> What in the fresh hell are we doing where nearly every part of this "economy" is mad about it?

We're at the point in the hype cycle where the service has become popular, so the media has flipped to the contrarian takes about how it's bad, actually. It wasn't that long away that we were reading stories about how food delivery services were providing restaurants an opportunity to keep their doors open during COVID lockdown.

Restaurants only hate food delivery when the companies try to force them to lower prices (so the delivery service can capture the margin) or when they perform bad-faith actions like misrepresenting themselves as an official partner of the restaurant when no such deal has been made.

The restaurants who simply prepare orders at their normal retail price and hand them off to delivery drivers who deliver to customers who know what they're getting into are actually loving this boom. It's extra business without the hassle of dealing directly with customers.

That's actually the driver of the problems: Restaurants have been so eager to get a piece of this booming business that some of them have given up their own margin to partner with delivery services looking to squeeze every dollar out of the restaurants. I suspect that era won't last long as restaurants do the math on what it's costing them.

> It wasn't that long away that we were reading stories about how food delivery services were providing restaurants an opportunity to keep their doors open during COVID lockdown.

Can you link to some stories? I didn't see any in my bubble.

>That's actually the driver of the problems: Restaurants have been so eager to get a piece of this booming business that some of them have given up their own margin to partner with delivery services looking to squeeze every dollar out of the restaurants. I suspect that era won't last long as restaurants do the math on what it's costing them.

They don't have a choice, with covid etc. Many restuarants would rather not have delivery, or delivery that didn't cost them 20% of gross.

Most restaurants would rather not pay rent/lease and property taxes that eat more than 20% of gross, yet those are recognized as 'costs of doing business'. These restaurants are unfortunately locked in to a business model that is incompatible with COVID.

Right, but understand that its not that restuarants don't mind these food delivery bandits, its that they have no choice in the current environment. In truth they want nothing to do with them, because they give customers the habit of 'lets check ubereats for dinner' rather than 'lets check Papa Francisco's', and the outrageous fees are beyond belief on top of that.

Restaruants HATE internet food delivery companies. Claims to the contrary aren't true at all.

Take a look at restaurants that run their own deliveries, and you'll see that it makes up a substantial portion of their costs, but they compensate by using smaller facilities in less expensive areas.

Outsourced food delivery services are a large uncontrolled expense which dine-in restaurants just weren't structured to handle. Low liquor sales on take-out and delivery orders are also a huge problem.

I feel like none of that has any bearing on the conversation, and is obvious. Of course restaurants weren't ready for a pandemic. It's not a revelation, it's part of what I was already saying. They hate these parasitic delivery companies, many just have to use them now, if they're still in business.

You’re saying these delivery companies are parasitic, I am saying that they are providing a valuable service at a reasonable cost, and that the real problem is that these restaurants have business models that are incompatible with takeout and delivery.

I'm kinda surprised that food delivery apps and ride-hailing apps are all money-losing. Why?

It's a modernization of an already-proven business model. Chinese food and pizza was orderable by phone, and delivered for free or a small fee, 30 years ago.

So, the pizza restaurants proved that there's enough margin in a 25$ pizza to pay a minimum wage driver to drive it to your house. Delivery platforms come in and break this up: instead of the restaurant having someone on payroll to deliver orders, you just outsource that to another party (and pay them a fee, which is passed-through to the customer, and replaces money you would've paid the on-staff driver otherwise).

Why can't the food delivery companies provide delivery services for basically the same total cost as before, and subsist on extracting a small percentage of the value, which is freed up by the massive economy of scale that they can create by aggregating orders from several restaurants into a single pool?

Ditto for Uber... it's possible to operate a taxi company profitably, and has been for a hundred years. Shouldn't Uber have basically the same economics / cost per mile as a traditional taxi company, except be more efficient thanks to top-notch demand prediction that no local taxi company could ever build?

> It's a modernization of an already-proven business model. Chinese food and pizza was orderable by phone, and delivered for free or a small fee, 30 years ago.

Different business model.

Drivers went back and forth to a single location, and had a fixed delivery radius. A driver who wasn't delivering could also be helping out at the restaurant.

