The fatal flaw of meal-delivery unicorns.
By John E. McNellis, Principal at McNellis Partners, for The Registry:
What do DoorDash, GrubHub, Postmates and Uber Eats have in common with Lassie? Nothing. They’re dogs; Lassie’s a superstar. What do they have in common with each other? Everything. They take the world’s second oldest profession — Babylonia had delivery boys — sprinkle it with tech dust, click their ruby slippers, chant “There’s no place like Silicon Valley” and hope to become unicorns. (By the way, since unicorns are entirely mythical, wouldn’t the Valley be wise to pick another moniker for its wannabe superstars?)
There’s no secret to success in tech. But like hitting a 98 mph fastball, it’s easy to describe, nearly impossible to do: Create a great product that can scale. Even better if you can build a patent moat around it. If, after five hard years of R&D, you create killer software at a cost of $100 million, then the first product you ship for $1,000 comes at a loss of $99.99 million. But by the time you’ve sold your millionth unit at almost no additional cost, you’ve grossed a billion. That’s scale.
Here’s the rub: You can scale intellectual property, you can’t scale labor. Your millionth pizza costs as much to deliver as your first.
Yet the meal-delivery guys claim they will scale when they create a critical mass. They will have the density they need to become profitable (none are yet) if they can somehow bag a huge market share. The density argument goes like this: if we can deliver enough meals in a given trade area, we can be like the post office in terms of efficiency (yes, the post office, I’m not being ironic). Nice idea, but it doesn’t wash.
The post office is a route business—your mail carrier hits the same couple hundred houses on the identical route every day. That beats 200 homeowners making 200 trips to the post office.
Meal delivery is a discrete business. No one else in your zip code is ordering spaghetti Bolognese from Trattoria Pastaria at 6:30 on a Tuesday evening. Whether the Uber Eats guy drives to the restaurant or you do, it’s the same (except the food is hotter if you do it yourself). There is no way to string that discrete delivery into an efficient, cost-effective route. To that point, old-school pizza joints average about 2 deliveries an hour and their drivers start at the restaurant. Can a free-floating DoorDasher do more than two an hour?
In short, Mount Everest is scalable, meal-delivery companies are not.
This claim of eventual profitability calls to mind the very old joke about the jeweler who sold his diamonds below cost, losing a little on each sale. “I make it up in volume,” he said. He didn’t and neither will the meal-delivery companies.
Let’s get specific. DoorDash, Postmates and Uber Eats all deliver for McDonald’s. According to that most reliable of all sources, the internet, they charge about $5 to deliver your burger and fries. And it takes about 30 minutes from the time you order to delivery. This means that, like pizza, the driver can do about two trips an hour. This is a truly great service for the consumer too stoned to get his own milkshake at midnight.
But there is no way, no way, in the world this can be profitable for the meal-delivery companies (or the restaurants if they do it themselves). Ten bucks an hour won’t even pay for the driver’s gas and minimum wage, let alone his incidental car costs. What’s left for DoorDash on ten bucks an hour? Nothing.
Consistent with this column’s reputation for highly thorough investigative journalism, I figured what the hell and ordered home delivery from a local restaurant Saturday night. DoorDash delivered the correct order hot within 30 minutes of ordering at a cost to me of 99 cents. Yes. 99 cents. As a consumer, I couldn’t have been more pleased. If I were a DoorDash investor, maybe not so much; somebody’s losing big here.
The driver told me he does ok thanks to tips. He added that he did better as a straight-up Uber driver (which, by the way, ain’t that great), but he couldn’t stand the drama: people throwing up in his car, the fighting, drinking and taking drugs while he was driving.
But sooner or later, Wall Street and the VCs will tire of handing over free money to these guys. They will insist they turn a profit, that they charge a fair price to make that spaghetti run.
Who’s going to pay for it? Everyone has a different number for the last-mile cost, but let’s say it’s twenty bucks if you throw in a reasonable profit. The 99 percent aren’t going to pay $20 extra for a $15 pizza or even a $50 fettuccine Alfredo. The lazy 1 percent would, but oops — bad business model — they’re only 1 percent of the population.
So, stick the restaurants with the delivery cost? Good luck, they’re already on life support. Being in the retail business means that — just like your children — you hear from your tenants whenever they have problems. And we’re hearing from our restaurants. They’re fighting to adapt to minimum wage hikes and cost increases in a highly competitive environment. Our restaurant tenants are scattered throughout Northern California’s more affluent towns; if they’re struggling — and they are — everyone is struggling.
Virtually free meal-delivery is yet another concept out of Silicon Valley that is: a) great for consumers (as are WeWork, Uber and Lyft); b) guaranteed to never make a profit (as are WeWork, Uber and Lyft); and c) proof that the smartest guys in the room are no smarter than the rest of us. By John E. McNellis, for The Registry.
Strongest argument in favor of an air-walking economy is the herd of unicorns destined to never make a dime. Throwing billions of dollars at these losers is a recessionary harbinger. Read… Silicon Valley Is Slowing, Whether for a Quick Breather or Extended Time-Out, I Have No Idea (Guessing the Latter)
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Same flaw as WeWork …. in an economic downturn, these businesses get clobbered. First, those expensive meals from restaurants are the first thing to go when the family starts to worry about its monthly budget. And, even if they stay, the tips and fees paid to these delivery services can go in exchange for driving yourself to go pick up the food and get it home quicker and hotter.
As we watch the goods-based economy start to turn down, now is definitely not the time to invest in businesses that will be clobbered by any weakening in the economy.
For us getting pizza is scaling up. We get pizza when we have extra money, and then somebody goes out to get it.
people get pizza delivered to my high-rise constantly. the best pizza in the neighborhood is directly across the street. call us cheap, but one of us always goes downstairs to pick it up.
as an aside, in nyc we have a real problem with delivery guys on ebikes hitting pedestrians. the drivers live on tips and are insanely efficient. i would estimate ten deliveries per hour.
And you are in a area that makes sense for delivery. The more people you can get jam packed into a one-square mile area of anywhere is great. The problem is that it is not practical for a company like Uber Eats or DoorDash to deliver an order from the North Central Bismarck McDonalds to the farm at US 83 mile 97 just outside of the city.
Sorry, but 10 deliveries per hour is impossible.
It takes at least 5 minutes just to get customers to respond to the call, go up the elevator/customer comes down the elevator, and take handoff even if payment is already done (at which point, tip?).
This is nonsense just like early Uber ads for ride share. In reality, customers dawdle, they call while still in meetings, they forget stuff and have to go back, they’re waiting for a friend to arrive or a spouse to get ready.
Based on my grocery bill I would say my cost per meal cooking myself is about $1. One trip to the store per week. Paying someone to prepare your food and to deliver it just isn’t worth it unless you are working 60 hours per week and making a decent eage.
Unless you’re growing/raising significant percentages of your own food (way outside the scope of a food delivery post), I’m interested in hearing how you feed yourself in the USA for $1/meal.
do you live in the third world?
To answer a question posted.
My breakfast is always the same oatmeal with an Apple and peanut butter.
I usually get same staples at the store to prepare all meals for the week. 3 small tuna steaks, a small pork roast, rice, broccolli, carrots, garlic, onions, bread, sliced turkey or beef, sliced cheese, coffee. That’s about $20 – $25 at Aldis.
I don’t know about $1/meal, but I buy staples in bulk. 25lb pound bags of rice and black turtle beans, plus bulk cornmeal, Bob’s Red Mill flour, sugar and oatmeal. I do get some things at Costco – cheese and their peanuts. That means I’m only hitting the local store for produce, spices, and chicken tenders or occasional roast.
I fund groceries by withdrawing $600 cash and putting it into a zippered bag that I label Groceries. When I buy, I pay cash and put the receipt in the bag. My last withdrawal was beginning of September and I have about $300 left in the bag now.
