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Comment by gnicholas | Hacker News Reader

I created a DD account but never placed an order. Quite some time later, they emailed to try to convince me to place my first order — with a $35-off coupon (min $30 order).

I ordered $41 of food and was stuck with a $22 bill (including a $5 tip I added). Delivery was "free" for this order.

This taught me a valuable lesson: if DD sends you a coupon for less than $20, it is worth zero. If it's between $20 and $35, it is worth about 10 bucks (especially when you consider how they inflate prices for dishes).

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I had identical experience but with Uber Eats. I was given 18 GBP coupon off any orders over 20 GBP. So I ended up buying a breakfast delivery from McDonalds for the family, I added the food and the coupon to the order... The first time I tried the payment my card failed. No idea why... it just said Authorization Failed. Second time round, it went through. Driver came, and I also left a tip.

About a week later I was doing my household budget and looked at the charge on my account, and it excluded the discount. Once you added in delivery, service charge and the tip, I ended up paying 30%+ more for the food (and didn't have my coupon).

I think this was a genuine dark pattern that they use, although I have no interest in putting it to the test. After a failed payment, they auto remove any applied coupons to your transaction....

This was my first and guess-what, last order.

Paying 30% is worth it to not have to go and get the food for many people.

If you get an Uber credit in the future, you can use it to buy takeout instead of delivery. Of course there is no delivery fee or tip involved for takeout. My credit card gives me a monthly $15 uber credit, and I always use it to get takeout bun from a restaurant down the street.

There's no explicit delivery fee, but I find that most prices on Uber Eats are already inflated by ~10-20% over what you'd pay if you ordered directly from the restaurant.

The pricing model is very odd - you'd think that Uber would take all of their profit from the delivery fee - because, yaknow, that's the service that they're providing. But no, they also take a cut from the whole order afaik - which forces stores to inflate their prices to avoid eating into their normal profit margins.

One effect of this is that if you order for pickup, you're paying prices that are inflated because they incorporate part of the delivery fee.

Or more charitably, if you order for pickup, you're paying to use their platform.

There could also be sales tax reasons to break the fees out like they do — i.e., some types of fees may be subject to sales tax, and other types not, so they fiddle with things to minimize the sales tax while still allocating reasonably.

Uber Eats credits are basically "funny money". My employer sometimes gives us a $25 credit to go get lunch... and it can only be uber eats (not amazon/etc) because those are discounted like 20-30% to get employers involved. Employers feel like they're doing a nice thing for their employees and getting a good deal, because 20-30% discount. Then the restaurants all charge 20-30% more to make up for the fees Uber Eats charges them, and it all washes back out...

Still buys me lunch, but it ain't $25 for them and it ain't $25 for me either.

That's true. The bun dish I order costs $12.95 when I call the restaurant to place my order vs $15.95 with the Uber middle man. We get two orders, so that is an extra $6.49 including tax. So I'm using $15 of Uber Cash to pay $8.51 less real cash than I would have otherwise. That doesn't sound like a good deal except that I have no other use for Uber credits.

> Of course there is no delivery fee or tip involved for takeout

Plenty of restaurants have added a tipping screen to their POS for takeout orders. Some add it (as a service charge) automatically.

Why tip for takeout?

I tip about 10% for takeout- for one thing the packaging work can be quite involved sometimes and also kitchen staff normall get tips from wait staff. Though this mostly only applies to places that are primarily reataurants, not primarily takeout windows.

First time I've heard this. If you tip often in many places I could understand it.

Why not takeout windows? The folks working at McDonald's could probably use it as much as that local business owner and staff. probably

I tip the Dominos takeout window in cash.

Thats a fair question, but I think places that were always takeout or fast food type places didn’t base their business model on dine in guests tipping so they don’t need it as much. I mostly want to support local businesses rather than fast food chains. There is some unfairness to workers possibly but also its a line that everyone has to draw somewhere for themselves.

Aside from fees, there's tax, tip, and DD charges more per menu item than the restaurant does. Markup is about $2 for fast food item and $5 for more expensive places. One place I like to buy food from, our order costs $35 for pick up. DD cost is almost $52 not including tip.

I have no idea how DD continues to lose money with this business model.

> I have no idea how DD continues to lose money with this business model.

Labor in the US is too expensive for sufficient number of people in the US to afford it that would allow a business like DoorDash to earn a profit.

"Growth & engagement" is the main issue. Insane amounts of money are wasted on advertising, marketers, software engineers, etc not to mention subsidies to undercut their competitors and secure a monopoly.

Food delivery is a viable business but only if the objective is truly "food delivery" and not "growth & engagement at all costs".

