventually and everything you had will be ours. Because what we had was not enough, we need to have it all.
Productivity is what got us out of poverty of the pre-industrial-revolution era. And productivity is still key in the long run.
So flat distribution of consumption seem like an egalitarian utopia?
The challenge with discussing welfare is that different people have radically differing definitions of what it entails. A solution that's worked ok so far is to seek a minimal band of commonality. In the future, given current trends, it might be difficult to maintain even that and it will likely "snap" into several fragments. The strains leading to this "snapping" are the root causes of most headline political dynamics worldwide.
Of course, some people like to 'consume' leisure instead of working to earn money to finance other consumption. That's a perfectly valid preference, just a bit harder to measure and model.
Agreed. But the sentiment within the Industry was that COVID gave an opportunity for the Industry restructure itself and repair the mistakes that were never addressed as things were always like repairing an airplane while inflight. The lifelines given to the Industry with PPP made it seem possible while allowing people to come back to work and the changing of menus to accommodate the seasonal changes as were the changes to make outdoor dining a critical part of the whole experience, but as those lifelines have diminished so have the chances of those reforms occurring gone with it.
And while I'm not in favorur of subsidizing noncompetitive Industries, the fact is the loss in sales for many successful restaurants is not due to a lack of demand but rather the imposition that legislative decree have made for those that are focused on menus that simply cannot accommodate a take out model due to shutdowns, limited indoor dining etc...
> Well, if that's true then why care which of those interchangeable restaurants succeed and which fail?
Because some have more contributions to the Community and Society as a whole, the last place I worked at sourced 60% of its seasonal produce from local and organic farms instead of the typical purveyors. It helped make learning gardens in many public schools thorough out the US making food education a real thing, it also helped make new young farmers to address the food deserts created from the last financial crisis left in its wake. And it had created a model to iterate upon to address how food production during Mars colonization would look like. Now all of that has been threatened as many of the establishments have had to close.
> Am I supposed to think there's something bad about "ghost kitchens"? If it means better, cheaper food, then surely it's a good thing.
Good and bad are subjective terms one should abstain from using in such a discussion, the focus should be more on the impact that this has and how its implications will ultimately re-shape the paradigm, and not just the Industry but the relationship many people have with food in general as diet based illness kill more in the West than anything else, including COVID.
If its quantified merely as a commodity with an impingement in economies of scale tied to the last mile logistics problem, then sure by those metrics these are all desirable things.
If, however, you value the whole process of how food is grown, raised, and prepared throughout the value system in order to nourish you and by extension your community then: No. Its horrible, the value system will be further denigrated more than what it already has and will consolidate itself into the hands of the few Megacorps that brought you factory farming and countless outbreaks and contamination and recalls of tainted and nutrient deficient, chemical laden, pesticide riddled produce and meat.
> If everything's being sourced from the same kitchens then that's a monoculture that's easy to compete with by offering something better. If those centrally sourced kitchens end up being so high quality that no-one can compete, well, mission accomplished.
That is a rosy, and over-simplification (to say unrealistic) way of how economies of scale and consolidation of capital take place. One that will ultimately leaves you with the a very narrow set of choices that include large fastfood franchises on one side, and boutique exclusionary high end dining with large external investment on the other side with little to nothing in between as restaurants are no longer deemed commercially viable parts of the economy and capital and loans dry and foreclosure is the end result for those already within it and denial of access for anyone who dares to try their hand in making it. Its not beyond doubt that we are seeing the same model the telecoms used to carve out fiefdoms and provide worse and worse services all while charging more for the privilege simply because they know their is no other game in town.
Despite the tired narrative Monopolies are not formed through unfettered Free Market laissez-faire systems, they're made when power is consolidated through the use of arcane legal loopholes and large lobbying purchasing power in elections and the orchestrated consolidation of Capital. The use of all of these things are present in this situation.
Personally, I'm still optimistic about this existential threat to the Industry as it is being FORCED to have to re-invent itself. Something thought to be previously impossible from within. My most optimistic outcomes are based on if the Industry has the ability to make many necessary changes and still be competitive or will home cooking (and by extension private chefs to those who can afford it) make a massive surge as a result?
