DoorDash and Airbnb prove corporate giants can scale in small towns | Hacker News Reader

DoorDash and Airbnb prove corporate giants can scale in small towns

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31 pointselsewhen47 comments

I don’t see how you write this with no mention of the pandemic.

AirBNB is helping city dwellers escape their tiny apartments.

Delivery companies are benefiting from me being temporarily okay throwing 30% of an order into tips and fees.

This will pass.

AirBnB is getting destroyed by the pandemic, they've had to layoff 25% and take out $2B in loans. 'It will pass' yes, but it's not been a boon for them.

Airbnb in April is very different from Airbnb today.

Anecdotally, AirBnBs in rural locations seems pretty popular at the moment. You can stay with your "pod" (or by yourself), you can prepare at least some of your meals yourself, and you just generally have a lot less contact than in the case of a hotel. I don't even normally stay at AirBnBs and I just booked one after the holidays as a hiking base and change of scenery.

ADDED: That said, the fact that self-contained rural properties are pretty popular at the moment doesn't mean that a business that depends on people traveling is necessarily doing great.

> AirBNB is helping city dwellers escape their tiny apartments

In my experience, both personal and relative to my country, kicking out AirBNB from cities has helped people escaping from their tiny apartments because a lot more apartments have returned back on the regular mid/long term rental market.

DoorDash will never be profitable, because there are three businesses that need a cut from a sale: driver, restaurant, and doordash. That just makes it very expensive.

That is not a convincing argument. Middlemen exist in many markets.

Not three middlemen in every transaction. At most two. Everyone needs ~30% cut. 1.3 * 1.3 * 1.3 = 2.2

There is only the one middleman, DoorDash, in two separate but related transactions. The restaurant is the company making the food for the customer, and the delivery person is the person delivering the food for the restaurant.

DoorDash doesn't provide any food-related service except being in between the restaurant/customer and the restaurant/delivery person.

The credit card processor almost certainly being used by the customer adds another middle man.

A middleman refers to someone whose role in the transaction is to bring the actual transacting parties together.

While credit card processors are involved in the transaction between the customer and restaurant, they are not a middleman to the transaction because they don't bring the parties together; the parties or a third party does that.

Additionally, credit card processors provide services to both sides of the transaction: they provide non-cash payment collection services to restaurants, and they provide customers a means to pay for things without immediately exchanging cash or other assets.

Tell me about it. My company gave everyone a Doordash gift card because we normally do quarterly meetings with a catered lunch, and it was $55 for 2 drinks, two burgers and 1 fry from Five Guys. Plus it took over an hour for it to be delivered.

On the other hand, using promotions I can get Famous Dave’s delivered for about $5 more than it would cost for me to drive there, pick up, bring back....saves me almost an hour.

Isn't Five Guys about $12-14/burger, $5-8/fry in-store inclusive of sales tax in the first place?

Close to that. I rather like a number of the "fast casual" burger places, but they're not cheap. (And it's unlikely I'd spend the money to get a half-cold soggy version delivered.)

Doordash can take an arbitrarily small amount, since their marginal cost per sale is very small. And restaurants and drivers both get paid in existing models of delivery food, which work fine.

They may be profitable for a time, by parasitically sucking the life out of restaurants. But when the host dies, parasites are in trouble.

Door Dash? You mean the company that takes 30% on top of the driver fees and delivery fee?

That company?

The company that, when you call restaurants, they’ll ask you not to use because it’s so expensive for them that they’re losing money on the already thin margins of food sales?

That one can scale?

I believe it can scale, sure. But some company that only takes 5-10% cut will some day eat its lunch, I hope.

I like reasonably priced food.

I think the problem is even taking 30%, the model barely/still does not work financially. Having someone drive halfway across town to deliver food is never going to be cheap.

This is it - we can’t all afford personal delivery services and our own chauffeur. It’s nice when it’s vc funded though

Yet somehow local pizza shops have been able to do it for decades.

There would probably be more benefit in having small sets of delivery drivers for all deliveries and all businesses in a small, square mile or 3, area; and probably something that isn’t trying to power a whole country’s purchasing habits.

> Yet somehow local pizza shops have been able to do it for decades.

Pizza is a really high margin business. From this article [0]:

> Consider the ingredients – flour, yeast, water, sauce, cheese and toppings. None of these are expensive, particularly when purchased wholesale. To build a small cheese pizza the cheese is the most expensive ingredient at $0.60, with the dough adding about $0.24 and the sauce $0.05. That adds up to $0.89 for a basic cheese pizza that could be sold for many times that amount. [...] One estimate of the cost of a meat pizza with pepperoni and sausage is $1.90 for food costs and an average retail cost of $14.00, which translates to a 636 percent markup.

[0] https://smallbusiness.chron.com/much-profit-margin-pizza-621...

You beat me to it. The economics of pizza are uniquely good. Spending 30% on the cost of delivery does not matter in that case.

It's crazy how much pizza costs in USA

In Italy pizza costs a third of that

You can get a whole pizza for $5?

Yes 5 euros when ordered in person.

