Maybe it's just not a very profitable business to send some guy in a Prius across town to pick up a burrito, then drive back across town to deliver said burrito.
I've tried it a few times and it took an inexplicably long time to get my order, and the food arrived cold and unappetizing. Never again.
Grab, Food Panda, Deliveroo, and a couple of others I cant think of, all use Bikes, Motorbikes, and e-Scooters.
The model works really well here because majority of deliveries are short distance to apartment blocks.
I can't imagine it working for long distances though. You would end up with cold food, long wait times, and it wouldn't be very environmentally friendly.
Singapore is one of the largest exporters of used cars because of this crazy system. It does reduce their emission though and they have an amazing fully automated (driverless) train system.
What they fail to realize is that by centralizing their focus on highly populated metropolitan area like NYC and SF they are essentially trying to compete in markets that I wasn't even aware could have restaurants capable of sustaining their businesses when they don't have the option for delivery.
I mean i've been on treasure island and ordered food from just about every notable restraunt in SF you could think of and they all had in house speed delivery services that were willing to travel that far and still managed to get there within 45-75 minutes of placing the order. (presuming you don't order too close to the nightly commute out of the city)
Where Uber should really focus on promoting UberEats is more rural cities like just about every town in the midwest because out here we have a ton of towns with privately owned restaurants that are extremely profitable and yet don't offer delivery services because it's not profitable for them to do so; but it would be profitable for everybody if Uber offered their services as the middle man for every restraunt in town.
I mean i know of like 4 restaurants in town that 3 or 4 ubereats drivers could provide delivery services for and I know that number of drivers would have to grow to 8 or 12 within a year of providing the service. And there is virtually no competition out here and out here car delivery actually makes a lot more sense than trying to figure out where to park in NYC or SF.
Honestly the fact that Uber isn't already implementing this in my town by now, would concern me enough to consider shorting their stock.
There is nothing more telling in my view that a company is headed into uncharted territory it's totally not prepared to navigate than a company not understanding where they aught to set their heading because they haven't got even the slightest clue in which direction all the booty has been buried.
Scale requires sales reps to sign restaurants, account managers to maintain the relationships with the restaurants, local operations people to recruit, induct, clothe and support the delivery guys, local marketing managers to get the initial userbase.
And that's not even considering the sprawling single-center infrastructure of smaller towns, with most affluent folk that could in theory order takeout every day living outside the immediate center of the town.
You maximize efficiency (cost per order, or in other words how many orders per hour a salaried employee can deliver, or in other words how little you can pay a non-salaried 100% commission-based delivery partner while they still maintain hourly earnings they deem acceptable) by increasing the pace at which deliveries are made by any single courier.
A dense population and a uniform distribution of popular restaurants will result in a courier going point A to B, B to C, C to D. Each node represents both a restaurant and the next delivery location.
A typical small town infrastructure would result in the delivery person going A->B, B->A, A->C, C->A, A->D, D->A. The town's only two restaurants are located in A, whereas B, C and D are delivery destinations. That's double the marginal cost per order.
Grab has always been a better experience than Uber too. Uber was expensive.
Uber launched in SG before Grab did. Many drivers preferred Uber - they’re payout schedule and incentive structure was more favourable. Many riders, both locals and expats, including myself, preferred Uber. Grab undercutting Uber’s pricing was a tactic, just like GoJek is trying to chew off a market share by underpricing Grab today.
I never used Uber because it was never cheaper than booking a taxi over the phone.
Grab did a lot more than Uber for their app too. Pretty much from day 1 you could type a taxi stand number in and it would pin the exact location. Uber couldn’t even come close to figuring out where I was standing. So personal booking and usage experience was far better than Uber for sure.
Without China (sold to Didi) and SEA, there's not too much of Asia where Uber still exists. In Japan they do. No UberX there, but Uber Eats look like they might be doing okay there. They are (including UberX) still in Taiwan.
The post was in response to:
>> there's not too much of Asia where Uber still exists
The post was in response to:
>> there's not too much of Asia where Uber still exists
I believe in the US, a car driving license is fairly easy to get and used cars are very cheap. Plus, given the driving culture, I assume that in the US people just don't think about motorcycles unlike in Europe or Asia as a viable way to get around.
- Even cheaper than motorcycles / scooters
- No license required
- Excellent bike infrastructure already available
In nyc it's usually someone traveling 2mi or less on a motorbike/bicycle. The food comes quickly and relatively cheaply.
