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.
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.
Food delivery is a viable business but only if the objective is truly "food delivery" and not "growth & engagement at all costs".
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?
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).
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?
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).
Mostly techies, kids who live with their parents and poor people with really poor impulse control.
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.
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.
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.
Can you give me an example of someone making it viable? Not trying to be snarky. Genuinely interested.
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.
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?
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.
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.
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 ~$15 of costs for the delivery recipient for a 15 min delivery.
Maybe you can get this down by bundling deliveries a bit, but I think it remains to be seen if it can really be brought down enough to make it cheap enough to drum up the volume DoorDash would need to sustain their operations.
Someone who is paid 100$/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$.
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.
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.
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.
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.