It was a pleasant surprise as someone who cooked professionally to see how many people who never cooked anything took to baking during the shutdown and shared it on social media in larger numbers than I ever expected. CSA and meat shares from local farms sold out in record numbers this year, I really do wish this momentum continues.
> Despite the tired narrative Monopolies are not formed through unfettered Free Market laissez-faire systems, they're made when power is consolidated through the use of arcane legal loopholes and large lobbying purchasing power in elections and the orchestrated consolidation of Capital.
I don't think it's a tired narrative. It's a recognition that monopoly is the end goal of every profit-driven company, and that economies of scale and compounding are purely free-market ways to reach that status. I.e. the more money you have, the faster you will make money, and the more you scale up, the less you spend per-unit. Of course eventually the organizational costs of scaling grow to compensate, but then there are many small people employed in inventing new business models and strategies that let companies get larger and larger before they become too unwieldy to keep the upstarts down.
Also: "arcane legal loopholes" are caused by accumulation of capital. Fundamentally, if you have a market and a government within the same light cone, they'll find a way to affect each other. Government officials participate in the market and want the money, so they can be influenced with money. You can't really treat them as independent entities.
Bottomline, though, all these elements are present here: DoorDash & friends are using everything they can think of in their fight to dominate the space.
That's going far too far. Governments introduce legal loopholes for any number of reasons: personal favours, genuine good intentions. Capital is one reason among many.
But, that's the thing. Would you? OP's article is a follow up to an original that focusses on and explains price forks and how that affects these delivery services. [1]
[1] https://themargins.substack.com/p/doordash-and-pizza-arbitra...
Why would you - the customer - pay a restaurant 24$ for a pizza while you could get that same pizza for 16$ via DoorDash in a far more convenient fashion? How much do you care about the restaurant's business if the exact same thing is offered to you at 2/3rd's the original price just 2 taps on your smartphone removed from your door?
Companies like DoorDash are currently losing money and they are happy about it. Why is that?
It's a cost/benefit trade off. DoorDash perceives covering the remaining 8$ of that pizza as an expense. What they bank on is being able to buy an established position of dominance as a middle man on the delivery market.
Two things are happening right now. The first is a race to the bottom and drive other delivery services out of the market. That happens by accruing as many restaurants and their customers on their platform. The second is that restaurants get pressured over time to lower their own prices since they compete less with the menu's displayed in their windows on main street, but with the cheap offerings on DoorDash or GrubHub.
If and when the price gap closes over time, incumbent delivery services who remain get to flip their losses into a profit.
The societal cost? Keeping a regular restaurant open becomes prohibitively expensive (which is why ghost kitchens are becoming a thing), low wages for gig and restaurant workers, impact on the quality and diversity of the food on order.
Maybe some of it's unsustainable, sure. But why should the restaurant care? They're still getting their $24; they should make hay while the sun shines.
> If and when the price gap closes over time, incumbent delivery services who remain get to flip their losses into a profit.
Maybe. This has supposedly been the business model, but has anyone actually managed to execute on it? As soon as they started jacking up the prices it would be very easy for a competitor to enter.
> Keeping a regular restaurant open becomes prohibitively expensive (which is why ghost kitchens are becoming a thing)
As they should - it sounds like they're a more efficient way to do things all round. I'm not worried about regular restaurants disappearing though, because I still like them and am still willing to pay a premium for them.
> low wages for gig and restaurant workers
It's always had a reputation as a minimum-wage (or even below-minimum-wage) job, no?
> impact on the quality and diversity of the food on order.
Sounds like a self-correcting problem - as and when quality and diversity drop, an opportunity rises for anyone who can offer them.
Many restaurants are small independent businesses having business owners taking a lot of financial risk and investing a ton of time to grow that business. They aren't interested in becoming de facto subsidiaries to delivery services. They want to serve their patrons directly while making a living in a sustainable way.
> Maybe. This has supposedly been the business model, but has anyone actually managed to execute on it?
Isn't this how Amazon entered and acquired the book market, by positioning themselves as a book broker at first and then gradually outbidding book stores?
> because I still like them and am still willing to pay a premium for them.
One swallow doesn't make a summer.