In the suburbs someone drives a car 10-20mi round trip for what is usually a chain restaurant. No aspect of this makes sense to me economically.
(and I can confirm, it works great, we do it all the time)
While I don't doubt your positive experience, it would be atypical for a suburb to have significant independent restaurants within 5mi of any given point, at least in most of the United States.
https://www.theguardian.com/business/2017/oct/28/deliveroo-d...
Some cities, like Dallas, seem to have a higher percentage of chain restaurants than the average suburb. Other cities, like Seattle, have a ton of restaurants that seem independent but are actually part of a portfolio of restaurants owned by one person, private equity, or a corporation experimenting.
I expect uber eats will scale very well in the suburbs if they can get multiple orders in the same car efficiently. Restaurants are experimenting with food that travels better.
I haven’t used UberEats but at least with GrubHub/Eat34, this was a big problem and they would routinely lie about it, hoping most people won’t call the restaurant to learn that “the kitchen is busy” meant “your food has been waiting for a driver for 45 minutes”.
If there are none then there isn't much you can do, you have to trade off freshly cooked food for the convenience of having it delivered to you
Getting food delivered slowly, cold and squashed into plastic containers is an awful experience, and it ends up costing me thirty bucks.
In the center of a large city, you can order something in a minute, pay a couple dollars extra, and have the food at your door in 10-15 minutes. Deliveries are done by bike or scooter and there are hundreds of places to choose from that’ll deliver within half an hour.
It’s great when you’re in the flow and don’t want to deal with the distractions that walking out the door inevitably entails.
The appropriate comparison is with cooking at home. Takeaway food is a luxury.
I’ve always assumed that DoorDash et al try to do this.
To your point, if I were to use them, quite a few of the restaurants are a good 15 minute drive from where I live. Which is further than I'd bother to go to get takeout. It's also further than I'd probably chance to get, say, a burger delivered as I suspect it would be getting cold by the time I got it.
Uber uses the current fleet for now, but once they have more data to analyze, they can switch to a better operational model which would be hopefully profitable.
What is worrying is the aggressive, anti-competitive, potentially illegal (depending on the country) subsidiaries aimed at killing the local competition.
So they have been burning billions of dollars in the hopes that there might be a business model in the future?
Maybe it's just that VCs were naive to think that taxis and food delivery were good businesses.
"Sure, hun, the Porsche was expensive, but it's not that much in regard to all the money spent in the world!"
How is Uber Eats any different from the many other operations strapping boxes to the backs of bicyclists? I don't see anything innovative about Uber's last mile logistics compared to Amazon (who aren't even that great) for instance.
It sounds more like an excuse Uber's leadership would make as they desperately search for profitable business.
Well there is, its called the postal system but there sure as heck isn't any just-in-time last mile network "at scale". You just have fuck tonnes of delivery drivers who need to get paid. There is no magic "at scale" wand to wave over it to make it economically viable.
The excuses for Uber losing money is getting jaw dropping now.
In order for a new entrant to come in they need to grow both businesses and consumers at the same time. Which is hard with no competitors. But very hard with cash rich companies like Uber trying to stop you.
We saw this all play out in Australia where we initially had Foodora and Deliveroo. Then Uber joined with aggressive marketing and pricing. They pushed Foodora out and the number of businesses in Deliveroo is dropping. It is going to be a winner take all situation. At which point prices will rise and the profits will roll in.
More to the point, all drivers seem to use multiple apps. I often get my food in bags from the wrong company. The barrier to switching for drivers _and_ the customers is zero.
As a result this feels less like money spent on a unique strategy and more like money spent buying the business.
Uber Eats just changed their delivery price to be based on distance, which has vastly increased the average delivery fee, and the prices on Uber Eats are inflated over every other delivery platform because of the cut they take.
And in Melbourne CBD, by far the largest number of bikes I see are delivering for Easi.
Not sure that the market is actually struggling here.
But everywhere else Uber is still by far the leader. Foodora couldn't compete. Deliveroo is struggling and Menulog isn't really competitive given lack of marketing spend.
That was Moviepass’s theory too, it didn’t work out so well in practice. Once the price went up people simply stopped using it.
Maybe Uber is killing the market it is trying to monopolize and by the time it gets it all, the pricing it will have to practice to actually make it profitable will drive customers back to eating in person in the restaurant
2 - Logistics is mind bogglingly difficult and capital intensive. Uber’s built in driver base has idle time that is an outrageously deep moat in competing in this space. Uber has 3 million drivers, say each vehicle costs $10k avg that is $30b In free capital equipment that they are starting with. Their internal traffic / route data that they collect from all 3m drivers all the time is the richest in the world. FedEx - for example - has “only” 85,000 vehicles.