I suspect they need to spend all that growth and engagement to mask the fact that enough people cannot afford to spend enough such that they earn a profit.

Most people were not able to afford butlers or drivers before, and DoorDash or Uber have not changed that basic fact, even if the butler/driver is split over 3 customers per hour.

Every time I see an example of a door dash order, it is a $30 per person minimum cost. The median annual wage is $44k and 75th percentile is $75k. Who is affording these on a regular basis?

> Most people were not able to afford butlers or drivers before, and DoorDash or Uber have not changed that basic fact, even if the butler/driver is split over 3 customers per hour.

I disagree - delivered food has been a thing for a long time, back in the day done by employees of the restaurant itself.

If it can work despite the driver being limited to a very specific restaurant, it should work better if the driver can be load-balanced across a wide range of restaurants near their current position to minimize downtime and travel time (in case of a driver owned by a specific restaurant, the journey back after their final delivery is a loss - doesn’t have to happen if they’re no longer bound to that specific restaurant and can deliver another restaurant’s food on that otherwise-lost journey).

That is not obvious to me. Only certain types of restaurants did delivery, and they probably had process optimizations to make it work. One being that the driver was basically paid in all cash netting the driver immediate savings from tax evasion.

It seems like it could be possible, but coordinating many individually owned and operated small businesses to ensure efficiency and throughput seems like a big task. Which is not a problem, but the upside is limited - how much extra are people really willing and able to pay?

> Only certain types of restaurants did delivery, and they probably had process optimizations to make it work.

I think that a big part of that would be because certain types of food are primarily enjoyed taken-away instead of dine-in.

It wouldn’t make sense for a dine-in restaurant to have delivery staff & vehicles (which would sit idle for the most part) given the bulk of their customers dine in.

However this is exactly the problem that a restaurant-agnostic delivery service would solve. The drivers can be shared across all the restaurants in the area which not only brings delivery to restaurants who otherwise wouldn’t have it but it also theoretically makes it cheaper for the usual delivery-focused restaurants because their drivers no longer have as much downtime (as they will now be able to deliver for other restaurants in the area too).

I can’t afford a butler or driver, either, but of course I can afford 30 minutes of such in an on-demand fashion a time or two a week.

I don't know about this argument - Pizza delivery has been a common thing for decades and it seems to work just fine.

> Who is affording these on a regular basis?

Mostly techies, kids who live with their parents and poor people with really poor impulse control.

> Who is affording these on a regular basis?

This question has driven me to distraction for the last 15 years or so. I’ve talked to many restaurant owners and they aren’t happy because they usually give up a massive percentage (say, 25 or 30%) and yet still the delivery services add a substantial amount. I can see how this would work OK in dense urban environments but I’m in the suburbs.

Food delivery is a viable business but only if the objective is truly "food delivery" and not "growth & engagement at all costs".

Exactly. But not every restaurant is ideal for food delivery. That's where these delivery companies go wrong.

We've had pizza delivery for at least half a century. If you lived in an area with enough density, you might also be lucky enough to have a Chinese place that delivered. Maybe McDonald's, or one or two others, again with enough density.

Starbucks? Dunkin' Donuts? There's no margin there to make money on delivery, unless you're charging outrageous fees or being bankrolled by VC companies.

> Starbucks? McDonald's? There's no margin there to make money on delivery, unless you're charging outrageous fees

I’m not sure about that - if you purely count the money that actually makes it to the drivers, it’s reasonable.

The problem with these services is that besides paying for the actual driver, you’re paying about as much if not more to the company itself in the form of explicit fees as well as hidden ones (such as the markups on food items).

The latter pushes the prices to unsustainable levels. If you just had to pay drivers, it could work - see my other comment (https://news.ycombinator.com/item?id=32088565) about how delivered food used to work fine despite being done by employees of the restaurant itself and despite lacking the economies of scale that restaurant-agnostic delivery drivers provide.

> Food delivery is a viable business but only if the objective is truly "food delivery" and not "growth & engagement at all costs".

Can you give me an example of someone making it viable? Not trying to be snarky. Genuinely interested.

There's no room for that. DD and others just loss-lead off VC bankrolls.

In the past, any restaurant who provided their own delivery proved it was viable despite lacking the economies of scale, tech and extra efficiency offered by restaurant-agnostic delivery drivers.

Nowadays it’s impossible to compete if VCs are happy to burn money to undercut you at a loss but that doesn’t mean the underlying model is flawed - if VCs and “growth and engagement” stops being a thing there could absolutely be an independent delivery operator that doesn’t screw everyone over.

My assessment is the same, thanks.

Wait… what? Labor is so expensive that people can’t afford DoorDash?