Orders could be batched up, go and deliver multiple pizzas in a row.

Uber Eats is super inefficient, drivers aren't based at a restaurant, the delivery radius is much larger, density isn't taken into account, and orders aren't batched up from a single location.

Or to put it another way, I live in a major suburb of Seattle. All the years prior to Uber Eats, my only delivery options were Pizza from a handful of places. That is it, they had the scale, and I was in their delivery radius, those small # of restaurants had determined it was profitable to deliver to me.

Uber Eats comes along, and now restaurants that, honestly, are far enough away that I wouldn't consider driving to pick up food from them, are available to deliver to me.

Of course none of that is economically feasible. As stated above, Uber Eats is already less efficient than directly dispatching from a restaurant. In super dense areas (e.g. NYC, SF) maybe couriers can be kept so busy that bouncing from place to place all night long to pick up and drop off food makes sense, but in the suburb of a third tier city? No way is that a good business model.

No, not really surprising. Uber used classic anti-competitive pricing tactics to drive competitors out and consolidate market share. As the marginal acquisition cost of a customer declined, they had to start burning more and more cash to keep their market share. In order to stay solvent, that money had to come from somewhere. Some of it comes from VCs, but alot of it comes from the "efficiency" of squeezing drivers, offloading the cost of maintenance and insurance, etc.

The only innovation was exploiting regulatory sluggishness to nationalize the taxi monopoly instead of a series of regional (and heavily regulated, for this and other reasons) taxi companies. I'm also not sure that Uber has a significantly better idea of what demand is compared to the New York taxis who have been doing that business for ~100 years now. None of this is to defend the taxi companies either - Uber blew up in popularity for a reason, but they aren't profitable because their economic model doesn't work if they have to pay their workers fairly.

Food delivery seems more straightforward as a largely unnecessary middleman, but comes from the same broken, VC-subsidized model. They acquired customers using anti-competitive pricing models, then they lost customers as they started charging the full cost of service. In addition, the food delivery companies have less incentive to perform, because the restaurants take the blame when something goes wrong. None of that is efficient, or worth the tax being placed on them. I don't think very many restaurants are benefiting from an increase in business, and the companies aren't making money by lowering costs - they add huge fees to every order, so things cost 50-60% more than they would if you picked it up yourself.

"their economic model doesn't work if they have to pay their workers fairly." Bingo. Enjoyed reading your take on this. You should consider publishing an essay on this.

I think the reason is that some foods are cheap enough in materials, quick enough to prepare and maintain their edibility in transit that they are conducive to home delivery. Those foods have therefore been available for home delivery for some time.

Pizza has very cheap ingredients and has a consistent highly transportable form factor. A kebab (Schwarma) contains a lot of expensive meat and will fall apart in transit. Therefore pizza has long been available for home delivery and kebabs haven’t.

I suspect a lot of restaurants are willing to stay open using deliveries just to stay open, even if they get no profit of make a loss, just to stay open. At least they get to pay some of the rent, keep staff and hopefully keep a customer base until they can open properly again.

It is not clear companies like Uber have any economies of scale or lower costs.

Hubert Horan made this claim in a (very long) series of articles starting in 2016. He based these claims on the history of the taxi business.

https://horanaviation.com/publications-uber

It agrees with my biases so I think he's right.

Notice that Uber is facing much the same, just at more than twice the amount. The UK correctly decided they are a transportation provider and they will have to pay VAT on the services provided, not the pseudo small businesses of their fake contractor drivers:

https://www.icaew.com/insights/viewpoints-on-the-news/archiv...

> Ditto for Uber... it's possible to operate a taxi company profitably, and has been for a hundred years. Shouldn't Uber have basically the same economics / cost per mile as a traditional taxi company, except be more efficient thanks to top-notch demand prediction that no local taxi company could ever build?

Owning taxi medallions was a pretty profitable business. Driving? Not so much.

Basically the medallions were often rented to middlemen who would also maintain cars and then rent them for the day (or night, a lot of these cabs were on the road 24/7). All paid upfront each night by the driver who then had 12 hours to try to break even and get a profit. No guaranteed minimum wage here.