It isn’t a moat at all! Every driver has all the apps and picks jobs from any of them. If I use Lyft instead of Uber the chances are I'll get the same driver in the same car anyway. And he’ll follow his in-car GPS to find me and then to take me to my destination so there’s no value in the route data either.
Amazon’s food delivery failed and closed last month. Caviar was sold to Doordash. Postmates is struggling.
1. Many of their restaurants are simply not geared well for being in the delivery business. They don’t have good parking for drivers. Their menu is built around dining in, not 30 mins in a car. Their delivery packaging is subpar or overkill. They really have to train their restaurant partners to succeed or they won’t get repeat business. They have an inventory problem.
2. The value proposition of food delivery really only exists in the largest cities. Not everyone wants to eat out, but in smaller towns it’s easy to access and social. For somebody who spends 3 hours commuting each day, cooking and dining out lack appeal, but that isn’t a problem for the majority of Americans.
3. There simply isn’t much margin in the restaurant business. Most are happy to run on 1-3% margin. Food cost, scheduling labor around varying demand, and overhead with tremendous fixed and surprise costs. A spike in fuel prices can spell for a losing year, simply based on food cost and reduced demand.
I think a new model of kitchen is in order. An on-demand food service would be able to provide very fresh and hot food in short order, without soggy packaging. It could run by a network of sort of Forward Operating Bases that are positioned around predicted demand, and may move based on data. They may take walk up orders but are tooled around providing delicious food to delivery vehicles. I can imagine a lot of frictionless ways to get food into cars, scooters, or even autonomous delivery wagons, if you knew in advance that is the business you are in. They can take preorders and run their inventories based on that data to avoid food waste. There are no tables to bus, plates to break and wash, or floors to maintain. With good planning the kitchens can be cheap to build, own, and run. And the food can be the very best, made by people in the neighborhood for the neighborhood.
Until all that is common, ya I don’t think the thing works without subsidies. If we did then food delivery would have been much more common; it’s never been a technological problem.
Case in point of delivery optimized to the hilt: Dominos Pizza. It actually all comes down to the menu.
2) A way to start understanding this is to understand the benchmark comparison for public market equities is Price to Earnings (PE) ratio.
3) Trying to judge an unprofitable company and develop a P/E that you can then resolve against other similar profitable companies requires one to look at trends, not absolutes. Uber substantially improved that single metric - $22m - YOY while still scaling. If you believe that trend will continue over time, they have a going concern in their core business. Do that for every line item and you can fudge a forward P/E.
4) incidentally the IPO “roadshow” is where the company goes around to institutional investors and bankers (who then communicate w their high net worth retail investors) and tell the story of the trend and roadmap to building a high value sustainable biz.
5) A decent article primer about the current market, why investors are ok w/low or no profit, etc is here -> https://theweek.com/articles/835726/reason-many-unprofitable...
- - - -
Because the market is insane.
Uber has yet to prove that their core business can actually make money. A large part of the appeal of Uber is that they're cheap, nobody has proved that customers are willing to pay enough for an Uber for them to turn a profit.
I'm legitimately surprised that they're _still_ not making profit on ride sharing. I just kind of assumed that the insanity had stopped. Running at a loss to gain marketshare is a fine and reasonable strategy if you think you actually have a plan to make money later, so far Uber's plan is to spend even more money expanding to other related markets hoping for profitability. I would never buy shares in Uber.
If you have to do it sooner rather than later anyway, why not do it sooner? They knew (or should have known) that self-driving wasn't going to be there for decades. Why not bring prices to sustainable levels and let the chips fall where they would?
The cynic suspects it's because various people could continue to milk the cow for a while.
Uber and ride sharing in general is especially screwed because there are other ride sharing services funded by other investors who are _also_ willing to burn money for marketshare. As soon as one of these companies tries to increase pricing for profitability, customers will move to a different platform that is still subsidizing rides.
Seems like a "Congratulations you've played yourself" state for the entire industry.
Terrible industry to invest in, essentially there are other investors who are willing to lose all of their money to ensure that you lose most of your own. It's almost a clever little wealth redistribution engine lol.
