Comment by nness | Hacker News Reader

Comment by nness | Hacker News Reader

Deliveroo, and really any gig-economy services, have a real problem — their largest markets are also the ones with significant cost-of-living issues affecting both riders and customers. Customers are spending less, especially in London, and riders need are being priced out of the market (reducing the supply of riders across a number of competing apps.)

There was a trending tiktok by economist Kyla Scanlon on the topic of "subsidizing affluence" and how these services were able to be offered so cheap because of incredibly low interest rates and investment. Rates have risen dramatically, affecting both the appetite of debt for start-ups and the spending power of consumers. Shareholders recognised this, and it showed through Deliveroo's historically bad IPO.

Ultimately, I suspect Deliveroo will continue to underpay (relative to the cost-of-living) because of the poverty trap — poor people don't have many options, and being underpaid as a Deliveroo rider may be the only option for survival in London and other similarly major cities.

The issue with companies like Deliveroo is more basic than that: It's plainly profitability of the business model, irrespective of interest rates (which are blamed for anything and everything lately)

At the moment the whole business model, and any plausible path to profitability, relies on squeezing riders as much as possible because (1) they are the main cost, (2) they have very low productivity (number of deliveries per hour), and (3) customers do not want to pay that much for delivery. Fees paid by customers have increased, and restaurants also often charge a different, higher price when ordering through Deliveroo and maybe this is getting to the limit of what the market will bear... So there is not much wiggle room.

If I'm having dinner in a quiet restaurant, I wouldn't accept to wait for the cooks to serve Deliveroo/Uber orders instead of taking care of mine.

In France, some restaurants give a 10% discount if you order take away. But I hope they don't do it for deliveries through these companies. This lowers the global quality level. You can't have the same quality with one cook and 10 tables than one cook, 10 tables and 50 deliveries per hour.

That's for the restaurant to decide, it's not a Deliveroo issue. Some do not accept Deliveroo orders when they are too busy.

> You can't have the same quality with one cook and 10 tables than one cook, 10 tables and 50 deliveries per hour.

I mean, the solution is fairly obvious - hire more cooks if you are serving more food.

Resturants will either handle this properly or quickly go out of business.

I’d expect them to just limit the number of take out orders so that they could handle it. Food establishments already do this.

For a while, the solution seemed to be "ghost kitchens" - central commissary operations that pretend to be restaurants in their ads. The first Doordash Kitchen is in Redwood City, CA, near the intersection of Woodside Road and El Camino Real. It seems to be much less busy than it used to be. That industry has collapsed.[1]

[1] https://www.cnn.com/2023/12/05/business/ghost-kitchens-were-...

More cooks = bigger kitchen which is impossible in tiny restaurants of city centers.

I also doubt it’s a good decision to invest in bigger real estate and more employees while the delivery companies are always on the edge of going bankrupt or being regulated.

Also, a restaurant is not an easy to scale business : most of their value is a mix between the location and the cooking team. You can’t easily change one (or both) without changing your restaurant uniqueness.

Sure, the alternative is to not accept online orders. There is no middle ground here. Either the business needs to expand to be able to service more customers or the business needs to refuse customers. Doing neither won't work.

>Restaurants will either handle this properly or quickly go out of business.

Whenever I read something like this on HN it makes me realise just how out of touch tech people are with the real world. Most of the people here work on companies that never were or never will be profitable or break even, it's just burning investors money or building your business on huge amounts of money until you get a monopoly on the market. Restaurants are working in the real world, where you don't get all that free money, you can't realistically scale, the margins are thin and the employees are hard to keep.

Which is why in the real world most resturants go out of business.

Money being tight doesn't mean you no longer have to provide good service to attract customers. Running a business is hard for a reason. If it was easy, everyone would do it.

I don’t understand the reasoning behind restaurants charging a tax on deliveries. Don’t deliveries increase sales by a multiple of what they likely make on tables? Why disincentivize that?

Doordash makes money from fees on the customer side and a 15-30% commission on the restaurant side. https://get.doordash.com/en-us/products/marketplace

Interesting. I know they charge fees to restaurants, but I assumed even with those, the additional volume would still increase profits as the unit economics would improve. Cooks don't need to scale linearly to deliveries. But it seems the fees are too high and they risk becoming irrelevant if they don't pay, because everyone if now ordering from delivery services, especially since covid.

I support capitalism, but I feel like these are exactly the things where govt should regulate to create fairness. Let's just squeeze each other because markets.

The restaurant is (or should be able to be) capable of setting prices for delivery vs carryout vs dine in to keep their kitchen busy without falling behind.

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