If labor were so expensive, wouldn’t the customers (who presumably get their money through working) be able to afford this service? Do DoorDash workers get paid more on average than the people that they deliver to?

The bottom few deciles might earn enough money to dig themselves out of debt, or save up for the next car repair. The next few might be able to send their kid to a better school or put together a down payment. The next few might prioritize going to the dentist. And only the top 2 deciles are willing to spend the money for a $30+ per meal. Hell, I earn multiples of the median, and I would not pay $30 for a meal that has a 50%+ chance of being shitty.

Either way you want to classify it, the number of people and the frequency with which they will order off DoorDash very well may not sustain their business.

I’m still not clear as to what your point is.

Are you claiming that DoorDash would be more affordable if (and only if) they reduced wages? I don’t really understand the assertion that of all of the possible factors that go into pricing that it’s important to focus on driver compensation.

>Are you claiming that DoorDash would be more affordable if (and only if) they reduced wages?

No, I am claiming all delivery services would be cheaper if they had to pay less for labor.

>I don’t really understand the assertion that of all of the possible factors that go into pricing that it’s important to focus on driver compensation.

It sets a bottom limit on the price on the service. Driving 1 minute costs $0.60 (rough estimate from IRS milage rate), and then you have to add driver's profit to actually do the job. Even if you assume the IRS rate is on the high side, you're still looking at at least ~$15 of costs for the delivery recipient for a 15 min delivery.

Maybe you can get this down by bundling deliveries a bit, but I think it remains to be seen if it can really be brought down enough to make it cheap enough to drum up the volume DoorDash would need to sustain their operations.

What exactly would be your proposal be to make DoorDash affordable?

People rate their idle time dollar value far lower than their work time dollar value.

Someone who is paid 100$/hr at his work will not pay Doordash 100$ to save 1 hour of his time. The bid-ask spread is quite high.

100$ is not how much a person values his hour. It is simply the market rate for his skill. He probably values his hour at about 10$.

> Labor in the US is too expensive for sufficient number of people in the US to afford it

How does that work? Naively, I'd expect that the more expensive labour is, the more disposable income labourers should have available to spend paying other labourers to deliver food, so it all balances out. It's at least not obvious that food delivery would be less viable in the US than, say, China or India, where labour is cheaper but customers also have less buying power.

It depends on the level of income/wealth disparity in the societies. China/India can have 200M rich people and 800M+ extremely poor people and still have 200M in the middle classes.

The extremely poor live in huts/have no expectations of moving up/have no education with which they can do things other than manual labor.

Although, even in India, the cost for cooks/maids/drivers/farm workers has exploded since the 90s. Many families that used to be able to afford them, cannot anymore. But that does not mean the cook/maid/driver can afford their own maid. It just means they now have the ability to eat at a restaurant once a month or buy a smartphone.

This would suggest that delivery would be even more impractical in countries with very low wealth inequality, like Japan, but my experience is that's not the case. If anything, the service quality is better there.

Japan is a different case due to a very outlier culture and extreme density that people live in.

But mostly, people are living so close to each other than delivery is much cheaper. It costs a minimum $0.60 plus labor costs per minute of driving in the US. Cost to run a 15 min errand is $7+, and that is excluding the person’s time and effort.

These kind of conundrums easily disappear when you factor in housing(or healthcare). Labour is expensive, but housing is even more expensive. The delivery guy needs to pay their landlord before they can pay other delivery guys.

From what I have seen these "startups" with tons of VC are full of useless and highly paid people that got hired rapidly. I bet they could fire 50% without even noticing. Or they would notice that things go better.

DD has to pay drivers, stick to regulations, fight lawsuits and pay their employees and pay for the usual marketing and growth as well. Based on the slim profits they make, it's no wonder they still burn VC cash.

> I have no idea how DD continues to lose money with this business model.

Many years ago when I was living in Rochester, NY as a student there was a service called “Rochester Delivers” which was essentially DoorDash without internet. They printed a big book compiling all the restaurant menus and you ordered over the phone. The price adder was always too much for a poor student like me, but I figured they probably were raking it in from the slightly richer folks.

Fast forward many years, and I mention to one of my good friends this pre-DoorDash service. Turns out he was actually the one running it. I knew he’d lived in Rochester around the same time I had, but hadn’t known him back then and had no idea. He said the entire thing was a disaster, impossible to make money, and it basically drained all his savings trying to keep it afloat.

Not that it's at all relevant, but at UofR?

Yup, UofR. Nice to hear you ask, as almost invariably when I say I went to school in Rochester, people ask if it was RIT.