I’m 59 and single, the kids are off to college or work. I just don’t eat all that much. Usually between 2200 and 2500 calories a day? Not sure. I’m about 5 lbs heavier now than when I was at University…
I am sorry I missed it if you have posted it before. I understand you nearly got wiped out during the last crash. What are you doing now to get by? Did you jump back into the fight or make a new plan to survive?
What better way for the have-nots to rob the haves,
Let’s see, order a pizza and buzz me in, I can’t help but think of alex in clockwork-orange
Just like Uber rape, where a maniac can go pick up college co-eds and take them for a ride,
Now you can ‘google’ a home-break in, what a wonderful world
Let’s see in this world say 20%, are ok, and 80% are living day2day, now you have this gig for guys getting out of prison to deliver cyanide, to the people who put them in prison,
Gawd bless amerikkka
You sound like someone who knows what they are doing. You should get into the money management business.
Exactly… someone goes out and gets the pizza/food. Have we become such a fat *ss society that so many can’t be bothered to get off the couch in order to pick up some take out? So, some punk comes up with an app and believes (as vulture capital always involved) they are entitled to billions of dollars. So much pizza here is pure crap (especially to this immigrant from Italy)…but this ends up hurting many of the good places as they have a difficult time eking out a reasonable margin because they try to adhere to quality as compared to the “junk” pizza makers (we won’t mention any names as there are many). Consider the following:
1. This “service” adds 25 to 30% (in my town) to the cost of the pizza or other food. This is often the margin the restaurant survives on and they can’t increase the price enough to offset – again, especially those with a quality product that may not have enough or any sit down space for customers.
2. A restaurant turns over their product to some 3rd party ( a real crap shoot as some drivers OK, while others are not). Once done, the restaurant no longer has CONTROL over their product. Once a restaurant loses its reputation, becomes difficult to get it back – especially with all these on line ratings.
3. I have heard of many cases where the driver picks at the food. Worse yet, I have even heard of some 3rd party drivers (possibly with an ax to grind) who have even spat or worse on the food.
Just one more example how our society is in desperate need of an economic “coming to Jesus” in order to clear out all this garbage that has accumulated since 2009 and hopefully clear up these absurd debt levels and inflated asset prices. Oh, but recessions have now become nasty words and nobody wants it on their watch….so the FED just keeps on blowing air into these bubbles. But the law of gravity will one day come back. I hope this “one day” is within my lifetime as I really want to witness what “this day” is going to look like and how it will play out. Will be historic !
Finally, I won’t get started on how bad much of this so called “food” truly is …sodium content and fat content off the charts…..any wonder why society has an obesity problem, heart problems, etc. – which then affect medical insurance….etc….what a vicious circle we have created. With that, have a nice day !
Since I turned to health food I can not use these drivers. There is enough traffic grid lock and air pollution without every one ordering from Taco Bell with a 99 cent delivery deal.
I did like taking Uber from the airport. Would pay more for the service if necessary. Some cab and airport limo drivers are out of business.
Thumbs up for spelling Bolognese properly. However, there is no such thing as Spaghetti Bolognese. My 2nd religion prohibits them. The only real Bolognese is Tagliatelle alla Bolognese, also known as “Tagliatelle col ragù“.
Therefore, as none of these companies can deliver a non existent food, they will all go bust.
From near Bologna, of course.
As a pasta maker & consumer, I’m with you on no such thing as Spaghetti Bolognese (sauce doesn’t adhere properly).
However, this next thought might start an international food fight: tagliatelle and fettuccine are really twins separated at birth: one went south, the other (tagliatelle) stayed in the north.
Having said that, the following names don’t exactly roll of the tongue:
o Spaghetti Fettuccine
o Tagliatelle Alfredo
Even worse is how do you prepare and deliver the al-dente ( just right not soft, not hard ), when its carried 30 minutes after it leaves the stove on an electric skateboard??
Seriously, we have people here who seem to know about food, but the gist is it goes from stove-top to table, and doesn’t sit in a styro-foam box for an hour, is anybody here going to argue that this is still food?
IMHO it takes seconds for the food to absorb the crap in the stryo-foam and/or cardboard/trash synthetic box.
My local airport has “the airport flyer” bus which is …. free. It goes around a circuit that stops at a train station and a light rail station, and it’s pretty nice, frankly.
Good article, as it happens, the intrepid Ken Loach came out of retirement at the ripe age of 83 and made ‘Sorry We Missed You’: “Hoping that self-employment through gig economy can solve their financial woes, a hard-up UK delivery driver and his wife struggling to raise a family end up trapped in the vicious circle of this modern-day form of labour exploitation.”
A biting indictment on what is essentially modern day slavery. Caught it at a film festival a few months ago, but it’s now it wide release, Highly recommend.
As bad as it is in the UK it’s even worse in the US because of the difficulty independent contractors have getting and/or affording health insurance.
Yep the UK has the NHS.
People outside the US probably have a hard time understanding how pervasive the lack of health care is in the lives of most people here in the US.
Mr. McNellis, I fully agree. Doordash & Grubhub will never make any money for the reasons you’ve outlined.
But I wonder about grocery delivery? Companies like Peapod have been around for at least a decade and are still alive. I like to use them when the weather is bad so I don’t have to schlep groceries in the snow. Grocery stores are offering their own delivery service as well. I’m happy to pay the $5.00 delivery fee and a nice tip for the driver, but I’m wondering how they are doing it in a notoriously low margin business.
If I may throw in my two cents, I think it’s the same thing for grocery delivery. There will always be a market for delivery, but it’s just not the “next big thing”
My parents are 89 and 93. They live in a rural area so I could see them using a delivery service for groceries in a few years. I drive them sometimes but not everyone has a child close. Had an aunt get killed because she ran a red light when she was old. Maybe medical issue.
Sorry to hear about the loss of your Aunt. But you also make a great point about grocery delivery. It is best to make the selection on the Kroger website and the store will deliver. It is more economical if you are going to deliver a full week’s of food instead of a single meal.
Everybody needs food. But the truth is that most of that food comes from the grocery aisle, not the clown, the king, the hut, the grandpa, or (heaven forbid) the colonel. A good haul would be good food in the form of fruits and veggies, meats, whole grains, and dairy. Finally, one person could go ahead and work the order in the store. Then the order is either delivered or the owner can pick it up. It is very likely that the order is for 25-50 items compared to your typical McDonald’s order of fries, a big mac, and a diet coke. The former is likely to achieve scale while the latter is only profitable at a $10 markup for delivery.
Finally, when we consider the author’s 99 cent delivery fee, we realize that this isn’t new technology. It is only somebody throwing on a website, letting others order food off of it, and hope that the tons of costs related to the site, auto upkeep, gas, and so on are enough to keep the company afloat. BTW, Pizza Hut abolished delivery fees, but they used to be $8 while most restaurants offer fees from $4 to 8 dollars. With some thinking, all the dealers above could end up doing their own delivery business and cut out the middle man in Uber Eats, DoorDash, Grubhub, and Postmates.
Tesco UK online delivery pricing is £8 ($10) a month with a minimum basket value of £40 ($50) for next day or later delivery.
Thats in the more densley populated UK. They can’t make a profit unless you make a bulk order and pay a monthly subscription.
And it is that way in the states as well. Grocery stores need to make this worthwhile for them as well as their customers.
Peapod and their like make sense. They only have to break even to have a benefit for the supermarket. For the consumer, consider that a car costs between 50 cents and a dollar a mile to operate. I know retired people in Florida who use them on days when it is 95 degrees and 99 percent humidity. It’s worse than snow.
I live in the North.
It’s not worse than snow.
I live in Florida.
It’s not worse than snow.