On deliveroo, 7-9 euros for something that’s easily 3x higher quality and taste than in the US

https://deliveroo.it/it/menu/firenze/bellosguardo/pizzeria-o...

Those pizzas are a lot smaller than US pizzas judging by the knife and fork though.

Size does not matter

You will find a great variety of pizza sizes, from the giants to the tiny, I for example prefer smaller pizzas, I don't like feeling bloated after eating a big one, but the price is always the same (more or less, you can pay 15 euros for a pizza in Italy, but it's not the norm )

If you refer to the fact that pizza is usually shared in US, we have a different kind of pizza for that, it's called pizza al taglio (sliced pizza, but it's not really the same thing) and you can have an entire pan for 12-18 euros, but at least 4-5 people can feed on it and you can have different toppings

The US has chains like Little Cesar's, or even Domino's that sell single topping pizzas for $5.

I can get a whole "not too bad for Italian standards" marinara for 3.5 euros and a very good margherita for 5-6.

For traditional toppings like mushrooms, pepperoni, sausages or anchovies add something between 0.5 and 1.5 euros.

That's for a take out or a delivery (it might sound strange but pizza being delivered costs a little bit less per sé, because it's considered of a lower quality, pizza should be eaten fresh from the oven, but add the delivery fee and the prices are more or less the same)

If you sit at a restaurant, it's usually a couple euros more.

And I'm talking about the prices I actually pay in Rome, in the city centre, I live at 5 minutes walking distance from the Colosseum.

I've been to Italy a lot, and while I'm sure the are places that charge 4 euros for a pizza (just as there are places that charge $5 for a pizza in the US), most restaurants I've been to charge at least 7-10 euros.

Secondly, pizzas in the US tend to be larger than pizzas in Italy.

As I've said "if you sit at a restaurant add a couple of euros" on average it's around 7-8 euros

We were talking retail prices though.

Also, we don't pay mandatory tips at the restaurant

Pizza size is a function of cooking then uniformly, large pizzas are considered a bit tacky here (not judging anybody, just trying to explain why pizza in Italy is smaller, it's actually a feature)

What about drone-based delivery instead?

Yes, DoorDash ... the company responsible for almost all restaurants adding sealing stickers to the bags because the drivers were losing food (I'm being nice ...).

DoorDash got a lot of bump from the fact that they were booted and scaled for online operation as the pandemic hit--they were the only option for delivery for a lot of restaurants for quite a while.

This has changed.

Restaurants are realizing that controlling the delivery experience is worth profit. They can sign up with an online ordering website service for far less than DoorDash. If they have their own drivers, they can control the quality and timing (make a batch of <n> orders all together and send the driver out).

Agreed. The headline reads like, “Soprano family proves family businesses can still thrive in corporate America”.

There is really no evidence at all to back up the author's assertion when it comes to AirBnB. I certainly recall AirBnB booming in large cities before it really spread. Here is the one quote the author provides re AirBnB:

> Airbnb's top 10 cities — London, New York, Paris, Los Angeles, Rome, Barcelona, Tokyo, Toronto, San Diego and Lisbon — collectively account for only 11.9% of Airbnb's revenues, and no city has more than 2.5% of Airbnb's total market.

I mean, all that proves is that AirBnB is in a lot of cities.

It's amazing how well you can scale when you don't have to make money.

Yes exactly, DoorDash is an OPM company (OPM = Other People's Money). Kind of like WeWork. They are hoping to do an IPO in 2021 AFAIK. They will likely try to pump and dump the stock.

Did "A money-losing business can lose money wherever it wants" need proving?

Counterpoint:

An IPO is a sale of equity. DoorDash and AirBnB wouldn't be going public if they really believed this rush to suburbs and smaller urban areas were sustainable and accretive to long-term profit.

Either the pandemic goes away and they go back to business as usual, or it doesn't and the economy gets a lot worse. In both cases, this moment is potentially the best it's gonna get for DoorDash and AirBnB, and an IPO is a way to hedge against that.

Counterpoint to the counterpoint: Door Dash and Airbnb realized that things won't improve so their management and investor decide it may be better to cash out now and leave the little guy holding the can...just saying

That's kind of my (counter)point.

No, it's a good time for an IPO as markets have a longer term view of things (rationally or otherwise). Investors see AirBnB is very viable, they know the pandemic will pass.

AirBnB and DoorDash are in completely different scenarios: one has massive labour force issues, the other is a digital service, the pandemic has nearly killed AirBnB while it's been a boon for DoorDash.

AirBnB is pushing through with a regularly planned IPO, DoorDash is probably being more opportunistic.

I guess it depends on how you define small towns. As someone from Australia/NZ I definitely wouldn't call Palo Alto a small town, it's just one of San Francisco's suburbs.

Yes, it did prove that they can scale on investors money.

A small town has maybe 1,000 or so people. While maybe a tourist area could get some Airbnb traffic, there is no way DoorDash would be in this town.

One company has a massive labour force, difficult to balance in remote situations, the other is a digital service - they are not very comparable.

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