> It's always had a reputation as a minimum-wage (or even below-minimum-wage) job, no?
Agreed. Is it to the benefit of society at large if an existing socio-economic circumstances turn more precarious for an increasing group of people?
> Sounds like a self-correcting problem - as and when quality and diversity drop, an opportunity rises for anyone who can offer them.
Isn't that contradictory if the opportunity doesn't exist... because the expenses associated with investing in quality outstrip your competitive advantage with other low-cost competitors?
Sure, you could aim at a high-end niche of customers - e.g. four star restaurants - but those are small and the competition is murderous. That's why there's, comparatively, only a handful of Michelin star restaurants with chefs with a reputation.
Granted, everyone needs to eat. It's a vast market after all. I just do not see how this particular business model applied in the delivery business is a net positive for everyone involved in the long run... except for DoorDash and their ilk.
Precisely because restaurants are already so risky, one more source of variable demand shouldn't be a problem. It's a rare restaurant that would want to turn down customers today because they might not be there tomorrow. As long as DoorDash are paying what you ask, take their money, just as you would if there were a bunch of people in town for a music festival or whatever.
> Isn't this how Amazon entered and acquired the book market, by positioning themselves as a book broker at first and then gradually outbidding book stores?
I don't think so, unless it was in the very early days? Certainly they were positioned as a mail-order bookstore long before they reached the size that DoorDash is now.
> One swallow doesn't make a summer.
Sure, but I really can't see delivery putting restaurants out of business as a whole, can you? I can see some getting knocked out, I can see price rises, but I can't imagine the category disappearing. Restaurants have always come and gone; there are definitely some that I'll miss that have already shut for good due to the pandemic, but that's always been the way of things.
> Agreed. Is it to the benefit of society at large if an existing socio-economic circumstances turn more precarious for an increasing group of people?
I'm not convinced it will be worse for them, on the whole; DoorDash et al will do the absolute minimum they're required to by law, but they will know and follow the law in a way that existing players in that space often simply don't. It'll be bad for illegal immigrants and healthy young men, but it'll also eliminate some very abusive situations.
> Isn't that contradictory if the opportunity doesn't exist... because the expenses associated with investing in quality outstrip your competitive advantage with other low-cost competitors?
> Sure, you could aim at a high-end niche of customers - e.g. four star restaurants - but those are small and the competition is murderous. That's why there's, comparatively, only a handful of Michelin star restaurants with chefs with a reputation.
I mean, if you're a commodity you're in trouble, but if you're a commodity you've always been in trouble. If your business model is being the cheapest place to get food in town then yeah, your lunch may be about to be eaten - but your lunch was probably eaten by McDonalds decades ago. I actually think the big chains are far more at risk from DoorDash etc. in the long run, because the likes of say Chipotle have already commodified themselves to a large extent.
If you can offer quality that is recognisably a cut above the lowest common denominator then there's plenty of space for that, even at a higher price. Yes, the top end is competitive. But again, it always has been.
> Granted, everyone needs to eat. It's a vast market after all. I just do not see how this particular business model applied in the delivery business is a net positive for everyone involved in the long run... except for DoorDash and their ilk.
The way I see it, DoorDash won't change the high end, but it'll offer a smoother, more consistent, more reliably non-terrible experience at the low end, and that was already a commodified space where big companies had a large presence. Will some restaurants on the margins get squeezed out? Undoubtedly. But I don't think this is a threat to restaurants that actually offer some kind of unique appeal, and more churn as another chain moves into the commodity part of the market is something that's already been happening for years.
Restaurants sign up but they have their own drivers. A common interface / middleman for all restaurants. At least it was so in the Netherlands.
Is there a Gresham's law for business models, something like bad business models drive out good?
With no more MFC clauses, retailers can charge a flat out %3 tax to all credit card users and pass the fee down properly to incentivize them to not use credit cards. Restaurants can list on doordash with the extra fees baked into prices. A %10-30 discount might be enough to incentivize people to call in, etc.
I'm not a law maker, so I don't know how many industries would be screwed up by this. Does anyone think making MFC clauses illegal would screw over society or industries other than organizations that abuse them? Are MFC clauses needed because otherwise useful services would die from prisoner's dillemas? A classic one is the 'maid on order' or 'dogwalker on order' kind of startups because people collude and quickly just create a direct relationship to save money, and you lose benefits like getting ratings and other such things. It makes me wonder.