How much more scale can Uber realistically hope to achieve? They're in virtually every US city, and they already have over 50% of the on-demand ride business in a lot of places. They've passed the inflection point on the S-curve: If the unit economics don't work out today, it's unlikely that they ever will
Also, it is my understanding that the $22 million loss you cited is exclusive of marketing expenses. That's troublesome because certain driver subsidies are paid out of the marketing line-item (under the dubious justification that the bonuses are attractive to new drivers). To be sustainable, the core business needs to generate enough cashflow to cover those bonuses, too.
Re 2 and 3:
I'm sympathetic to the idea that useful metrics for valuing established companies are not necessarily useful metrics for growing companies, _but_: The fundamental problem is that I don't see a path to profitability (to make the share price worth more than the "scrap" value of whatever assets, including IP, Uber owns).
Contrast this with Tesla (another rapidly-growing company): They have double-digit positive unit gross margins and less than 1% market share. Maybe the stock is over-valued, maybe they won't execute, but it's clear that the company can be profitable (and they've had profitable quarters).
Re 4:
[My cynical take] Right, that's why they've started the Uber Eats product. It gives Uber cover to remain unprofitable for a few more years, until Uber Eats has the same reach as ride share and it's clear that Uber eats isn't a sustainable business, either.
1) The bulk of their apparent loss is a one-time expense
2) They are improving the unit economics of ride sharing and that, if the trend continues, they will be positive in the future.
3) The divisions that are losing money are new ventures like Uber eats and represent a short-term investment that should payoff
If they can reach positive unit economics after subsidies, that would be great for the company. It is still unknown, especially since Lyft and other companies are competing in the space.
I think the main contention is that they could as well be at their max expansion right now.
Not in a purely hypothetical way, but because the actors of the market had the time to digest and react to Uber’s business.
In particular, drivers, legislators, scooter/bike rentals, etc. could be legitimately seen as forces stopping Uber from keeping with their business practices and business model.
2 - Misinformation poisons and I’m trying to surface facts that are being overrun by a narrative.
3 - Misunderstanding one of the largest entrepreneurial & capital efforts in our lifetime, especially on HN, will inevitably slow other entrepreneurs journeys who miss the real story and how to apply these lessons themselves. That’s why I wrote the parent comment.
4 - With your “uppity” comment let’s limit the ad hominem yes?
5 - Broaden your thinking around how “eats” eventually becomes a business worth having. Research “cloud kitchen” concepts - this is an amazing space with giant scale, an unnessesarily distributed supply side (most B+ quality delivery food is more or less the same), and massive loyalty / customer LTV
2 - Depends on perspective, from my point of view the narrative on HN at the moment seems to be in your favour and you're not going against much, hence my antagonistic comment
3 - Misunderstanding implies there's merit, which you seem to be very sure of - I'm just saying be careful, this has all the signs of blowing up and if you're right it won't be because there's been writing on the wall
4 - Refer to 1), again, unfortunately I got emotional and my comment could have been written with more substance and less bullshit
5 - Talking about "cloud kitchens" just makes me feel like I'm talking to someone from a different planet.
You are probably right about my bs martyrdom on this topic, HN is better informed.
I am on planet earth although head in clouds :). But really look through the cloud lens of:
1 - people order a lot of takeout, and mostly the same thing with same frequency (Thursday is Chinese night, etc)
2 - Uber owns a lot of data around who is ordering what and when. This data is similar to amazons general product info and how they can manage the insane logistics of same day stocking, not even to mention same day delivery.
3 - setting up a massive production line kitchen in a rent efficient space (aka not retail, industrial at 30% the costs) with the same predictive models amazon uses to stock “same day” is many times more efficient than mom and pop restaurants.
4 - Transport costs can be mitigated with an Uber pool like model or a heavily tip reliant model (like Amazons prime now)
Fun fact - Travis K after leaving UBER is heavily investing time and money in cloud kitchen space.
https://techcrunch.com/2019/06/28/a-rare-glimpse-into-the-sw...
https://thespoon.tech/former-uber-ceo-lands-in-the-cloud-kit...
I agree with you on the fact that there's a huge amount of potential to improve upon existing systems of producing and delivering food to people, transporting people from point A to point B, and so on.
Where I think our opinions differ is that I'm way more cynical in the ability for these first-mover advantage companies to deliver substantial value in a way that will make them profitable and sustainable in the long run.
I may be wrong though, and no one wants to be the guy who made that Dropbox comment on HN a decade ago about why it's useless. But I stand by my opinion and when it's proven I'm wrong I will eat my words without complaining.
https://finance.yahoo.com/quote/DBX?ltr=1I had an experience with a Deliveroo driver, who told me the restaurant took an hour to make the food despite saying it was ready and that's why the delivery was almost two hours late. He ended up waiting for one hour at the restaurant for them to make my order. He was asking me to make a complaint against the restaurant because there's not much he can do.
