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Comment by foobar1962 | Hacker News Reader

foobar1962

There was a post a few months go about a pizza place that started getting customers complaining about their food arriving cold and damaged: except they didn't offer delivery. They discovered that a popular search engine was offering free delivery. The story ended with them ordering dozens of pizzas from themselves to themselves and making a nice profit.

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Similar story but with Door Dash. Explanation: Door Dash charged lower than actual price, so owner placed an order and sent just plain dough. Their profit was higher than cost of making the pizza.

https://themargins.substack.com/p/doordash-and-pizza-arbitra...

Now that's what I call making dough!

for even more profit become a doordash driver and exclusively ‘deliver’ these pizzas.

The story: https://www.theverge.com/2020/5/18/21262316/doordash-pizza-p...

Reminds me of the story of Don Johnson, a professional blackjack player who made $6,000,000 in one night.

Because he is a known high stakes player, the Tropicana casino in Atlantic City invited him over and gave him a discount ("loss rebate") on chips.

Because of this 10% rebase on loss, even when his blackjack win-rate was below 50%, he would still make more money that what he lost.

https://www.theatlantic.com/magazine/archive/2012/04/the-man...

How did they made a profit off this?

They delivered pizza base with no toppings. The base was just so the boxes weren't empty.

EDIT and Doordash got the price wrong (I forgot about that).

Doordash priced the pizza at $16, but the pizza place charged $24. Presumably a 'growth hack' to get more users.

The pizza place, seeing the difference, bought pizzas for $16 and received $24 from Door Dash, so for each purchase they were $8 better off.

They also ordered plain pizza dough in larger quantities, for more profit. Presumably because they didn't have to actually make the full pizza.

That makes more sense than someone just offering a free delivery.

Technically they didn't have to make any pizzas at all.

I always felt like the story about the dough was embellished a little bit to avoid being charged with fraud.

They had to produce something that could legally be called a pizza to at least fulfill the purchase contract with DoorDash and avoid making themselves legally liable.

But what would probably have worked would be to pull this off with two restaurants, each ordering pizzas from the other, with them sending the same physical pizzas around all the time. Cold and old pizza is still legally a pizza, just a bad one.

That reminds me of the Raines sandwich. "Minimum viable sandwich"

https://www.atlasobscura.com/articles/raines-sandwich

So this is "Minimum viable pizza"

Before clicking on this I thought it was going to be about Cuomo's order in this summer that all restaurants offering drinks had to be served with food. I went to at least a couple outside bars that were serving half a piece of white bread with a slice of American cheese on it for your "meal"

They have to claim that they made something that met the definition of pizza, but with the “buyer”, driver, and store colluding they could just lie.

The first buyer is DoorDash however, and if they somehow want to take vengeance on you after you managed draining their funds in an otherwise perfectly legal way, they might just use the non-fulfillment of their initial purchase contracts as a wedge to take you to court (of course this assumes they somehow learned about that detail of your plan). I don't know if they would have any luck with that, but it's easy to prevent this from happening by actually delivering something that's basically a minimally viable pizza.

They could simply make a single pizza, and then deliver it to themselves N times.

Reading through the article again, it is strongly implied that a lot of stores may have a similar arbitrage issue and the DD os getting taken to the cleaners over it. That and I don't think there are any legal issues over this as there were no contracts signed. If anything DD is the one in legal trouble over it.

How would is that ever going to work long term? Most pizza places I frequent offer free delivery, or very cheap delivery once you get pizza for two people. The “growth hack” will never work when you compete with your supplier.

Even if this was somehow going to work, once Doordash has pushed others out of the market, then they would need to raise the price significantly, pushing many to just do pickup themselfs.

More suprising, to me, is that it was ever legal to list resturants without and opt in.

Growth hacks are never about sustainably growing a business, they're just there to fatten it up before parading it in front of the VCs.

Of course by growth hacking, we're talking about the act of using unethical practices against users to boost certain metrics.