[0] https://en.wikipedia.org/wiki/Most-Favoured-Customer_Clause
The alternative to this would be to go the European way and cap the fees themselves - 0.2% for debit cards, 0.3% for credit cards.
As a result, we don't have these "cashback" programs that incentivize customers to go into debt and pay interest upon purchases, and cash-paying consumers don't end up subsidizing the CC reward schemes.
Like, if the customer A pays me $10 in cash, and the customer B pays me $11 using credit card, and the credit card company then takes $1 from me, in some sense I have provided "the same price for each customer": each of them ultimately gave me $10.
But regarding drivers I feel that we're confusing causes and consequences: If being a delivery drivers for these guys is so bad then why do they seem to still find so many people willing to do it? So it seems to me that these apps are not destroying anything there. The destruction happened before and these apps are picking up the pieces and providing jobs.
Also, it's not like being an old-style delivery driver for a pizza joint was ever a very good job...
What jobs do you think those people would otherwise have? Very few are choosing between "secure job with a future" and "zero-hours contract gig economy" and preferring the latter.
I make an exception here for students and similar - when I was a student I happily worked part-time behind a bar for example, others did other dead-end jobs like stacking shelves. But that's not what's happening here that I can see.
Exactly my point. So accusing these companies is hitting the wrong target.
One should also realise that these jobs are very low productivity so cannot pay much. If for the drivers the choice is this or no job then people should complain about the economic situation not these companies.
That's because people keep opening extra restaurants until that's true.
(That's doesn't mean restaurant workers will always be just scraping by. There lot depends on what other employment options are available.)
I think I've seen this vulture capitalism self-cannablize itself in my Lifetime in the US in so many industries its become the norm and I not only expect it I plan for it: things aren't meant to last anymore. Everything is made to be disposable.
Industries and Communities alike are not immune, especially large urban sprawling ones and specifically speaking the tech based ones I've lived in the US where you have large swaths of diasporas coming in waves.
All of which is some how strongly encouraged in order to be a part of the 'disruptive wave' and make your mark for the entrenched players who benefit from this model, that is until you finally get fed up with overpaying for old, cramped and often poorly kept housing situations and you finally decide to return to where you came from in the East Coast, Rust Belt or Midwest where Life seemed more 'normal' only to see that too has been hallowed out and been devastated by substance abuse as a result of large amounts of displaced/under or unemployed workers.
This is now the norm, and while California is in a bad place many people who came to the Valley from outside CA and isolated themselves in its bubble are in for a very sobering realization of what many of their Industries have done now that they have the option to work from home and they return to their home states in most of the US.
I think this is the big take away from the article:
> When a multi-billion dollar tech company takes a hidden audit regulatory exemption, that's on all of us. They're going to keep doing it. Building a business model that relies on a permanent underclass under the doublespeak of "entrepreneurship" and "freedom", and then spending tens of millions to make sure that you will never have to provide health insurance to your workers will always continue on if it's allowed. As a formerly famous person once said, "they let you do it. You can do anything".
I've been in the culinary Industry in the US and in Europe, and sadly I thought prior to COVID the US was finally making significant inroads (outside of California and NY) to Asian and European standards of culinary culture, wherein a restaurant and restaurateur is a proud beacon of a vibrant community. A hub for locals to gather and enjoy each others company and patronage alike in a mutual beneficial manner that helps embody and nourish itself.
Instead, what has happened is that these low margin businesses that struggled to make payroll and keep the lights on unless they had outside investment(s)/investors are bending at the seams and the rest just gave way to the weight of well funded commercial chains and what I'm now convinced will be the re-structuring to make the Ghost Kitchen Model the new de-facto way most people get their meals when 'going out.'
As a former chef, biodynamic farmer and proponent of farm to table business models as way of making environmentalism viable (read: profitable) I felt we were robbed of many more years (possibly decades) of experimentation and progress, but the truth is that the model was always joined at the hip to a very precarious, exploitative and quite frankly unsustainable Industry: restaurants/hospitality.