My small order for a single person, costing £7.50, took two hours out of this person's life. Now I'll admit I don't know how the system works and whether the people get paid to wait around doing nothing but I very much doubt it, and actually felt bad that I made some person trying to make a living wait an hour at a restaurant so he could use his own vehicle to deliver a burrito to me, possibly at a loss.
But yeah everything's fine, let's keep going
Kind of like how Groupon and Living Social often made these money losing deals with small businesses. Many of those businesses figured out that the one time influx of customers was not at all worth it, which is why both Groupon and Living Social are shells of their former high-flying unicorn selves.
The figure is probably about 30% on average, can be lowered to 25% or 20% for extremely desirable or high volume restaurants that have brand value and demand.
This summary is a bit out of date on the competitive landscape, but gets the basics right: https://www.mckinsey.com/industries/high-tech/our-insights/t...
But what if the goal is something else like creating a profitable, sustainable and efficient service that benefits both consumers and producers? Too boring for shareholders I guess.
All they're doing is pick up and delivery. There's no moat there and there's not a lot of untapped profit margin there. Ubereats could win in this market tomorrow and it still wouldn't be worth billions.
Unless they pull something similar to Amazon when they released aws I don't see that changing. (Like engineering their own self driving car, but we all know that'll come too late to save them)
I think the point is that it's not bad news. Losing money can be good for a company if it's being done in a way that leads to long-term growth. Amazon didn't have a profitable quarter for ~7 years after its IPO: https://www.theatlas.com/charts/BJjuqbWLz
I guess. But being profitable while growing is better.
This has been a highly analyzed criticism of Uber since day one. See the Naked Capitalism series on it. It boils down to the fundamental economics of taxi businesses and the intrinsic costs of ride supply in illiquid ride markets like suburbs.
To start with, many cities have no fly zones around their airports that already cut down on who you can serve. Then there's the fact that you need a sizable drone to carry a payload big enough for meals. The bigger the drone, the bigger the landing zone you'll need.
Flight times are heavily limited by batteries which means you'd have to swap batteries frequently. Then there's the fact that you'd need someone to pilot them, at least for the landing part. On top of that drones would be heavily limited by the weather.
And all that is not even getting into liability and FAA regulations. There is no way Uber or anyone else is gonna be air dropping food deliveries without charging a pretty big fee and even then there'd be a lot of limitations.
Available food payload is 1.2kg for now - which is on the "slightly limiting" for a dinner for 2 people, but many cuisines can work quite well.
Honestly, $500m sounds like a wild underestimate for what it would take to get last mile drone delivery working. Remember that this is something that's currently (mostly) illegal! There's clearly a lot of work to be done.
Why would you value their stock at 0 to get that 'actual' number?
It's a one-time non-cash expense. Allocating to a single quarter is an accounting convenience.
Stock comp represents an economic cost--shareholders are diluted by it. But allocating it now or then, here or there, is arbitrary. As such, when making longitudinal statements (e.g. is Uber's economic position improving or receding), stripping out such items is standard.
But that is not an accurate portrayal, here's what's going on when you look at their un-editorialized results (1):
- Headlines have portrayed UBER as losing $5b this quarter. This is the easy one to address as this article touches on - UBER paid out almost $4b in stock based compensation (one time, due to IPO) that inflated their loss number. The more accurate portrayal is that UBER burned ~$1.2b this quarter on operations.
- Of their remaining $1.2b operating loss almost 50% of that is from UBER eats subsidies. They paid $544m more to drivers to deliver food than they took in. Why? (a) It is their fastest growing (by %) division (2) It's arguably the most valuable battleground in logistics - developing a "last mile" delivery network at scale.
- Their core business - ridesharing - has improved their gross margin and unit economics quarter-over-quarter to the point that the discounting is almost non-material (less than $22m total worldwide this quarter, representing less than 1/2 a percent of total ride sharing revenue).
- They have >25,000 employees and >50% of those are international in new markets that require heavy HR spending. Their move to clip 400 marketing employees (25% of entire division) last month implies the CEO has confidence that there is a lot of fat in employee base.
- Add to that other losses in their "other bets" which is almost certainly their freight brokering network at -$50m, and the losses appear to be diminishing.
(1) https://investor.uber.com/news-events/news/press-release-det...