Managing an enterprise doing it at scale requires a larger-than-small percentage of revenue. Catch 22.

Also note that plenty of delivery workers have, historically, been paid under-the-table. Can't get away with that if you're uber

And deliveries were historically mostly for a small class of food items where it made sense--mostly pizza and Chinese--for various reasons.

I definitely don't understand the demand for soggy fries and burgers at 60% upcharge, but to each their own ;)

I have a free subscription through one of my credit cards to one of these delivery services--which I've never used. I noticed they have a Five Guys listed. But they're 20 minutes away. Whenever I've entertained the thought I've told myself to just pick up a pound of burger meat and grill it because I'd hate the result of the delivery.

It is possible to do this profitably. However the app companies are more interested in spending marketing dollars on discounts with the end goal of becoming a monopoly over the market. The end goal is to restrict customer and restaurant choice so they can charge both parties and take their cut.

They will spend big over the next couple of years to see which markets they become dominant in. Once the land has settled they will do deals with competitors to exit certain markets so each can extract margin from that geography.

Ding ding ding. It isn't even just the app companies; there were a ton of S-1 postings on HN this and last year of companies with cost of revenue a multiple of revenue. They were spending $3 to get $1 in revenue and claiming customer lifetime would make up for it.

For things like SaaS I don't see that as too harmful to society. However when the goal of spending more than revenue (funded by VC or PE) is to achieve a monopoly over that market by driving out competitors it sounds like a case for regulatory intervention.

I think this is making clear how many restaurants were only making margin on the up-sells like beverages. At the high-end it's alcohol and dessert and at the low-end it's soft drinks and packaged snacks. It's extremely often discussed that your fancier restaurants live or die by their bar.

I had the same question.

I guess when you pay a part timer to deliver you’re not paying for the added overhead for a whole new division of highly paid engineers, marketing folks, advertising, expansion budget, underselling, etc.

You'd think that the economies of scale would work in its favour though.

Or would literally just running a giant call centre that manually routes orders/drivers be more efficient, like in the old days.

I just can't figure out how Uber Eats and Deliveroo charge higher fees, underpay their drivers and have 10000x the scale, use technology to reduce costs - yet still can't make a profit in a proven market. It's mind boggling.

> yet still can't make a profit in a proven market. It's mind boggling.

Because they let me order food from a restaurant that is 20 minutes away, w/o traffic, in a suburb.

First time I visited Manhatten I was blown away by what I could delivered. Economy of scale, amazing! I could get a single chocolate chip cookie delivered at 2 in the morning! But that only works because the bakery that makes it was only a few blocks away.

Food Delivery companies try to bring the convenience of living in a big city to low density suburbs.

Of course that failed.

Some delivery services offer order a head of time where you place an order a day in advance and they batch up deliveries from one restaurant going to a given area. That is a sane model.

Even better, pre-pandemic, services like chow-bus that did orders and then large pickup sites in cities. You'd walk a few blocks from your work place to a pickup site where your food was waiting for you.

An actual innovative business model! Using technology to improve logistics. It was great, Seattle's business district has horrible food choices, being able to be part of a mass group order of food from a good restaurant was great! Wonderful idea.

Uber Eats is, outside major metros (of which America has very few) not a great idea.

Pizza delivery has worked in big cities and the suburbs.

Yes I acknowledge that density is on your side, but the pizza business has been able to make things work even in low density localities.

TV Ads for one.

There is no incentive for startups to actually profit. The whole goal is to throw enough money at the problem until you can IPO and dump your shares.

I honestly think companies should have to be profitable / trending towards profitablity to IPO. Otherwise you get situations where investors pay people to use the service, and then go public saying "look how many users we have". No proven business model and not a single cent of profit.

Because they have hundreds or thousands of HQ employees to pay and justify the hiring of. Really, that's it.

Because unicorns are playing price dumping with venture capital

I'm not saying this is a reason to do it, but the part of the model that isn't broken is that people love it. The consumers are benefiting.