Restaurants have no margin to begin with. In the before times, delivery guys made bank on tips and the food sold at retail.

Now you have big VC companies bleeding money while stealing the tips and dumping more costs on the consumer, which further hurts the restaurant. It’s a gross business.

Navigating the real world is inefficient and slow. I’m amazed any delivery business except maybe pizza makes sense. Without lucky closely spaces orders you are paying an entire individual worker’s salary and gas for what can easily be a 20-30 min round trip.

If I'm understanding correctly, it's worth zero iff you attribute $0 of value to the delivery.

DD's value prop is that they deliver. If you don't want that, then yes it's probably not for you.

With Doordash and co the fees over the normal cost of food are so high that even vs traditional delivery fees you're overpaying.

Off the top of my head, yesterday I passed a billboard for McDonalds advertising two large sandwiches for $6.

Lets open Uber Eats and try ordering two Big Macs... $13.68

So they don't carry the deals. Not looking good already.

Went to checkout...

$1.49 delivery fee for a place 6 minutes away. Fair enough.

$3.27 service fee. The explanation text is implying the cost of servicing my order (orchestration essentially) is more than double the cost of delivery.

$2.00 CA Driver Benefits fee. Delivery drivers were always employees of independent stores, but Uber took such offense to being forced to provide healthcare that they itemize the cost.

Grand total comes out to $20 before tax. For a $6 meal in store.

And in case you were thinking "Well Uber isn't DoorDash" this whole time... DoorDash comes out to $22 before tax.

Has a "traditional" delivery place ever charged you a 60% delivery fee?

It's so absurd I even tried increasing the order size... the ratio of price of fees to price of food actually went up!

And all this is before tips!

Well, you live in a country with tipping culture, but you're free to not tip. If its mandatory, then include it with the price. Its very American to pull this kind of BS. They mention a price, and then say X is tax, Y is delivery, but then they come with all kind of 'additions' (Apple does it here too, about mentioning environmental taxes or something). I don't give a shit about any of these (they're your expenses), just tell me what it costs and I'll say 'yes' or 'no'. I mean, what on Earth why would you as customer be responsible for 'CA Driver Benefits fee'? That's on the employer. And 'service fee'? Which service? The service you get is a proper delivery.

Like I said, none of this includes tips, but decided to see if this happens in other countries, so I switched around my delivery location:

UK: 10% "Service Charge" on top of delivery fees

Spain: "Marketplace Fee"

Canada (Montreàl): "Taxes and other fees" which when expanded shows "Service Fee" separate from.

Doesn't seem to be tied at all to tipping culture, these companies are quite content taking extra money regardless of social norms

In my country the market leader is TakeAway / Just Eat (Thuisbezorgd) and they just mention a price for the food and a price for the delivery. Nothing else, no bullshit. If you're a regular customer, you're better off ordering directly though, since they take a cut of about 10%. Websites of restaurants regularly mention this, and since Dutch like to be cheap I suppose it works. In a way its honest to mention the 'service fee', if they were also upfront that the cut is because they're a broker/middleman.

The problem is really that in total Uber Eats was asking for 300% what they claim delivery costs in exchange for what they provide as a broker. That's pretty absurd.

And I was skeptical seeing "no bullshit" in the same sentence as a gig economy app so I had to search, and of course the first result for "Thuisbezorgd service fee" was that they're hiding service costs by charging more than menu price... then turning around and claiming that's because it's the delivery menu.

Which of course would mislead any reasonable person expecting to pay what the menu says... the one they'd hand you if you sat down.

https://nltimes.nl/2022/05/29/meal-deliverers-misleading-cli...

There's no way to make the current delivery app model work. The app needs to be small in scope and/or localized otherwise it seems without exception, "growth at all costs" leads to heavily subsidizing food and labor, then increasing costs drastically and decreasing pay once you have people hooked on the system.

> Uber Eats was asking for 300% what they claim delivery costs

And most restaurants charge 300% of what the food costs.

You have no idea how restaurants work if you actually think this.

They get giddy if their margins are like 5%... or the equivalent of charging you 105% of what it cost them.

There is a difference between gross margins on the food items in isolation vs the overall restaurant's profit margin. The point I was making to the OP, seemingly lost on you, is that there are plenty of costs that Uber (or a restaurant) must bear, such that earning a large gross margin on a specific item or service doesn't guarantee an overall profit.

The only thing I see lost is you. The complaint isn't that Uber is bearing costs, it's that they bare costs in the neighborhood of 3x what the delivery costs!

For a restaurant food needs to compete with paying for actual humans to cook it, paying rent, etc. all things reasonably expensive and costs huge money to scale.