Peapod is two decades old and Ahold (their owner) did a trial with home delivery with ne of those pre-internet internets in the early 80’s
with one of those pre-internet internets in the early 80’s
A BBS? Those were fun! There was always one with a name like The Wizard’s Castle, and one with a name like Professor Falken’s Lab, one named Joe’s, or Nate’s place etc. The local college(s) had them, and we often knew things like the “bat phone” dial-in line for the local top-40 station, telephone co. utility lines like ring-backs and such.
It used something like that French Minitel system which was called Videotex n Holland and the supermarket was called James telesuper
Another problem emerging…
If you want to sell your junk through an auction, they are now being much more specific to extremely fine high end products due to the volume of people with stuff to sell.
Internet is packed full of people trying to get rid of stuff.
And their international investors who are also invested in their overseas equivalents will tell you that “labor is cheap, so it makes sense to charge $3.5 for something that costs $7 in store, pay the drivers $1.05 for the trip”.
But its ok, I’m sure these companies can create some patents and use them as collateral to take out loans from JPM to offload to some other yield seeking investor in the EU or japan who figures 0% coupon junk tranche in the eurobond clo they’re financing is much better than the -0.x% coupon “safe” asset they’re holding.
No quibbles about the article.
I would just note that the restaurant food delivery business isn’t just about delivering food.
It also encompasses advertising for restaurants (search order in the 10 or less spots visible on the first page of the order app), plus data collection on the users.
Basic economics are absolutely crap, agreed.
What’s really ironic is that so-called financial journalists seemed to be utterly hoodwinked: they’re still saying Uber Eats is additive to Uber’s people transport, because they both involve driving.
Pack a Barbecue in the trunk and sell hotdogs hot to your door…
Any other meat, you might get mugged.
Traditionally in my country certain food delivery services always were about more than just food delivery, pizza delivery comes to mind but there are others.
The drugs industry must love the countless delivery drivers that are on the road all day delivering small packages to private customers; drivers who love to make some extra money because they are underpaid. And the customers probably like it too, just like in those pizza days – no need to get out on the street for your daily dosage. Probably only a matter of time until you can officially order your cannabis, XTC pills etc. together with the fast food thanks to the latest high tech innovations (are these companies already investing in cannabis stocks etc.?).
Your prediction is already a reality – We have pot delivery in LA.
And there was also Pot delivery in South Park, the TV show.
Anyone remember 1980s Doonesbury? Dr. Feelgood who delivered condoms.
There’s a sort of hot dogs and hamburgers and beer and I guess there’s a pool table in there, sort of place, it’s a chain called Grill’Em. I went in and looked at the menu and prices and was NOT impressed. The clientele were kind of rough too. I’m thinking, You too will pay $12 for a stripped-down cheeseburger in your “hook up” place to buy meth etc.
Lots of blue-collar types like construction, tiling, carpentry, cabinetry, type people. Certainly not all but some tend to run on Dunk, er, meth.
One of my pizza delivery guys was an older college professor whose contract didn’t get renewed. He said he really loved his delivery job. He just chilled out and enjoyed the driving and meeting people. He worked at least two towns for two different pizza places. Dominoes I think.
Some wise soul said “what comes around…keeps coming around”.
I’m an old fart (73) whose dad went to the University of Tennessee on the GI bill in the late 1940’s. Both my mom & dad told stories of their college years in GI married housing (half) a Quonset hut) and receiving moonshine along with the delivery from the milkman. NASCAR partially evolved out of the moonshine delivery business.
Note for millennials: the milkman was a dude dressed in white who delivered milk (in glass bottles), butter, cream, and (apparently) moonshine to your door 2-3 times a week at about 6am.
This business model failed because they didn’t name it Milk Technologies, Inc…
My dad worked for a while as a milkman! It’s before I remember but the tale passed down is, for some reason my parents lived in a cottage on the Huntington Library grounds, and my dad worked for a bit as a milkman. My older bro, wanting to be helpful, picked up two milk bottles and started walking down some steps with them in his hands, tripped, and the bottles broke and he cut himself. My mother hated milk bottles and when I was growing up she never let us forget that cardboard milk cartons are a great invention, and that potato chips are a huge ripoff.
In Saginaw, Michigan when I was six years old (1937), the milk delivery wagons were horse-drawn.
They were per-cursors of self-driving automobiles; The horse new the route, where to turn a corner, what houses to stop at and how to time the delivery man’s door-step dash and return, to get going toward the next stop just as the delivery man jumped back aboard.
Imagine being so brainwashed by the war on drugs that this actually worries you…
Funny you should say that.
They did some research in the Uk and ordered a Pizza from Dominos shops and cocaine from a illicit drug dealers and the cocaine was generally delivered faster than the Pizzas.
Why is this surprising? Drugs don’t need to be prepped or cooked. The drug delivery was also likely much higher net value, so more value for the deliverer.
Just a guess:
1) Coke has much higher margins
2) Coke dealers have better/faster cars
You said that “Coke has much higher margins”.
Not so sure about that; most of the stabings in the UK are about drugs and drug dealer market areas. It is quite a cut throat (pardon the pun) market out there now.
Most journalists are busy getting their next headlines off of Twitter or Reuter’s, not what I call credible, while the financial ones are too busy sucking off the teets of the companies they are covering or whoever is the rich dude of the day.
Sure, Democracy dies in the darkness, but let’s not assume the journalists are actually bringing in the lights.
I suspect what we’re actually seeing with journalism is it has never been highly “fair”, “ethical” or “accurate, but the consuming public had almost no way of knowing that fact, or of sharing that discovery/suspicion with a wider public.
Spin forward to today, and we probably have somewhat the same level of crap journalism, but now we all get to see the laughably screwed up & biased reporting.
Laughter aside, a vigorous free press is still a requirement for democracy so our “public servants” (aka politicians) don’t easily sell us into slavery.
Except the type of transport needed for food delivery is totally different from taxis. A Smart is an almost ideal food delivery vehicle but it sucks as a cab.
A master cylinder for a Smart is 2 thousand (Canadian) About a hundred for a Honda.
When those things came out they were over 20 G.
How about half price for half a car?
“Throwing billions of dollars at these losers is a recessionary harbinger.”
Even more of a harbinger of things to come is that these businesses are apparently the best we can come up with in our ‘post-industrial’ society – companies losing money delivering [mostly] unhealthy food to people already too fat and/or lazy to collect or – heaven forbid – prepare it for themselves…
I watched a video recently about bitcoin. Presenter suggests that bitcoin type apps will replace services like Uber. That the bitcoin app will eliminate the middle man because it will allow consumers to search for providers (drivers) directly. Interesting to see if it plays out.
There’s a reason all these big tech companies like FB, GOOG, AAPL are trying to get into fintech.
IMHO, Bitcoin presenters are a couple pegs below the local used car crowd.
I fail to understand why you can’t (almost immediately & cheaply) do this by starting up a local website in your area (suggested name: http://www.riders want drivers.com).
If you desire a ride somewhere, post you name & to/from address on the site and some driver dude will reply and come pick you up. Unclear how Bitcoin has any impact on this transaction.
Of course, the driver may be drunk, rape or kill you, but that’s the same risk you already have with any ride service.
When I was in college many years ago, there was a bulletin board where people needing rides or offering rides ( for gas money ) would post actual pieces of paper.
Strangely enough, it did scale as people sometimes posting directly on the wall besides the board.
BC has achieved near zero use as a currency, and so is not a currency. Root word is ‘current’, as in current i.e., common use. No one uses it to buy anything. The transactions in it are 99% by people speculating in it.
Say you have a car for sale. (for a while a few years ago some ads on Craig’s etc. would ask if BC was OK. Haven’t seen one in a while.)