The goal is to kill the competition, no local delivery service can compete with a few million in VC funding. Once you are the only delivery in town you can raise the prices all you want and force the local restaurants into one sided deals on your terms. It also has a rather questionable legality

When it's goods and not services (delivery is the service here, I guess, not the food as a good), usually it's termed dumping, and I'm fairly sure it's illegal. I don't know if that language ever gets used for services.

> no local delivery service can compete with a few million in VC funding

A simple ordering form on the restaurant's own website always gets preference from me and seems to usually end up being the first result on Google/Google Maps.

No, part of the problem here is that the big delivery company will always win in SEO.

It doesn't in my experience. Google Five Guys near you, the actual first result ignoring ads will almost certainly be their website or even its order form. Same for every local restaurant with an order form I've tried it on.

A lot of "local restaurant order forms" are actually sites set up by the likes of GrubHub, Uber Eats, etc. Not all of them, but it's one of the sneaky ways they use to insert themselves.

But people like you and me are in the minority.

Most young people I know, when they want to order takeout, go directly to their preferred delivery service on their smartphone, select from what comes up, and consider nothing else.

It’s not clear how that’ll work in the long run, since there’s no protective moat to protect GrubHub once they’ve outspent their competitors. Pizza companies can re-hire delivery drivers if GrubHub tries to charge monopoly prices, and the bigger chains are fully capable of making their own ordering apps.

At this point I currently order my takeout through at least 3 separate small competitors to GrubHub. That these exist while GrubHub is still trying to use VC funding to push everyone out of the market makes me doubt that they’ll be able to recoup their investment without new competitors arriving.

lol. That's nice. I can see from the trademark point of view, it makes sense to stop other people from listing your business in their list, brands should be protected. But providing a service for customer should be legal. It would be the same as Taxi drivers should be able to pick you up from your home to a business without the permission of the business.

The difference between what delivery services like Doordash and what Taxi companies are doing is that Doordash is holding themselves out to be the company.

There's several instances where Company A has had Service Provider B set up a website in the name of Company A, update Google Listings to replace the Phone number and website of Company A with their own version of the site.

Then when an unwitting customer calls the number given, they're actually talking to Service Provider B, not Company A.

Taxi services don't hold themselves out as the personal driver service for the company you're going to.

I totally agree with you. The business of Doordash should be legal while the exact practices you described above are illegal.

The problem is how to allow the former while preventing the latter, in a way that is reasonable for small businesses.

Just prosecute the fraudulent misrepresentation of the restaurant.

Lawsuits aren't cheap both in terms of time and money.

The state prosecutes crimes.

Not if there isn't a law that is being broken.

You mean like "fraudulent misrepresentation"?

But I bet I can’t start a taxi service and call it Uber Shuttle Service for job applicants and build a website with Uber logo, phone number, and everything and when job applicants call me I pretend to be Uber?

Hey why stop there? maybe I can ask the job applicants for their personal information letting them believe they are talking to Uber and if they look like good candidates, I can build a website with information I gathered from them and start my own employment agency, call it quadruple bites or something and then call FAANG companies and offer to place candidates...

I think a big part of the problem is the misrepresentation/false advertising.

However, the goal I think is more sinister. For example, I believe Walmart decides how much it wants to pay suppliers who want to have their stuff sold at Walmart. If a delivery app is big enough, it can dictate the prices and terms of sale with a restaurant and demand deep discounts and forbid restaurants from making the deal public. The challenge is how does a delivery app become big enough to do that? Feels like a chicken and egg problem.

Yes. That's unfortunately how internet business work these days, use 'strategy' to dominate the market, and it has the power to dictate terms and profit from it. Although Walmart market dominance are protected with the shops and locations they own, apps such as Uber or Doordash where it is mainly a utility, the market dominance is not protected in any way. Once they start to charge more to make a profit, consumer can always go for an alternative app for it.

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