I'm still close with my old Team and have many friends with (struggling) restaurants and while they were all apprehensive of the disruption they understood why I welcomed it and how it would be indifferent to their acceptance either way. And to me Doordash is just the 21st embodiment of the same model, the advent being logistics and supply chain management are sold as a SaaS business model via a horrible/buggy app and system, wherein its ok to lose millions.billions so long as you have access to untapped labor in an ever growing underclass that can attract another round from a VC like Softbank flush with cheap/hot money that seems almost eager to lose money so long as you structure it correctly to keep the illusion of infinite growth via multi-billion IPOs going.
I'm glad to have had the opportunity to step away from Fintech for a period and got to work and live through what now seems like an unrepeatable period in the culinary Industry that spanned everything from Michelin star, James Beard awarded restaurants as well as my primary focus in agro-tourisms and farm to table models. I think it is an end of an era as more restaurants are forced to close their doors forever and are giving way to a handful of well financed players with access to immense amount of Capital in a race to the bottom to capture ever thinner margins and displacing anything that poses a threat.
The model that Roy Choi created after the 2008 financial crisis, that disrupted the culinary World with the advent of marketing via social media and food truck distribution in lieu of brick and mortars, may be the only viable model that the most well funded and equally daring cooks/chefs will have to aspire to moving forward if they have any chance of being independent.
I can only hope that they too learn the lessons from Roy, and his imperative to be involved in locally based community investment as a measure of their success instead of what are now at best gilded awards like Michelin stars and James Beard awards now that so much of the competition has been unfairly removed from the equation due to COVID.
What I mean is: you're neglecting the collateral damage. These companies, fighting tooth and claw to win the prize (whether imaginary or real), are destroying the business space in which they operate, and adding to misery of the local communities.
> Is DoorDash extracting money from its users, the restaurants and the delivery drivers? Or is it actually providing something of value?
The way I see it, they provide a big value to its users - convenience and decent ordering experience. At the same time, they also take away a different value - consistency of quality in delivery (and make you think it's the restaurant's fault). The users are probably net ahead, but there's no free lunch (pun intended)! DoorDash & Uber Eats are providing this value by burning through the supply restaurants and abusing delivery workers. They're strip-mining the industry.
(Personally, I'm surprised it's DoorDash that's winning. I was always betting on Uber Eats - because Uber has abuse and sociopathy deep in its corporate DNA, as they did all these things and more while building their international rideshare empire.)
Not my experience for takeout.
Before: I called in an order, they told me how long it would take, I would arrive, it would be done.
After: I submit an order via the app. I receive confirmation and an estimated time. Arriving at the time is optimistic, so I arrive 5 minutes later. I find staff juggling half a dozen (often more) devices, one per app, and converting them to whatever their internal order system is. Frequently they have entirely missed my order and who can blame them because they've gone from phone & counter "inboxes" to more than you can count on one hand. You can ask staff which app tends to be most reliable and they'll tell you which one they pay the most attention to and that has a hope of reaching parity with phone orders.
Delivery's a little different of a beast, apps have made the market for that kind of service more "liquid" and responsive, but it remains to be seen exactly what the models look like without growth capital subsidies.
> But like music, it won't just go away, it'll be a new business structure that perhaps dominates the industry.
If this is the comparison, then be afraid, because streaming has both destroyed a huge amount of value in recordings and redirected a significant portion of remaining value towards new middlemen.
Counterpoint: streaming didn't destroy value, it exposed how much value was fictional or an artifice of a dearth of consumer options.
Apps have done something similar. They have exposed that many customers, in many cases, don't actually care all that much about things that restauranteurs believed they did. The supposed value largely didn't exist.
One example is supposed relationships between vendor and customer. Most people don't have strong, deep, and enduring emotional attachments to relatively generic pizza shops. They do not deeply bond to an artist they kinda like one song from, but otherwise find interchangeable with several dozen other artists on their lofi playlist.
His perceived lack of objectivity doesn't mean he's wrong, and as a person who has been in the Industry and has many friends who own kitchens that have had to deal with their toxic relationship to make payroll his opinions resonate with my own.