If you are not into BC at all, your only conceivable interest in a BC offer would be to sell it, to convert BC into a currency in current use that you could use to buy things. But why do that?
Only if you are interested in BC as an investment, you might be tempted. Sure, the US$ might move up or down a few basis points against the yen from the time you agree on the deal and get paid for your car, but there will be no measurable change in its domestic purchasing power.
BC could, and often has, moved up or down ten percent overnight. This precludes its use as a currency. The ‘sale’ of a car to someone bullish on BC is closer to barter than purchase with currency.
Re: the tech outfits toying with fintech, this does not imply creating a currency. Paypal and SWIFT are also fintech. They use tech to transfer dollars. I thought the only ‘real’ attempt was FB and that one looks like being canned. FB has enough problems.
Just read an essay (maybe on ZH which sometimes actually does have an oz of gold per ton) saying that BC is not an improvement in currency, it is an improvement on the chain letter. You can limit the number, make it impossible to counterfeit and offer it for sale, all online. The early buyers get in cheap and you get in for nothing.
Hurry up food Drones! Cars and workers soon to be obsolete but, still can’t top the world’s oldest profession.
Far too noisy.
Have you heard how much of a racket the average drone makes?
In our rural area residents know that drones will be shot down with the only exception of the emergency drone soon to be operated by the fire dept. However, they know to provide prior notice when they plan a training flight, or at least they have acknowledged the need to notify residents at our last public emergency preparedness mtg. Our peace and quiet, + privacy is closely guarded. :-) No drone deliveries any time soon!
Great article. It was an enjoyable read.
Yeah, they talk a big game, but won’t do anything. Drones are fairly easy to fly above the range of most rifles dude.
Better than V 1
I don’t know about that…I foresee a whole legion of robots dominating the sex-working field.
Already being done in Switzerland at half the cost of a human sex worker.
Her in Qingdao, we have thousands of food delivery guys on e-bikes and small motorcycles. One day I saw a provocatively dressed woman riding as a passenger on a food delivery e-bike. I thought “Brilliant!. He’s delivering food AND hookers !”
I cannot see how the robot delivery vehicles can succeed in the UK.
Our ethnic immigrants will be steeling the delivering robots for their goods and dismantle the robots to sell for part and weigh in any metals at the scrap yard.
We’ve had delivery land drones/four wheeled robots in Berkeley for awhile now. Delivering packets of food to those too busy to stop their work and walk to a nearby restaurant (or prep their lunch before heading to work/class/research project.)
Controlled by guys in Columbia reportedly making a fair bit less than any U.S. minimum wage. They operate within a small radius of their home base and of course there’s no snow and no rain most of the year. Haven’t seen any of them flattened yet by the too numerous bad drivers but they do sometimes lurch down the street as if to say “keep away!”
“. . . but, still can’t top the world’s oldest profession”
Yes you can–robot sex partners:
During the Nurnberg trials, the questionn was asked can a man justify his actions by stating that “it was his assigned duty and job”. The answer was “no”, and that every man carries individual responsability for his actions. You ask what this has to do with Uber…Well, when the pension funds take over the stocks, and they obliterate the savings and pensions of millions – willingly and knowingly selling them junk, they will all say “Everyne did it!” and “It was our job.” and “We knew it was bad, but not that bad.” etc. Because don’t forget, somebody needs to pay the tab, and barman is about to make the last call.
The worst part is that the ones who lead are percieved as the smartest and brightest the US has. Ivy league, topnotch managers and engineers, classy knowitall guru visionaries that always have an answer at hand…All of them a joke, with a few exceptions.
“…wouldn’t the Valley be wise to pick another moniker for its wannabe superstars?”
I suggest the American turkey would be the most appropriate. California “vulture” capitalists (VCs) might disagree.
I’m not familiar with the US food delivery services, but what I hear from similar services in my country makes me think they are a racket, an attempt at monopolizing the food market and an environmental disaster that should be outlawed ASAP.
First of all get Millennials, younger customers and too busy parents hooked on easy ordering of all their food/snacks from their phone, using billions of free money (thank you FED, ECB and countless government “tech innovation subsidies”) and while you are loosing money make sure that many small businesses producing fast food etc. sign up with initially a very small fee for participating (after all, the more money you loose the better your business looks). Then increase the fee every year while the customer base is growing so that after five years or so these companies spend 1/3 of their turnover (not their profit!) on platform fees but cannot afford not to participate out of fear that their turnover will go into freefall. It’s an extremely unpleasant business model, like most that comes out of Silly Con Valley. Oh yes, while some people and even some politicians think we should do something about the addiction to fast junk food these companies make it even easier to eat junk all day and get addicted – it never was easier!!
Apart from that, these services are an environmental disaster. In my area, traffic movements due to food delivery have increased tremendously in just a few years. Streets that were quiet all day (except for early morning and late afternoon) are now crowded much of the day with careless and clueless delivery drivers, if only because often the customers are not (yet) at home to take delivery so they have to try again later.
It’s also an environmental disaster because of the packaging. In the local parks the amount of fast food litter has exploded in a few years with sometimes over 90% of it originating from Dutch delivery services like Thuisbezorgd.nl, HelloFresh etc. Apparently the young generation (you know, those people who protest against climate change and other environmental problems) love ordering their fast food online, take it to the park and then throw away the record amount of packaging all them even if there are garbage cans one meter away. At the same time some of the marketing people from these companies are screaming in the media how great their company is for the planet because e.g. they are going to replace plastic straws with paper ones (and ignore the other 99% of the garbage they are producing).
Thanks again for helping destroy the planet, Silly Con Valley :(
Silly Con valley is empowering and enabling the world I will have you know. It’s not their fault that the world is populated by hypocrites and morons. What happens when you empower either of them? You get the result described above, protesting climate change while dumping garbage everywhere. So, we get buried in trash, but at least these folks will have protested climate change for the journalists to cover. Which enables more protest, and more journalism. Now, that is what I call a positive feedback loop.
I don’t see any advantage in this kind of “empowerment” without thinking through (or limiting) the bad consequences for others. What is the real gain for society of this “innovation”, apart from the bank accounts of the owners of these websites? Just like most of the other tech unicorns, a few people become billionaires and the rest of the world has to suffer the bad financial, economic or ecologic consequences.
Now if they did provide some real advantage like producing less traffic then when people do the shopping themselves (most people don’t go shopping for just one pizza I guess, but maybe they do in the US?) or if they did their best to use the absolute minimum in packaging materials (especially all the plastic) and include hefty recycling fees, then I would reconsider. But that will never happen because they could not care less.
It’s like young people liking socialism while surfing the web on an iphone. I heard I think it was Walter Williams ask the question why didnt George Washington use a cell phone while crossing the Deleware? Helps you think about how things work.
That question is kind of nonsensical. They didn’t have cell phones when George Washington was crossing the Delaware. He probably would have used one had they existed at the time. He probably would have used machine guns and hand grenades too had they been available.
But they weren’t so … what’s the point of the question again?
I think it’s particularly disingenuous to take qualities of “groups at large” and then concoct a caricature out of it. It’s what you’re doing when you say “young people liking socialism while surfing web on an phone”. Are you sure that you’re talking about the common tendencies of a specific group of people? Or are you just conflating “young people who like socialism” with “young people who surf the web on an iphone” because it’s convenient for your world view?
People do a similar thing in internet discussion forums. I constantly read posts from people saying “back when X was true people were always saying Y but now that we know Z they just change their tune and say W”, as if the poster can even know if any of the people who said X are the same as any of the people now saying W. They don’t know that, but they concoct this fantasy in their mind about how all those people who were “so wrong” now must be the same people who changed their tune. It’s really quite a stupid way to understand (or not understand) what you are reading.
