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Comment by addicted | Hacker News Reader

Let’s say there was just 1 delivery service.

Could they charge enough delivery fees to actually build a sustainable business?

How much fees would you need to charge? $4/delivery means having to make a delivery in 15 mins to be able to pay the delivery person minimum wage. Plus Uber’s profit, plus the cost of the car and maintenance expenses + tickets, accidents, etc,

It’s hard to see how a monopoly can also make money, without charging so much that people would rather pick up and restaurants would rather offer their own delivery.

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I think that if there was just one delivery service, they could absolutely make a good business.

Now, I mean, would it be a good business that was used by 80% of the population multiple times per week? No. As you point out, it's intractably expensive. But there's nothing wrong with a business that sells a relatively expensive luxury, and it's not sooo expensive to have a meal delivered that only a tiny fraction of the population would ever use it.

The question is why restaurants would sign up to a niche boutique service. They are super unhappy about the cut UberEats and friends charge, and the only real impetus to get them on was a pandemic that shut down restaurants totally.

Nowadays, I see restaurants charging easily $5-10 above their in-person list price on delivery apps, and some have left entirely now that normalcy has returned and they don’t have to put up with it.

Restaurants would do it to increase sales, of course. There simply is demand for delivered food; there always has been, and in a world where more and more families are dual-income and have more money than time, there always will be.

During the pandemic, there was certainly more pressure on the restaurants. After it, the restaurants may get a better deal -- none of that is a particular reason not to comply with the service, it's just one to negotiate more of the costs onto the end user instead of the restaurant.

Right, but every additional sales channel is also work, and so the sales need to be large enough to actually justify doing this.

If they're not, in a world where some mix of users and restaurants get charged the true costs of delivery service, then you're left with a service that gets people to order things for you, which is basically just Postmates, and they're also not doing hot.

I think some of the actual value of delivery apps has been that they have low start-up costs for restaurants. They aggregate demand for that channel and some of the genius here is that it's pretty simple putting a restaurant's menu online.

It seems clear to me that there is plenty of demand to justify the service. Doordash's revenue was about $5B last year (I believe that's revenue and not GTV, which is probably 5x that). Doordash also only has about 50% of the market. Even if you believe that some of that demand is illusory, brought about by subsidized prices, that still seems like there's a pretty straightforward business there if you can charge a sort of "ordinary business profit."

And, again, there's been delivery food businesses since time immemorial, it would be weird if we thought that there was no kind of business here. Pizza companies used to be more or less the only ones because pizza delivered so well that pizza restaurants could absorb the fixed cost of entire delivery employees, but a food delivery app lets you pay for just part of a delivery-person.

It seems pretty straightforwardly the case to me that the problem in food delivery apps has never been that the fundamental business makes sense, the problem has been that from the very beginning there have been a large number of companies ferociously competing in the space, with nothing to differentiate them, which has squeezed margins to nothing.

The problem is inherent in paying for part of a delivery person.

Pizza delivery works because there is only one place you need to go to pick up the food that needs to be delivered, and there is a very high volume of food to be delivered. There's no additional traveling cost to flit between restaurants, most of which don't churn out food at high production rates like a pizzeria.

App delivery drivers spend a lot of their time not traveling directly to customers, or waiting around for food to be ready for them to deliver.

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> Even if you believe that some of that demand is illusory, brought about by subsidized prices, that still seems like there's a pretty straightforward business there if you can charge a sort of "ordinary business profit."

This remains to be seen. MoviePass was never able to successfully both retain customers and raise prices, streaming services are starting to see the same issues. The premium over pickup is often $10-20 already, if it increases anymore that probably starts having a negative exponential effect on market size. (How many people are willing to pay $30? $50? over pickup?)

I would guess that restaurants would get bigger checks on higher margin (less effort to cook) items in-person due to drinks and appetizers.

People definitely order appetizers and drinks, though. And lets not forget that while some of these take less effort to cook, they take a bit more effort in other ways. Cost in cleanup and wait staff that you don't have with takeout, for example.

Also, bigger margin doesn't always mean less effort to cook. It might depending on labor costs and the cost of goods (gravy mix is more expensive than the ingredients, but takes a bit more time to prepare) and you might also wind up needing consistency: Waffle House (a chain restaurant) probably wants its gravy to taste the same in two different cities, and it doesn't matter so much if it takes away a bit of margin.

The simpler explanation is that there is no middle man demanding a 15%+ cut of the menu price. https://www.restaurantbusinessonline.com/technology/uber-eat...

Restaurant margins are already thin. So they hike the prices to pay UberEats and co. their share.

The only successful version of this business I can imagine is, maybe, the ghost kitchen model that is basically App equivalent of a mall food court. So it's basically a handful of giant kitchens to serve an area that offers several styles of cuisine. You order and their delivery drivers go to the one place and bring it to you.

At that point, though, you're not gigging out delivery people. You're just hiring short-term couriers to move stuff to people from the central kitchens. This is, basically, the model that big city Chinese restaurants and pizza places had anyway before the apps muscled in by swamping them with superior SEO.

There's also a lot of cuisines that simply don't travel well and these Doordash/uber eats business are indifferent. Pizzas travel well, Chinese travels well. Sushi kind of does too assuming you can be quick. But ramen? French fries? Lots of stuff just isn't meant for it.

Ramen travels fine if you separate the ingredients and have people mix them at home. It does use a lot of plastic though.

We had an operator here which was essentially marketplace. Mostly pizza and kebab. But basically what they did was offer a marketplace for online food ordering. And the delivery was done by restaurants. To me that looks like most reasonable model, hiring people for delivery on low margin items while marketplace charges massive fees just isn't sustainable.

I doubt it, I make a decent amount of money and haven't used their service prices crept up.. $43 usd for $22 usd in fast food burgers is insane

And it only takes a few times going through checkout to ask, wait, I got a $10 burger and $4 fries, how is my order $30? Nah, I ain't _that_ hungry for a luke-warm burger and soggy fries.

Amazon won online retail, and changed online retail behavior, by getting rid of shipping fees. The price you see on the product is the price you pay (sans sales tax, but at least in the USA no one is used to seeing tax included).

Don’t have to tip Amazon delivery drivers either!

> by getting rid of shipping fees.

you actually mean "by hiding shipping fees in an annual subscription model carefully tuned to deal with real world customer ordering behavior".

Non-Prime customers still see shipping fees for everything.

I'm a non-prime user and I only have to pay shipping on about 20% of orders.

Thanks for that correction. As a prime user, I was clearly ignorant about this.

Uber and DoorDash seem to be doing the same with their annual passes

Though they also get a 30% cut of the food price, so that considerably changes the economics.

>Though they also get a 30% cut of the food price, so that considerably changes the economics.

IIUC, 30% is the top end, with rates ranging from 10-30%.

That said, many (most?) restaurants that aren't high-end (which won't be preparing orders for delivery anyway) have gross margins of at most 10-15%.

The cut that DoorDash, GrubHub, etc. take has driven many lower cost restaurants (a number of which had provided their own delivery and been in business for decades) where I live (NYC) out of business over the past 10 years.

The only choice for these folks is to raise prices enough to cover the extra costs, often killing their business (note that GrubHub requires restaurants to charge the same on their site as on their in-house menu, not sure about other services).

The result is fewer independent low-mid priced restaurants. And that's a loss to any community.

If it's a monopoly sure ... It's how physical mail "worked"

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