Yes, people love getting stuff cheap. But if, say, an auto shop was offering cheap oil changes because they're just dumping the used oil down the sewer instead of properly disposing of it, "people like cheap oil changes" isn't justification for the continued harm.

Tell that to nearly the entirety of the global textile, chemical and energy industries (to name a few). Causing harm is not, nor has it ever been, a deterrent to operating a business.

Sure! But "other industries do bad things too" does not excuse these companies doing bad things.

The Italian government can't do much when a Chinese factory pours chemical waste into the ocean. They can stop Uber Eats from screwing over Italian delivery drivers.

No, but losing money on every transaction (or the majority of them) certainly is. In that sense, food delivery apps smell a lot like Moviepass. Customer love was not enough to save Moviepass, though it certainly didn't help that the actions they took to turn it around burned through all that goodwill in very short order.

There are tons of services I would use if I could get them for well below cost.

At what point do hundreds of millions of dollars in operating losses begin to constitute "dumping," where a product (service in this case) is priced below its cost in order to accumulate market share and harm competitors?

Other comments mention that delivery "worked fine" before, which implies DoorDash can't argue that they were perfectly innovative against a "dumping" accusation.

In legal terms "dumping" is only applicable to imports. There's generally nothing illegal about delivering a local service at a loss, except in limited cases when one company has an effective monopoly and uses that pricing to drive out competitors. For now the food delivery market is still highly competitive.

I don't think existing competition law or theory applies to this new phenomenon. The delivery companies are essentially selling at a loss to obtain an overwhelming network effect to become a long term monopoly.

in this case, Uber eats is importing foreign capital and "dumping" it into the system as subsidies to the consumer which are designed to establish a monopoly. They will either fail to establish a monopoly and close shop, or succeed and jack up prices. Whatever term you want to apply here, this doesn't seem like a business practice that should be permitted.

" Meanwhile, these companies can't make any money as it is.[0]"

Food creation & delivery: A hyper competitive, low margin, inventory rotting, regulated, logistical & insurance nightmare.

Gig work and Airbnb saved my life and kept family off street.

I got injured and disability decided to play hard ball.

Working whatever hours I could be functional and being able to stop and rest, or wait for medication side effects to ease off. These are the only thing that kept us off the street.

That's great but gig work is possible without false self-employment. Most European countries have laws for this. That's why you see articles like this.

Eat operates similar to Uber Eats here while paying a higher wage than Uber Eats after they payed social security and provide a bike. Meanwhile Uber eats drivers have to pay social security and their vehicle from a lower wage. The social security is what keeps them off the street in the case they are out of work or disabled.

Why are some people defending companies that try to go around existing labor laws by claiming their employees are different contractors just because everything is done over an app?

Luckily our laws are relatively clear and the courts will probably keep on ruling against Uber.

If you can get on disability.

I was in bed 16 hours a day nearly blind and extreme agony for nearly a year.

Disability laughed at me. Said I had a desk job so it was fine, all I had to do was sit their.

I'm glad that worked out for you, but having VC backed SV Unicorns become _the_ social safety net seems very wrong to me.

I'm glad you managed to stay afloat through gig work but this example really seems to point out that it's prevalence is due to failing social systems (job market/safety nets) driving people into insecure forms of work.

I think drones will save them. Can't wait to spend a romantic dinner in a small restaurant with my girlfriend and watch the delivery drones come and go, humming around us.

> Can't wait to spend a romantic dinner in a small restaurant with my girlfriend and watch the delivery drones come and go, humming around us.

I honestly can't tell if this is sarcasm.

I mean, speaking personally as a customer, I'm a pretty big fan of being able to search for food online and order it. When we're trying to figure out whether a market is broken, the question of whether customers are happy is a pretty important starting point. (But maybe I'm just a weirdo and everyone else who uses Yelp etc. is miserable?)

> The gig workers hate it

... but for some reason they keep doing it.

Also, I assume the consumer is very happy that he's getting a venture capital subsidized food delivery service.

How many restaurant owners and delivery gig workers do you know? From my (admittedly very limited) experience long-term gig workers have a "system" that tends to work well enough for them, though they're not so successful that you'd hear about it on the news.