Just for the 'axe to grind', compare the comment on Prop 22 by Mr Slate Star Codex at https://www.reddit.com/r/slatestarcodex/comments/j9kxl0/my_c... with the article submitted here.
(I'm linking to a note by Scott Alexander, because he's generally seen as a level headed person. More than anything I could write.)
Example: I order a pizza through Deliveroo. The driver doesn't care about either the restaurant or me, so he chucks the pizza vertically in his box, ruining it. I get a shitty pizza, I won't order anymore from the restaurant.
Compare this with me calling up the restaurant and having one of their employees delivering the pizza: the restaurant has all the incentives for me to enjoy the pizza, since they suffer if they lose me as a client.
And no, it doesn't help using something else as deliveroos: the deliverers are all the same (they use multiple apps) and they don't give a shit about the quality of the service (and rightly so, since they are paid peanuts)
+ DoorDash actually does refund quite frequently for food issues.
The end result is that there is a constant stream of new, unrated drivers, who can ruin your pizza.
With drivers paid by the restaurant, you tended to get the same delivery guy (or a small set of delivery guys) for years at a time.
I used Deliveroo for the first time in London a few months ago. It was the worst delivery experience I have ever had. Deleted after two tries.
My experience with Caviar, UberEats and ChowNow have been immeasurably better. As evidenced by their having live chat and phone support to Deliveroo’s e-mail only two-day turnaround support.
For example I had the opposite experience as you have and have deleted UberEats to stick with Deliveroo.
There is probably not much difference between them.
The delivery driver delivered me somebody else's order. Within 10 minutes, they had refunded me, and were re-preparing my original order (which I received 30 minutes later). I also got to keep the wrong order - I stuck it in the fridge.
Even though the situation was a bit of a mess, the live support worked well for me.
That is why you review the driver and food separately.
As someone who sometimes orders from Deliveroo and who has had this exact experience I agree with your premise but not your conclusion.
When this happens I understand that this is the delivery guy's responsibility and I don't blame the restaurant for it. This may put me off using Deliveroo but not the restaurant if there is another way I can order from them.
Now if this happens with an in-house delivery guy then yes, that would put me off ordering from the restaurant again.
Interestingly when this happened to me it was partly because the Deliveroo guy was riding a bike. Thus I put the 'blame' on Deliveroo and their organisation and process because trying to deliver a pizza by strapping it on the back of a bike can only end badly...
I agree with this up to a point: At the end of the day, I want my pizza intact. If the only delivery option is appshare, and if appshare does vertical pizza more than once, I'm going to stop using that restaurant for delivery.
Not because I don't like the restaurant or because I want send them a message or something silly like that. Simply because I will have learned that I can't get the food I want from that channel. And if I haven't eaten from that restaurant recently, they're not top of mind. Which means I'm less likely to dine in or do takeout.
I may try a different appshare in this scenario. However, drivers usually work for multiple companies, so you're not necessarily getting a different driver by using Uber Eats instead of Door Dash.
To me, it seems that DoorDash et. al. are delivering negative value to the consumer.
My recollection is that most restaurants with takeout also had a delivery option, usually at a smaller percentage cost than DoorDash takes. But, more than that, delivery worked better.
Restaurants typically only offered delivery within a few miles of the store. So there was a "critical mass" effect that drivers could learn the territory, and usually had fewer problems finding an address (especially after you ordered more than once). That is especially true if Google maps has the location or entrance pin wrong for your address.
Practically, that few mile radius isn't a big limitation for most take-out food because the food will get cold if driven a longer distance than that. Kitchens were also better able to prevent cold food by batching orders to have all of a driver's orders ready at one time.
I think these are solvable issues, but, to date, for me as a consumer, DoorDash/Grub Hub/Uber Eats do not deliver positive value compared to restaurants with captive drivers.
Bandwidth is the biggest problem small restaurants have in managing a delivery service. If you don't have enough drivers to meet peak demand, you have to either decline orders or make customers mad when their order takes >1 hour to arrive (and disgruntled customers don't typically re-order or tip well). If you have too many drivers, they are making less in tips and you are probably spending more to bring their tipped wage up to minimum wage - and if it happens often they are going to quit.