To answer below. Material progress comes about because someone doesn’t consume all they make but saves a portion for the future. This ends up as capital stock. George Washington didn’t have cell phone because the capital stock of the world was too small to produce it at the time. 5G is rolling out all over the world. I think it’s going to take a trillion dollars of capital to roll it out world wide.
Mobile phones were mostly developed in Scandinavia and everybody knows that they are absolutely not socialist.
Great comment. There is just one thing wrong on your take about food delivery in the US, the company making the delivery can make a delivery to the office or just about anywhere you want. But everything else is spot on including the environmental aspect.
No delivery here.
Just finished butchering 25 chickens.
Free range and fermented feed.
Time to can and make some great soup for the winter.
Tomorrow will be deer hunting.
When I lived more rural I tried getting my chickens drunk. Tipsy chickens were just too good an idea not to try. In all fairness I tried it with geese too. Neither type of bird would try the beer, spiked water, etc.
Chickens love yoghurt though!
Fermented feed is a big thing in Europe and Asia. It’s a huge business over there.
I just do it because I’m cheap.
I could claim it enhances flavor,
We do believe it does, but the driver is cost.
Silage for cattle ferments in the silo. They love it!
This is another great example of low interest rates creating misinvestment. The money goes in, creates some hype and activity, then the write-offs occur. It’s just a huge wealth transfer exercise, and there is nothing lasting to show for it. The jobs come, then they go. So why does the Fed encourage these random, aimless wealth transfers?
“So why does the Fed encourage these random, aimless wealth transfers?”
Because random, aimless wealth transfers – to the .001% – is the raison d’etre du Fed.
My post office delivers most of the mail to one person and they get to take it around to their neighbors. Maybe that’s how the delivery services will scale up.
The new thing in food delivery is the subscription meals people are ordering now. I know people in Florida who use one for a certain number of meals every week. It’s cheaper than eating out and you get to choose from a weekly menu.
That would be us, Petunia. We get, I think, three meals a week from HomeChef; each is enough for a full serving for me, and smaller ones for my GF–who prepares the meals–and my elderly mother as a ‘leftover.’ I’m probably paying a bit more than if we do the shopping for ingredients ourselves, but my GF isn’t much on food shopping, you get exact proportions of the ingredients (no waste), and the instructions are essentially ‘paint-by-number.’
Like most deliveries, if we aren’t home at the time the box sits on our porch, and I suspect they will be top targets for porch pirates if the economy takes a turn for the worse.
Senior centers do this a lot. In fact, my local one, called Yu-Ai-Kai, a sort of association, has free movies, all kinds of hobby and interest groups, and meals for about $3 apiece if you’re over 65. It’s a really good setup. There’s a senior apartment building, Fuji Towers, in walking distance but of course the meals can be delivered too.
Most parts of the US have Meals On Wheels, and I’m fairly certain various church groups etc have programs.
Many of these are subsidized, either by the gov’t or by donors.
So I don’t see Door Dash etc horning in on the senior market.
Except products to the Senior market can be very limited. I am famioar with the Burleigh County, North Dakota Meals on Wheels program, and that program is limited to just one meal a day and five days a week not counting holidays. That means Breakfast and Dinner aren’t available any day of the week and lunch isn’t available on weekends and holidays. That could be a better deal for these unicorns instead of letting Joe Blow spend his money on trash like The Hut, the Clown, and the King.
Same thing here, alex.
You mean no food waste. Plenty of packaging, transport and post-prep waste that stays in the dark kitchen, safely out of sight.
What are the chances they’re really a ‘data’ company ? … theyre collecting tons of information from there users (when/how often they go to the airport/bars/restaurants, what they eat, etc.)
They might have a tough time competing against the likes of Google/Amazon in the new surveillance capitalism, but theyre collecting extremely valuable user data. I think they also charge restaurants fees to join.
The data that has value is medical data. So Google is going after that (see the most recent scandal). Your credit card data is already out there at data brokers, and is worth almost nothing. What you ordered Friday night doesn’t have much of value either a few years later when the company is sold to Google or Amazon. Besides, they already know this stuff in real time because you ordered it via your Android smartphone or your Alexa.
I believe Uber Eats etc charge a percentage of the meal value from the
restaurant – 30% or something similar
I made risotto today.
The goal is to own everything so that elections
become like you know a P.T.A. meeting
I don’t know what you had to drink before you wrote that first paragraph, but it was abso-freaking-lutely awesome! A hilarious piece of very accurate satire. You set high bar for yourself there.
The rest of the article was good, and as usual for me, informative.
Thank you, O E much appreciated j
Agreed. I was hooked 100% from the first sentence.
Good writing is appreciated here, too.
Where I am food halls are a thing. They are large spaces with many food stalls and tables in an indoor space, for those that don’t know. Is this something going on or viable where your properties are located?
They are popular with the young people. The developers here seem to know stand alone restaurants are hard to keep open.
I know the restaurant business is bad because a neighbor is now catering out of her home. She bought a small van and has at least one helper. She used to work at an events catering business outside the home but is now home based.
We just had the owner of two restraints file for bankrupty. $500,000 underwater. Heard a restraunt owner call in to Dave Ramsey a couple of months back similar story. It’s got to be tough. If you are just getting by and the city tells you you have to bump everyone up to $15.
Restaurants are very low on the financial viability list. Very few of these people know anything about running a successful business. They come and go. Always have. Gambling at a casino has only a slightly lower success rate.
I think food halls are very tricky, they can work well in dense urban areas, in other areas, not so much
There are two that I know of here…a “mess hall” and a “packing house”…they are very trendy.
Mess Hall really? That’s a laff!
In my downtown there’s a restaurant that calls itself “The Farmer’s Union” and the decor on the building even has a tractor.
Wonder how long its been on average that “we” have seen a real tractor?
Same story in Netherlands, there are a few food halls in large cities that cater to the hipster crowd with “exotic” food experience and sky-high prices (and often partly financed by building expensive apartments around the food hall). Ordinary merchants cannot survive there: extremely expensive for them, and without the right political connections probably no chance to get in there even if you can pay the outrageous fees. The customers are basically young people with too much money and no idea what real food costs.
On the other side, we still have real food markets in some older towns once a week (on open spaces like a market square), with relatively low prices and a far more general clientele – but mostly skewed towards older people. These used to sell mainly locally produced food when I was young, but nowadays most of the food comes from the same few vegetable auction houses etc. that sell to the big supermarkets. Because the supermarkets subsidize some of their food products, it is difficult to compete for them and those markets (that have existed for at least ten centuries) may disappear completely within ten years. Good that Silly Con Valley is getting ready to replace them ;(
We have local “farmer’s markets” established by the state university extension crowd – too expensive and full of hassles.
But there’s salvation!
Local farmers park their pickups in town and sell their produce off their tailgates.
In the Netherlands every town has fresh produce markets. Even a place like Almere. The reason they are dying has more to do with the death of mall stores in the secondary retail centers as going to market was often combined with shopping at a “mall-store”.
What blows this model out of the water in the USA is the high cost of living. Overhead on vehicles like tax and insurance. Here in Ecuador, where the minimum wage is $400 a month, food delivery is a booming business. Because of the tropical climate, delivery people all use motorcycles, which cost less than an electric bicycle. In the mall where I watched the food court, drivers waited less than five minutes at the food counter. Most of them had day jobs, just picking up some extra cash.
All those cool 1950s/1960s bikes Honda and Yamaha etc developed, are still being made and sold in the “3rd world” and if any motor vehicle can be called sustainable, these are first in line.
The Honda Super Cub is still sold pretty much everywhere bar, I think, the US and Canada.
The models earmarked for the European and Japanese markets differ mainly in having ABS and different FI settings and exhausts but are basically the same thing as those sold in Mainland Asia. If I recall correctly they are now made in Thailand.
