Comment by dvduval
6 years ago
Lose a few 100 million today for a monopoly next year. I make the assumption here that these delivery services are intent on dominating the search results so that independent restaurants are not able to compete. They are forced into using the services, or rather having a large majority of other orders coming from these services.
What's amazing to me is that they can all so brazenly pursue a strategy of "monopoly or bust" without any fear of regulatory action once they reach that endgame. I'm not sure whether it speaks more to the foolishness of VCs, or to the corruption of regulatory institutions.
I'm afraid that soon any regulation action will be seen as a death knell for the stock market, and all the monopolies will be judged "too big to fail". Then we'll have regulations not controlling, but cementing these monopolies
The problem is all these businesses (ride share, food delivery), have extremely low margins and the tech to spin up a competitor is extremely cheap and commodity.
Thus the “monopoly” you allegedly get later is deeply unsustainable at the profit level and scale required to recoup losses on any timescale that would work for investors, assuming you can even hold onto it in the face of constant reemergence of competitors.
This is what Naked Capitalism has been point out about Uber for years and years. Uber just keeps changing the story. First rideshare itself would be profitable. Then logistics and trucking would be a sexy new profitable area. Then self-driving cars, then food delivery.
It’s frankly just a Ponzi scheme at this point that was foisted onto unwitting retirement plan investors.
GrubHub / DoorDash / etc., are just more of the same.
You can’t take businesses like taxis or food delivery, with well understood economics, round trip costs, density requirements, low margins, etc., and just slap an app on top and make them somehow different than they really are.
Artificially increasing the supply of something that’s fundamentally not sustainable at that price just will not work.
It works great. All those management middle men of thousands of delivery and taxi companies have been replaced with software. Razor thin margins are enough to keep the servers running and a small team of developers managing it - for the entire planet.
It's difficult for any company to abuse their position as they're easily repalcable. So the margins will get lower, and more of the money paid by the customer will go directly to the supplier. Efficiency incarnate.
Uber is laying off 800 engineers tomorrow, they have thousands. All of them making salaries probably in the range of 250K-500k. Not really a small team of developers.
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You should probably read the articles the parent cited on nakedcapitalism.com.
> the tech to spin up a competitor is extremely cheap and commodity.
This is the part that makes me the most mad. The delivery companies have almost no value as business entities, all of their value is in the technology, and the technology is not complicated at all.
The job that's being done by doordash and grubhub and all of them would be accomplished much more affordably, sustainably, and ethically with a marketing co-op, which is already pretty common in the food industry in America (Blue Diamond, Land o Lakes, Ocean Spray, Sunkist, Sun-maid, Tillamook, Welch's, etc). There's no need for a separate VC-backed for-profit here, a simple confederation of restauranteurs would work fine and be just as effective and way better for the whole marketplace.
How about public transport? It makes a substantial difference that I can pull up the route suggestion and station timetable from my pocket always-on always-connected supercomputer to know to the minute when I need to start tieing my shoes to get where I'm going. You're basically arguing that adding telepathic conscioussness to a service provides less than zero value.
It's not that these services don't provide value, it's that they don't make money. These are two quite different things.
>rather having a large majority of other orders coming from these services.
DoorDash has managed to change my behavior to the point that it is where I do when I am hungry, so I can see that being viable for a portion of the population.
Until the prices inevitably rise back up to the level they require to make up for the massive losses. Then that’ll just drive your behavior right back, probably much much faster than it took for DoorDash to establish this, meaning the “monopoly mode” profit time will be so short-lived as to recover next to nothing of the losses.
True, but then on to the next delivery startup :).
I suppose the fact that I left UberEats for DoorDash as soon as there were coupons suits your point though.
If anything, the market has shown that there's always a VC with too much money to spin up a new one of these every now and then.
I'm not sure if it'll last forever, but I'd be willing to bet I will be dead before that cycle ends.
I am guessing that DoorDash will succeed in the very long term. Eventually they will not need independent restaurants, they can just start their own (and cut ingredient costs to whatever they need to make a profit). And eventually deliveries will be done by robots, so no workers to pay. I'm not saying this will happen tomorrow, but think 20 years out -- there is a lot of money to be made.
I am not sure that making something a commodity is necessarily bad. You can go to the grocery store and get store brand macaroni & cheese, kraft dinner, or some organic brand. Kraft and Amy's stay in business, so people must be buying those despite the higher cost. But the lower quality / lower cost version is available for people that want money more than better cheese powder. I don't think that's a bad thing, and is the direction that food delivery is going. (Starbucks didn't kill independent coffee shops, McDonalds didn't kill fine dining. DoorDash seems like that kind of thing to me.)
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If prices rice on doordash the restaurant can just offer takeout cheaper.