I remember my dad disconnecting the phone at the store when they got too may orders to handle. We ended up using my mom and siblings as the flex/surge delivery capacity. If delivery apps had existed at the time, he would have gladly traded the headache of employing drivers and managing capacity for the ability to make and sell as many sandwiches as he could. In todays' world, if he got 12 orders going to different parts of town at the same time, he could accept all of them and know that if he could make the food, someone would be able to deliver it.
Delivery networks also increase courier efficiency by adding the ability to batch deliveries from multiple restaurants and avoiding the need to round-trip every order back to the restaurant when you are done. Couriers on Eats/DD can drop off one meal and be dispatched another from a restaurant nearby, and don't need multiple people who live near each other to order from the same restaurant at the same time in order to have efficiently batched trips.
There are efficiencies in the network model that can't easily be replicated by individual restaurants with their own drivers. The gold standard is Dominos but they are a behemoth that can't compare to any other restaurant - they are singlehandedly as large as Doordash.
It's extractive because the service gains power by becoming the platform. Users go to the app to view food items and order. The app becomes the experience of the restaurant. The service also becomes a major centralized competitor to everyone in the region. How are you going to compete with a service which is fighting a war of attrition backed by millions from Softbank? Rather than many restaurants having delivery drivers, all the drivers then become gig workers. And perhaps this is just the beginning. Where else might this service expand once it has a solid logistics platform in your area?
I don't have to think much about winner take all in the social media space. Services like Door Dash, Grab, Uber, etc are taking winner takes all economics to your home town. They have the power to become transformative and we're placing a lot of trust in them to do things right. And they're doing this with questionable transparency, as the article pointed out. How do we know this isn't some massive scam which threatens to upend communities by imploding after they have transformed the way we work and our daily habits?
It's too much power IMO.
In my area, there's a pizza shop that is doing well. They also sell on Takeaway.com. But if you order through that - like I initially did - they'll give you a small business card that says "Did you know that our prices on Takeaway.com are 15% higher to compensate for the fees that they charge us?" And on the back of the business card is their URL for ordering and their own phone number. I now always order directly from them and the service is insanely better than the best I ever got from Takeaway.com. Their long-term delivery employees will actually remember how to find my house on the 1st try while the Pizza is still hot. I've never ever had a <30 minute delivery from Takeaway.com. But those pizza guys reliably hit 20 minutes if I order directly from them.
So yes, the restaurant that I know that does best on online delivery platforms is the one that treats it like an expensive advertisement channel and that funnels customers off the platform as fast as they can.
DoorDash's biggest risk is that one of their "partners" might become successful enough to leave.
Possibly, buried in the fine print somewhere, but enforced by whom? Aside from the restaurants, only the drivers will see the food. Will they be ratting out the restaurants to their corporate overlords? I doubt it.
It's how trust-based arrangements are handled in other industries.
To use a meme, "por que no los dos?"
I hate both the player and the game. No one ordered Mr Xu to get into this business; there's no requirement that he abuse the living shit out of his workers and sell them up the river by helping pass prop 22. At every step in the decision process, he or people he hired and gave instructions to voluntarily made these decisions. From the pay scale to the inclusion of binding arbitration, they own every single one of those choices.
Along the same lines, we own not making the changes we claim to want, while wolfing down our ghost kitchen burritos with subsidized delivery. California voters absolutely own voting for proposition 22, and signing the petition to get it on the ballot. We're not reforming our labor laws to give some people the flexibility they want while not leaving everyone as an unrestricted free agent. We don't separate health care from employment. We gab about it, but little changes, and certainly not at the rate of the people exploiting those pressure points. As someone once told Captain Picard, "you talk and you talk, but you have no guramba."
And now, with COVID, we're watching our economy cleave into the starkest case of haves and have-nots in my lifetime. That split won't be permanent, but fixing it is going to happen when we least expect it and is going to be messy and painful.
To be fair they set a new record for money spent on supporting a ballot measure in state history ($225m) and it still only passed with 58%.
If you divide the $225m spent lobbying this by the 9,339,069 votes for it comes out to $23.98 per vote.
https://ballotpedia.org/California_Proposition_22,_App-Based... https://www.latimes.com/projects/props-california-2020-elect...
