Re:Ask HN: Why are delivery apps so expensive?
by hansvm on Friday July 29, 2022 @10:58AM
(#32277789)
Pizza places are an example of what an efficient (low-cost) implementation might look like. They often bring in too many drivers for the dinner rush and let people go as demand tapers off, they'll cook pizzas in the right order so that a driver taking a double can have both items come off the line at once, and they have loading/serving stations optimized for getting the driver out the door faster. The net result is that drivers are making plenty of money since they're constantly busy, while there are usually enough of them to keep people from getting cold food.
Even in those circumstances, the fully loaded cost of the driver to the customer in some no-name suburbs was around $18/hr, split between on average no more than 3 customers. So on a $5 pizza you'd pay $11.50 for the pizza, tax, and delivery costs.
Contrast that model a bit with delivery apps:
(1) Doubles are rare, so the driver earns less per hour.
(2) There's still a back-and-forth between housing and food, but extra latency was tossed in since you have to wait after your delivery to figure out which place you're going to be grabbing food from. I.e., drivers make less per hour.
(3) Enough restaurants aren't fully optimized for fast deliveries that the drivers easily tack on an extra 5 minutes waiting for their food, resulting again in fewer deliveries per hour and less money.
(4) We can keep going on about why drivers are getting fewer deliveries per hour, but the consequence is that drivers need more compensation per order to be willing to do that over another job. Easily 50% more. Your $6 delivery cost is now $9.
(5) Combine that with the fact that they know the tip ahead of time. There are basically no consequences for skipping an order you don't want to take, so the only people getting hot food are on the high end of the tip scale, which is already higher than the pizza place average. Conservatively, bump this up to $12 per delivery, but when I tried DoorDash I was making $36+/hr for at most 2.2 deliveries per hour. You do the math.
(6) On top of all that, there's a middleman in the transaction with their own fixed costs they need to cover. The pizza place is happy just to sell more pizzas per hour by having a delivery option and charges a fee large enough to roughly offset the cost to them of providing drivers (included in that initial $6 estimate I provided). Uber Eats can't increase their profits _just_ by increasing orders per hour since they didn't have a cut of any of the initial transaction. They have to charge their own fees on top of everything else you're already paying.
I'm actually a little surprised the total bill was only $20. Was it cold?
Even in those circumstances, the fully loaded cost of the driver to the customer in some no-name suburbs was around $18/hr, split between on average no more than 3 customers. So on a $5 pizza you'd pay $11.50 for the pizza, tax, and delivery costs.
Contrast that model a bit with delivery apps:
(1) Doubles are rare, so the driver earns less per hour.
(2) There's still a back-and-forth between housing and food, but extra latency was tossed in since you have to wait after your delivery to figure out which place you're going to be grabbing food from. I.e., drivers make less per hour.
(3) Enough restaurants aren't fully optimized for fast deliveries that the drivers easily tack on an extra 5 minutes waiting for their food, resulting again in fewer deliveries per hour and less money.
(4) We can keep going on about why drivers are getting fewer deliveries per hour, but the consequence is that drivers need more compensation per order to be willing to do that over another job. Easily 50% more. Your $6 delivery cost is now $9.
(5) Combine that with the fact that they know the tip ahead of time. There are basically no consequences for skipping an order you don't want to take, so the only people getting hot food are on the high end of the tip scale, which is already higher than the pizza place average. Conservatively, bump this up to $12 per delivery, but when I tried DoorDash I was making $36+/hr for at most 2.2 deliveries per hour. You do the math.
(6) On top of all that, there's a middleman in the transaction with their own fixed costs they need to cover. The pizza place is happy just to sell more pizzas per hour by having a delivery option and charges a fee large enough to roughly offset the cost to them of providing drivers (included in that initial $6 estimate I provided). Uber Eats can't increase their profits _just_ by increasing orders per hour since they didn't have a cut of any of the initial transaction. They have to charge their own fees on top of everything else you're already paying.
I'm actually a little surprised the total bill was only $20. Was it cold?