I wanted to buy one earlier this year but I was literally shocked to discover it costs as much to insure as my other much larger bikes: 125cc scooters are terrible to insure due to high accident rates.
But it’s a really nice little scooter, albeit it could use some extra carrying space.
The Honda CG125 was actually introduced in 1975 and it’s, I think, the best selling and most cloned vehicle in the world. It’s been widely successful and it’s basically the two-wheeled version of the Toyota Hilux.
However models manufactured over the past decade have been steadily declining in build quality leading to Honda losing a big slice of the market to competitors such as Hero Motors of India and KYMCO of Taiwan.
Yamaha’s weren’t worth much when it came to build quality before the company was pulled in the Toyota orbit in the 00’s. They have always had serious problems penetrating developing markets because of their flimsiness and poor materials.
That’s the same reason why Toyota Hilux and Land Cruiser keep their value so well in developing countries why Ford and Mitsubishi trucks are sold by dozen.
Cuba runs on 1950 automobile bodies with local running gear inside.
Cuba has engine and transmission plants?
isn’t that delivery existence in trouble now that Ecuador is starting to ditch their subsidy on fuel (or increase fuel taxes)? Until recently fuel cost next to nothing there, which is a sure incentive for indiscriminate use of such services.
It isn’t clear to me that cost of living matters – because food delivery is primarily geared toward the wealthy.
Being an expat in Ecuador – you certainly fit that profile even if you are are retiree.
Restaurants in general are geared to those with money; delivery is simply a further refinement of that.
Food delivery is geared to the working who make long hours, not the wealthy.
Yes and eventually high crude energy costs.
In a MarketWatch article last week they mentioned Travis K, formerly of UBER, has a commitment of five hundred million dollars from Saudi Arabia for a food delivery service.
MW mentioned if it is such a good deal why get money from Saudis when you have five billion of your own??
re: “MW mentioned if it is such a good deal why get money from Saudis when you have five billion of your own??”
It’s called ‘OPM’ (Other People’s Money). Why risk your own money when there’s greater fools all around?
The Aramco IPO has to go ahead even if far below the valuation of 2 T because Saudi is maybe 2 years from
running out of money.
Restaurants in big cities are on life support because there is just too many of them. Worse if they rent instead of owing the building.
Seems like being a barber is a better gig than a restraunt. My barber runs a one man shop. $14 plus tips which put him above $15. He does about 4 per hour. $60 . He has to pay rent and utilities and supplies which I guess is $1000.
I have often thought the same thing. I don’t go to the barber often so there is quite a lot to cut off when I do, so I hand the barber a twenty for the $14 cut. I also told him he doesn’t have to snip away for 20 minutes to prove anything and that’s why I tip him the 6 bucks. Good cut, quick, smiles all around. The shop is owned by to 35 year olds and I hope they put a good deal of the cash in their pocket.
I go to the a type of barber shop that’s found in at least my area, the kind run by Vietnamese ladies. They charge around $10 for a cut, use about 15 different clippers that sprout of a scary tangle of electrical cords sprouting from under their little desks, and are prepared for anything. They’ll do elaborate dye jobs, a surgically perfect fade, a basic buzz for squirmy little kids, everything. One day one of them was trimming up a guy I think was an elderly Sikh, with his middle-aged son(?) coaching her in what’s allowed to be cut and what’s not.
I usually tip $3-$5 on my $10 cut. They do a good job.
I’ve looked into barber college myself and it’s beyond my means. If I started saving now, I might have enough saved up by the time I’m 67 and ready to retire.
In reply to Alex:
I too, had Vietnamese barbers when I lived in SJ. There’s an interesting backstory about why so many cosmetologists are Vietnamese:
Why not exploit your wife? Mine cuts my hair for nothing. looks, good, too, and highly adaptable to local conditions.
Recently had a squamous cell cancer irradiated to destruction on one side of my upper forehead. Left me with a bald spot above it, so I just stated publicizing the newest thing; The lopsided Dutch Boy haircut …
I remember people in the late 90s saying how could a search engine ever make money? Then a few years later the naysayers scoffed at the idea of FB making money. FedEx was pie in the sky crazy talk too.
The more things change….
Yes, this is exactly what John McNellis, the author of the article, said. And he also said that food delivery is NOT software. That’s the point of the article. Would be helpful if you read the article before posting comments like this. This is what McNellis said, paras 2 and 3:
“There’s no secret to success in tech. … Create a great product that can scale. Even better if you can build a patent moat around it. If, after five hard years of R&D, you create killer software at a cost of $100 million, then the first product you ship for $1,000 comes at a loss of $99.99 million. But by the time you’ve sold your millionth unit at almost no additional cost, you’ve grossed a billion. That’s scale.
“Here’s the rub: You can scale intellectual property, you can’t scale labor. Your millionth pizza costs as much to deliver as your first.”
And it is up to the delivery guys to figure out what to deliver. Eventually the big fast food giants will cut out the middleman and do the deliveries themselves. Then what will the Unicorns do?
Its hard to believe that there was a time that the drive thru was a new thing. I think it accounts for more than half of mcd’s business.
Pizza is a good divery item cause it’s good hot, warm or cold.
He’s confused. GrubHub doesn’t make pizzas, as should be obvious to everyone.
Grubhub is like Delta and Boeing is the pizza. Delta doesn’t care how much labor is involved in building a 777. Delta cares about maximizing profits using the 777, once it is built. Same with grubhub. They don’t care how fast a pizza is made, their business starts once the pizza is ready. He’s confusing business models.
Both of those platforms make money primarily from advertising — which kind of blows my mind actually. Who pays for enough advertising to float billions over to Google every quarter? And who looks at enough Google/FaceBook advertising to make it worth it for the advertisers? I know I do not, with my ad blockers and the fact that I intentionally ignore all ads whenever I see them. When I do a google search, I skip past the paid links because the same links non-paid always follow, and I’d rather choose the link that doesn’t enrich Google further.
Whoever it is that buy stuff from online ads I guess I can thank them for the large number of free online services I get. Like google searches are free for me to make because someone else is buying stuff from their ads.
Oh sorry and to get to my actual point — I don’t see food delivery services making money from advertising so they’re not even close to the same business model. Can’t see how your point applies.
They just cut into the margins of an already existing pie (no pun intended). So, they will succeed in closing the decent pizza and other food makers and folks will then be left with a choice of Dominos or Dominos.
You’d be surprised. Years ago we were getting over 10:1 on our Google ad spend some months. Average was around 7:1 for the year when we were spending big.
You aren’t trying hard enough, to understand how online advertising makes money.
An early example: a friend of mine decided to go into the high-end appliance repair business. He was paying $5000 a month to Google to monopolize the SF Bay Area high-end appliance repair search clicks for several years.
Online advertising enables new business models: ones which incorporate high margins and/or “brand” which pays for the advertising – and in turn forces a spend by competitors – who would otherwise disappear completely from visibility.
Think of it as “rent” on visibility – which in the past, stores would have just be existing.
Never tried Uber but did use GRAB in Asia.It was great and a lot cheaper.There is more honesty in Grab than taxi’s in Asia.
Uber is coming to Vancouver but to much regulation and will fail soon.Not enough money for drivers after all expenses.
Uber owns 27.5% of GRAB.
Uber sold its stake in 2018.
Seems like being a barber is a better gig than a restraunt. My barber runs a one man shop. $14 plus tips which put him above $15. He does about 4 per hour. $60 . He has to pay rent and utilities and supplies which I guess is $1000.
From Reuters. “U.S. restaurants remove dining rooms to speed off-site food frenzy”
The way they make a profit is delivery by drone. It gets to you faster and at much lower energy costs.