For Uber owning a human's time for the next X minutes should be by far the largest expense because the other side of it is software!

If you understand how software works this shouldn't be hard to grasp... software scales for relatively nothing compared to human labor and rent!

The only way to break that equation is to squander your cut on overaggressive expansion. Overaggressive of course being defined as the point where you spend so much money drowning people who aren't using in perks and advertising that you end up having to squeeze restaurants drivers and existing users harder and harder to keep the ponzi scheme going...

So according to you, delivery companies have fat margins and zero marginal costs because it's all infinitely-scalable software. The only thing holding these companies back, then, from massive profits is "overaggressive expansion."

Very impressive. Your plan is impeccable, I cannot find any flaws whatsoever (keep in mind, however, that I'm a dummy who doesn't understand software). You've obviously cracked the code that has eluded the existing executive teams at GrubHub, Postmates, Door dash and Uber. I hope you have submitted your resume to all of them, clearly you are all set to be CEO!

When you're out of your depth, drowning yourself snark isn't a good look.

What have I said that's incorrect, or where have I mischaracterized your statements? You wrote: The only way to break that equation is to squander your cut on overaggressive expansion. If "overaggressive expansion" is preventing profitability, why aren't any of the delivery companies reversing course and doing what you suggest?

Of course they somehow need to earn money. So it is 10% on top of the price in exchange of being listed in a centralized DB of delivery application (in this case the defacto standard). Do I find 10% a lot? Oh yes (although less of a problem than 300%), but that's the problem of the network effect. They would start for free or very low margin, and once they have market share they slowly increase that percentage. The problem I have with it is that I want customers to keep having default choice, that they are not honest about it. They should be honest they are a middleman. So that they get flak for delivery, not the restaurant. Also, the customer should be informed they are not dealing directly with the restaurant.

> Of course they somehow need to earn money.

Even your Dutch service you brought up is actually charging more than 12% when they deliver, and like I said above was found manipulating prices

It is almost tautological, you cannot have a delivery service spending millions on non-operational expenses like expansion, and not take advantage of restaurants, drivers, and customers.

It's simply too expensive for fair business.

NYC has small privately owned players who take a flat monthly fee to provide a simple web interface for ordering. They don't advertise, they don't deliver for you, they just provide a boring reliable service. That was originally how Thuisbezorgd operated before growth pressure forced them to start their own courier service.

They could run indefinitely without taking advantage of anyone because of the fixed scale, and that's really just another indicative case of our current growth culture.

Its a subsidiary of JustEat/TakeAway btw, they got different brand names in different countries.

I agree its disgusting, my point is there's degrees of disgust. For me, 13% is ridiculous given the service they provide. But from the PoV of restaurant owners they could get away with a very simple website. IMO its a deal with the devil.

Anyway, 13% is a different league from 300%.

Same with dark stores, the value being paid isn't worth it. The profit should go to the hard working restaurant, the owner and the employees.

I do attribute some value to the delivery. But this was a promo code plus free delivery. A future promo code that doesn't have free delivery would result in even higher fees. So if it's a code for less than $20 I'd expect that entire amount would be eaten up by fees and the increased cost of menu items. Delivery would be extra.

I won a $100 gift card for grubhub. Awesome! That is about 4 meals for my wife and I based on what we usually order. Uh... after all the fees and everything it came out to about 1.5 meals. Even if I include my time and gas to drive and pick up my order myself, I can't see why anyone would ever spend their own money to use grubhub unless you don't have transportation. In that case, it seems to just be a scam to take money from poor people.

I don't understand, isn't 41-35=6 USD ?

I'm guessing the coupon only applied to the value of the order items and not to taxes + fees (lol) + tips.

There were a bunch of fees that were added on top. I added a $5 tip, but was expecting the total would be around $12.

Same here. They sent me a 50% off coupon a while ago. Once I had completed an order the price with all fees was basically still double the in-restaurant price despite 50% off.

InstaCart’s pricing seems way more reasonable.

My friend did the math and found that her Costco orders were 40% more expensive with IC. It does save her the time of going to the store, which is not trivial (especially with two kids), but 40% is one hell of a markup!

If they were upfront about high delivery fees that would be one thing, but what is infuriating is the way prices differ across the reataurant website and various apps that try to sneak in an extra $2-3 per item. I used to use Seamless regularly but have found Uber to be among the slimiest kind of algorithmic price discriminators.

Use the coupon and pickup the food yourself. Avoids the tip and delivery fee.

I considered it. But most of the fees didn’t disappear when I selected that option. I’d have saved the $5 tip, but the hidden fees would have remained. I figured if I’m paying for delivery related fees either way, I might as well get it delivered.

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