A small case study on how inequality is growing in our country and tech like this is pouring fuel on the fire
But many restaurants don't make any profit after the 25% cut. Pre-covid you could write it off as a marketing expense but when in-person dining disappears you're faced with option to close or keep open and make a loss or no money on every DD you get.
This is partly why 110,000 restaurants have closed since the pandemic
Like you said here, with DD around it does give some restaurants a lifeline they wouldn't otherwise have. Plus the government gets more tax revenue, over time some large percentage of the currently $60B valuation created by Doordash, which could be used to help the rest of those hit hardest by the pandemic if our democracy wasn't being held hostage by one Mitch McConnell.
I feel that regardless of your feelings on the truth of that last quote, the connection can still (and will) be made by many people.
To be fair though, not all tech is similar. I don't think people mind Amzn charging the seller 5-15% and paying the delivery guys whatever it takes. I hope food delivery apps become more reasonably priced- or then maybe Amzn comes after their margin!
I don't order delivery anymore, for $20 I'll pick it up myself.
From my back of the envelope calculations, it seems that the conditions necessary for a restaurant to break even or make a tiny profit with delivery apps that take a 30% cut exist but are narrow. For the restaurant to cover that fee, it would have to increase its online prices by 1/(1-0.7) - 1 = 43%, which would make it less competitive to a segment of its consumer base.
On the other hand, if the app's fee was 15% (which it is in Chicago, due to a city-wide cap), a restaurant only has to increase its prices 1/(1-0.15) - 1 = 18%, which is more palatable and less noticeable.
It does also create cash flow, and there are various things you can do with cash flow.
If you can increase sales velocity, the increased returns might be able to help profitability (though the counterfactual is hard to prove -- if you didn't have the apps, would velocity have been lower? Hard to measure).
Can you please explain this to me?
Inequality of ... what? Opportunity or outcome?
Anecdotally apps are how I and a lot of people I know have come to discover or order from many independent restaurants for the first time. Even with a 25% cut, without knowing the exact numbers of how many new customers these services introduce, its not that easy to say that big tech boogey monsters are destroying independent restaurants, especially since its a fairly risky venture to start with.
Similarly, private mkt investors get insane outcomes while retail investors end up buying at peak prices and less information.
I'm not saying what DD did was unfair or unethical. We're just moving quickly to a very unequal society and this is a small ex of how that's happening
2 more questions:
1. How is this a "problem"? 2. How would you go about solving it?
2. Australia has minimized this problem pretty well by having a pretty unregulated economy but a robust safety net.
Thank you.
"[a] Stanford professor posits that throughout history, economic inequality has only been rectified by one of the 'Four Horsemen of Leveling': warfare, revolution, state collapse and plague."[1]
You can hang on to imaginative phrases like "inequality of opportunity" or an economy that reliably delivers food. I think most people are going to go with the second option.
[1] https://www.economist.com/open-future/2018/09/10/can-inequal...
Serious investors play in their niche: Restaurant investors don't invest in tech either.
If your statement outlines a problem, how would you go about solving it?