To deliver 3 pounds of food, packaged in materials that keep it warm and protected, you need a BIG drone. That will be the day that we’ll have these big things flying through the airspace between buildings and dodging utility wires and dive-bombing pedestrians and cars. I can see drone delivery in suburban or rural environments where people have yards or larger properties, but not in densely populated cities.
Are they seeing delivery drones coming over the southern US border yet?
Theo: a US company (Matternet, in which Boeing is the chief investor) had a trials program for delivery drones in some Cantons of Switzerland (Genève, Luzern and Ticino). These were not ordinary delivery drones, the kind Silicon Valley peddles, but big burly drones for healthcare applications: these things were supposed to deliver samples for tests, handle emergecy deliveries of blood and plasma and, after a while, even organs for transplants.
As Swiss authorities required these large drones to be equipped with ADS-B transponders for collision avoidance purposes we tracked them with various apps for fun. Turns out they didn’t fly much and in May they were quietly withdrawn. Why?
First reason: if hospitals have a patient they struggle to diagnose it’s good practice to quickly move the patient to a more advanced facilty where he can be diagnosed and immediately treated. Sending samples around is wasted time, and time is absolutely critical in medical diagnoses.
Second reason: hospitals don’t “suddenly” run out of blood and plasma unless there’s a big emergency in which case existing protocols have proven to be perfectly adequate in supplying them with blood and plasma.
Third reason: these drones are nowhere near as cheap to operate as claimed. Part of the reason for this test was to work out airworthness procedures for such large drones and it turns out you cannot just keep them in a box and take them out when needed. To use them as intended pre- and post-flight checks are required, a trained operator is required to oversee every phase of the flight (and not using a satellite link, which has a 3-6 second lag which is seen as too long when flying over populated areas at low altitude) and finally regular and expensive maintenance is required.
Switzerland has the second highest per-capita healthcare expenditure after the US: it’s a sector where money is no issue and is thrown around (and wasted) like confetti. Yet they gave up on delivery drones.
Delivering pizzas is simply not an option here.
Sounds very much like the emergency heli services that have been launched in many places in my country some years ago, with one of the arguments being fast delivery of transplant organs. IMHO this is also happening because there is WAY too much money sloshing around in the healthcare industry and all kinds of companies and individuals try get their hands on this money. These heli’s produce lots of noise (and sometimes risk, hovering low over a busy city) for frequent test flights and almost never do something useful. Often after a few years the service is ditched or moved because of enormous cost and zero proof of benefit.
We now have continuous supply problems with frequently used medicine like antibiotics, birth control pills etc. Can’t be long before someone starts a drone delivery service to “cure” the supply problem. Won’t help a bit of course because the shortage is deliberate, one of the tricks used by the Big Pharma mob to increase their profits.
I also wonder if they really want to start those drone delivery services (we also have these stories in the media about drone delivery of food or Amazon packages) how they can at the same time keep the current very restrictive rules for other drones.
MEDEVAC helicopters have saved countless lives since they were first introduced in the 40’s. In areas like this they are a veritable Godsend, well worth the money, especially since all-weather versions of the Airbus 145 have been introduced.
You cannot really compare them to drones, a technology which proved once again my old physics professor right when he said “Westerners have what can only be called a naive fascination with gadgetry”.
I once saw a presentation on Switzerland’s aeromedical transport system, by the guy who founded it. Given the terrain and weather, road travel can be difficult or impossible. They have a system of bases so that they have a helicopter within thirty minutes of everywhere (it helps that the country is small), and beat that target consistently.
Actually, this talk was 25 years ago… they probably have something even better now
What is really crazy are the number of “ghost kitchens” opening that only serve this delivery market.
I guess that just like with Airbnb, Uber etc. part of this “success” is about circumventing official rules and minimum wages that professional food companies have to stick to. They take away business from existing companies by lowering standards, avoiding taxes etc. While sometimes there is a bit of innovation and new products/services, much of it comes with a huge cost for society.
When government raises the unit-cost of labor significantly above what real customers are willing to pay, customers are incented to explore other, lower cost solutions.
You accuse ghost kitchens of “…circumventing official rules and minimum wages…lowering standards, avoiding taxes…” but provided no evidence to support your claim.
It is a logical outcome.
A normal restaurant has very specific real estate needs, primarily proximity to foot traffic and customer base.
A dark kitchen can be 10 miles away from its customers. It doesn’t need seating, signage or foot traffic.
10 miles is probably to far away for deliver as it adds 6 minutes to a delivery (assuming 60 miles/hour) but it does allow much cheaper real estate. Its why a for me local thai take away restaurant that has existed for years has only home delivery as they are located in an industrial zone.
In Southeast Asia, actually food delivery is profitable compared to ride hailing. The model here is that the apps promote your restaurants but they get to keep 20% of the sales. Additionally, the user also pays for the driver transportation cost. And the apps also takes another 20% commission from the driver transportation cost. And the driver here usually uses motorcycle, which is a quick and cheap way to get around. New startups restaurant benefit by getting free promotion and they don’t need to lease at high foot traffic area, thus paying less rent. The subsidy from the apps is they sometimes give free voucher so users use the apps. But usually the voucher value is not much.
The dabbawallas of India constitute the most efficient large-scale food delivery system in the world. Nearly 200,000 meals from home daily, using workers of limited literacy. Every couple of months they make a mistake.
For over a hundred years they used no modern IT. It’s not about tech. It’s about sharp organisation, and it’s about extremely low costs. In a country with crushing poverty, workers can earn a secure but very modest living, and that’s something.
Western logistics experts find them fascinating, but like EcuadorExpat says, it couldn’t work in western countries because of the high cost of living, but they’re trying it anyway, by reducing workers to crushing poverty.
200,000 meals a day sounds like a lot, until you consider that India has over a billion people and a pernicious caste system.
That 200,000 is a thin wealthier slice on a mass of poverty and literal societal segregation, as you say.
Not at all clear that the sales job is succeeding on the value of the food delivery business.
That 200.000 is i Delhi IIRC and for the Average Joe. Not the wealthy because while Delhi is a very big city 200.000 is still a very big number for that city.
The population of Delhi is over 25 million people.
200,000 is still a very small part of the population – under 1%.
1% vs. 99%…
I’m told unicorn tastes like horse meat. I guess I’ll never know.
Neither will the unicorn.
Sorry to rain on your parade but, unicorns are REAL. It is Scotlands national animal, so they must be real!
On a lighter note when I read the title I was reminded of the Samo Hung-directed film “Wheels on Meals” about two cousins from Hong Kong (Yuen Biao and Jackie Chan) running a Chinese restaurant in Barcelona, one of whom (Chan) also doubles as the delivery boy. Much hilarity and much kung fu ensue.
The hilarious title was a product of Hong Kong corporate culture: executives at Golden Harvest, the film studio which produced Wheels on Meals, came from a series of box office bombs whose English titles all started with ‘M’. A Taoist wise man was consulted and he suggested using a title whose English title started with ‘W’, the graphic opposite of the cursed letter ‘M’. Golden Harvest executives liked the idea so much they decided to turn the whole title around.
Say what you want but Wheels on Meals was a major box office hit throughout Asia, just the smashing financial success Golden Harvest needed.
Perhaps all these meal delivery services should start consulting wise men to solve their financial troubles…
Why is “M” cursed?
Starting in 1980 Golden Harvest had produced a string of films to break into Western markets. They were all box office bombs but the last two, Ménage à trois and Megaforce, were financial disasters. Megaforce alone lost Golden Harvest $15 million, an enormous sum of money for the time.
If you know older Hong Kong types you know how superstitious many of them are: Golden Harvest executives in 1983 were no different.
If the wise man said titles starting with “M” were bad luck and should have been avoided, these folks were ready to believe him: after all they had just lost millions of US dollars on titles starting with
That’s why “M” is cursed. ;-)
I am taking this story to the bar. Thanks for the laughs.