Meg Whitman spent something like $180M for the governor's race, and still lost badly. You can't sell voters something they don't want to buy.
I am really sad about this. It's going to be a literal depression for a significant portion of American society.
There's a clear imbalance of power there -- it costs the customer nothing to not tip or to leave a one star review. But those things could absolutely impact someone's earning potential as a worker.
Consider how many people seemingly enjoy being petty tyrants when given the opportunity, and the story gets worse and worse for the worker.
I always recommend that people always give five stars and a generous tip (until we outlaw typing). It's not my job to narc on your workers, Uber.
It’s the same issue with tipping. The larger the standard tip the more power you give to people that defect and tip nothing. Essentially, high tips simply subsidize freeloaders, it’s much better for society to avoid restaurants or services that use tips.
There are a lot of issues with this newsletter, but this bit at the end stuck out. The 'loophole' is for companies with
- total annual gross revenues less than $1.07 billion and
- less than $1 billion in non-convertible debt in the past three years and
- not a “large accelerated filer,” as defined in Exchange Act Rule 12b-2
The newsletter is trying to make this sound like it was meant for mom-and-pop shops, but how on earth can you have revenues of more than $1.07 billion without being a "multibillion-dollar" company?
“In the United States, the Small Business Administration establishes small business size standards on an industry-by-industry basis, but generally specifies a small business as having fewer than 500 employees for manufacturing businesses and less than $7.5 million in annual receipts for most non-manufacturing businesses.[4][5] The definition can vary by circumstance—for example, a small business having fewer than 25 full-time equivalent employees with average annual wages below $50,000 qualifies for a tax credit under the health care reform bill Patient Protection and Affordable Care Act.[6]” https://en.wikipedia.org/wiki/Small_business#Size_definition...
A sub 500 person factory could easily be too large for this bill, on the other hand an ACA small business would be tiny by comparison.
Not sure about you, but my mom and pop definitely fall in that category.
Both Doordash and your mom and pop qualify (if your mom and pop decided to IPO).
Yandex, which never felt to such idiocy, then scooped their remaining business for a symbolic sum.
This is an excellent encapsulation of most of the gig economy in one sentence and explains why I hate the entire thing. It's only a valid business model by taking advantage of people and sidestepping regulations, all funded by VC money rather than actual profits.
The previous article should be required reading for anyone trying to understand how crazy this era is.
1 - Voters voted Prop 22 in their own self interest. It keeps prices lower. Similar to voters who vote for lower property taxes. (May harm others but not the voters)
2 - I deleted the app because the times not reliable. This is what will hurt them more than ballots.
However there is no other easy way to buy food without doing significant amount of research and then most of these companies are reliant on the online ordering for inbound sales anyways. It's a total cluster.
Probably a downvote here but I don't feel good making investment money on an extractive business like this - i.e. I'm not going to buy stock. Even though these services are lifelines during the pandemic, I wonder if they are a faustian bargain of sorts in the long-run understanding full well that in the short-run the alternative is to shutdown.
The sad future: I think the executives and staff will make off and the retail investors will be holding the bag as well as the shutdown restaurants and employees laid off.
The happy future: Some/most restaurants survive pandemic and ease off their online habits, stock stabilizes/investors take a hit and people go back into restaurants. Online delivery services companies market caps take a nose dive.
Wishing for self-driving cars is easy, building them not so much. But Pizza delivery unicorn based on some arbitrage?? Come on, at least develop a fleet of food trucks in which the pizza is cooked along the way. Baking a Pizza takes 6mins, add 2-3 for preparation so the order can be prepared along the way. No need to get back to the restaurant. This gives you 2x efficiency of the delivery person ($15/h). Equipping a restaurant is probably $200k+, a food truck closer to $50k which gives 4x capex efficiency. Perhaps in the future the pizza can be made by a robot saving you one person (50%) of the personnel. There is room for efficiency.
Here in Europe during Lockdown take away pizza was €2 cheaper, around €8 instead of €12+. I cannot imagine how someone selling it cheaper is anything but a pyramid scheme / attempt to corner the market.
They are out to extract market share from folks with less information, primarily drivers and owners.