Everything is anecdotal. I live in NYC and I talk to restaurants, or I used to before the pandemic. I know the owner of this restaurant, and he absolutely hates these delivery companies. He’s not alone.

https://ny.eater.com/2020/4/23/21231943/grubhub-nyc-phone-or...

Kudos to the legislators for allowing the experiment to run as long as it did to find potential solutions.

Now it’s time to legislate it away, just like many have done with Uber/Lyft.

The gig economy is just a return to the basics of the industrialization and the machine age; where people went to the factories' gates to seek a job for the day. During this period, such flexibility brought a huge boost in production, innovation and revenue. So this model isn't necessary broken.

Someone should let the gig workers know!

I bet they'd quit if they knew how miserable they were.

Did it occur to you that some people could be in situations where they simply cannot quit a job no matter how miserable it makes them?

It probably did occur to GP, that's the whole point (if I'm right to be charitable).

Top comment is arguing that these people should be laid off as part of a government initiative to reshape the economy. If these people can't quit, what will happen if they are laid off? Is there any policy that could help these workers? My best guess is UBI, but that is another discussion.

I would be more charitable to calls to destroy the gig industry if the proposals were coupled with any realistic path to retraining or alternatively-employing the employees.

When the comment is just "this job should not exist" I just know there's no intellectual consistency behind it. They want to punish employers they don't like, and don't especially care who is hurt in the process.

That's going to be bad news when it gets legislated away then, isn't it.

The solution to a race to the bottom, or to other kinds of prisoner's dilemma, is frequently to outlaw the option of racing to the bottom. Healthy bread can't compete because bread with sawdust is cheaper? Outlaw adding sawdust to the bread. Environmentally conscious factories can't compete because it is cheaper to pollute? Outlaw polluting to make a level playing field. Companies that pay their workers a living wage cannot compete with those who don't? Outlaw paying workers below a living wage, so that companies paying a living wage can compete.

In this case, I'd also want to see some form of UBI.

The best kind of safety nets are ones you set up BEFORE you throw people off the bridge.

If you want to protect the workers, set up a UBI now. Then destroy the jobs. Don't talk about hypothetical-might-maybe-work solutions to fix the problem you're about to create. Focus on making things not worse, not punting and hoping you can save the workers from homelessness later.

I don't know you circumstances but it is possible to still do something out of desperation - possibly to feed your family - and hate it.

So in that hypothetical scenario, would that person be better or worse off if they were denied the option to do that thing they're doing that they hate?

Worse off. Feeding their family is probably a higher priority than a shitty job.

It doesn't change the fact that the job is rubbish.

Lots of people do jobs that they hate. It’s common in practically every industry.

On the off chance you’re unfamiliar with the term, I suggest you learn about wage slavery.

https://en.m.wikipedia.org/wiki/Wage_slavery

That sounds bad! It sounds almost as bad as unemployment slavery, or homelessness slavery!

Yes, exactly. People shouldn't need money to live.

Gig workers don't hate how its set up, they make a nice bit of cash for hard work when they need or want.

Restaraunts don't hate it because they don't have to have staff hired to deliver, infact all the logistics of delivery are removed for them.

> The San Francisco-based company reported a fourth-quarter loss of $312 million

Excuse me while I shed a tear for the billion eur company over the riders who will get screwed for this ruling.

DoorDash's business management is not reflective of its customers, who are the riders and restaurants. Who, in this scenario are the losers.

Under a dumping accusation, their competitors are the victims here. Operating at a substantial loss as a strategy to expand your market footprint is pretty textbook anticompetitive.

I'm sorry but why are competitors not allowed throw money away beating out the other imitators ?

> Operating at a substantial loss as a strategy to expand your market footprint is pretty textbook anticompetitive.

No it's not actually.

That would entice people with a better twist on the idea to do things differently.

Regardless of both our ignorance of market philosophy.

The riders will get screwed here. I'm not gonna applaud the debt of companies like Deliveroo, Ubereats, JustEat etc etc being shafted to riders long term.

Bravo