So I use my voice command remote to change channels on the TV, dial my smart ass phone, turn my lights on, adjust the heat or AC, adjust the window shades, and click to view my front porch happenings, and I’m considered way cool.
Unfortunately I am well over 300 pounds now, can’t breathe, and very thankful that I can pay $20 bucks to get my $11.50 McDonald’s order delivered in 30 minutes.
I’m all in on this stuff!!
Do you ever get the feeling that your AI systems only keep you around so they’ll have something to do?
delightful sunday morning read , but i believe unicorn profitability is a ancillary mission objective . the value of its stock at IPO is primary. they all can be collectively rebranded as “GRAB and GO”.
If you buy these unicorns, what do you get, a chance to earn –no that is not accurate— better use the word scam… a few bucks off the next greater fool?
Ignore this reply, I’ve wasted enough minutes thinking about unicorns that I’ll never get back.
We have Deliveroo in the UK for delivering fast food.
I bought a safe on ebay and when I collected it I joked to the seller that I gathered he was selling it to buy a larger one.
He informed me that he was closing his shops because he cannot afford to offer delivery service.
He informed me that Deliveroo wanted 20% of the customer sdale for delivering.
He said it was not possible to make a profit because paying them 20% of the sale to deliveroo and then 20% VAT (sales tax) to the government made the business model unviable.
If you haven’t noticed yet, the secret to success of the Unicorns is the importation and re-birth of the concept of slavery, totally promoted and especially supported by the Saudi Arabia Sovereign Investment Fund. But, for a positive note, the “Why Factor” stories promoted by the BBC sure reveal some of the newest and latest social trends for the not-need-to-be/not-want-to-be/cannot-be employed.
If you haven’t noticed yet, the secret to success of the Unicorns is the importation and re-birth of the concept of slavery
It’s better than slavery. This way they can avoid the purchase price of labor and just rent it cheap with minimal maintenance costs. Rather than trying to escape, you’ll have plenty of applicants who are just dying to work for you.
Morning… True story.. My better half was in the heart surgery center of local hospital for some work 2 days ago. A trio were also sitting in the waiting room. They got hungry so they sent the smaller one out for Frappuccino and breakfast McDonald’s. The smell drove me out of there. What irony for that menu in the place they were. There were no delivery drones involved.
So who will survive.
Uber-saved too many lives-both financially and late at night from pub
Lyft not-will be bought by uber
Food delivery not-no moat
Air bnb-yes-Wiped out many similar organizations with their website
and small 3% booking charge.
Thats all for now.
This whole concept of adding more people to the service, that is, drivers, delivery people, etc. seems to be counter to the general economic forces which encourage businesses to get rid of service workers and “nudge” the customer into doing the work themselves.
Their goal is to avoid employment taxes, employee benefits, having to hire management personal, having to enforce government programs like immigration, retirement plans, social services (minimum wage), provide access to the healthcare system, people problems (theft, drugs, etc.). By doing this, they save money and offer lower costs.
If we want a real financial sense service in our economy, then the solution is to get rid of taxes on wages, salaries, and tips. Quit making businesses an arm of the government.
Any necessary social programs should be government run, locally if possible, and financed by taxes on things we want less of, because that’s what we’re going to get.
But taxing jobs? Do you want less jobs? Tax pollution, petroleum, plastic, pesticides, and poison instead. Wouldn’t you rather have less polllution? Wouldn’t you like to see the job market take off? Wouldn’t you like to have great personal service from the business you patronize?
The taxes and undesirable regulations of employment are distorting the business plans for production and especially services. Adam Smith’s invisible hand does not work efficiently when we do not even have the freedom to trade with our neighbor with our reporting to the feds, burdening ourselves with paperwork and regulations, and paying tribute for the privilege.
Most restaurant food is frozen microwaved anyway. Put a microwave in the backseat of your old taurus and when you are five minutes away nuke the food.
Same old story….the crooked fed creates cheap money so business that does not deserve to exist continues to fund its operations.
This will go down as the biggest heist in history.
The fed chief thinks he is a hero…..he will be pissed on by future generations.
FF…..Yep Chief Goon Powell, Fellon and Helicopter Ben have all done a wonderful job for the Banksters
I grew up in Dallas with y grandmother nearby. in the 50s. She would order groceries from “Mr. Moore” over the phone. Later a teenager would deliver a cardboard box. If she was out, she’d leave the back door open with the cash plus a tip on the kitchen table. He would put butter and meat in the “ice box”.
She lived in a small house bordering a large black neighborhood.
About restaurants….as families double up they are looking for reasons to get out for a pleasant, cheap meal or a neighborhood bar or to get their hair done. Those were the business that NEVER went broke in the 29-40 depression. If I were young and looking ahead, instead of the past like most people, I’d open a small coffee and sandwich shop with soup of the day…simple stuff…egg salad, grilled cheese and a pot of vegetable soup…2 pots, one for the vegans.
Door Dash charges a service fee on all of their orders. It fluctuates based on the amount of the order. If each $10 order has a service fee of $1.00 and DD completed 10,000 nationwide orders in one hour then the company made $10,000 in one hour. If this happened every hour from 6 a.m. to 6 p.m.(12 hours) then the Door Dash platform makes $120,000 DAILY revenue. I think the restaurant is on the hook for the delivery fee and I imagine the platform overhead is low so I don’t see how food delivery is viewed as a disastrous program that is about to crash and burn. Many restaurants on delivery service platforms mark up the price of their food(I assume) to cover the delivery fee.
$1/ hr earnings to pay a delivery driver $6-10/hr. Do the math again.
Just my experience, but I was in a small city when I did delivery. 6 deliveries/hr was as good as it could get – 2/hr was a bad night and 4 or 5/hr was average, distance is the big challenge for just using one source location. Add the complexity of UberEats and others serving multiple start points for each delivery, the scale would decrease to one or 2 an hour at the best of times. You get more out of one start point because if 4 homes in one part of town order from the one location, they all get one delivery driver. 1 – 2/hr would be garbage pay and even worse tips because people don’t tip these drivers.
Great comedy is rooted in truth and the truth is exactly what you said Wolf: that your millionth pizza costs the same (or more) than your first and thinking it doesn’t is ludicrous. Maybe Silicon Valley ought to think about scaling businesses with average returns that pay human assets a livable wage. Yea, that is a ridiculous thought. I apologize for that truth which is regarded as laughable.
Better than V 1
Sorry above was a joke about drone noise
The profitability of food-delivery unicorns is directly related to the [b]population-density[/b] of the chosen delivery zone.
The higher the population-density, the higher the profit.
You can make more deliveries per hour.
UK has a pop-density of 700 per square-mile. Just Eat, its biggest food-deliverer, made a crisp +10% net profit margin in the UK in 2018.
Looking at the US, only 5 of the 50 US states have a higher pop-density than the UK.
Therefore, Uber Eats and alike should be focusing their operations on rich, overcrowded states, like New Jersey and Massachusetts. That is where the profits sit.
Food-deliverers should quit remote states, like Alaska or New Mexico. They will never make money there.
In the UK they rarely deliver more than 1 1/2 miles away so average population density of states is totally useless. It is the density in towns that is important
It is the same thing. A dense state will mean dense cities and dense towns.
I use doordash for business travel. Severe food allergy restrictions allow me to eat Chipotle or a sit down place that doesn’t mind making one off food(hard to find), I am more than happy to pay extra for my food versus going without. Do I wonder how they make money, yes. I will be sad when/if they go, make travel much more difficult but not impossible.
The post-office mention makes me wonder if any pizza place has tried a “Planning Genius Discount”. Order now for delivery 2 hours from now, and you get a discount.