This is not a genuine partnership, it’s extractive.
Is DoorDash extracting money from its users, the restaurants and the delivery drivers? Or is it actually providing something of value?
To me, the delivery apps like DoorDash and Uber Eats just work a lot better than calling up restaurants for delivery did in the pre-app era. Maybe the drivers are underpaid, maybe the restaurants are underpaid, maybe the food costs too much, but even if they end up charging more money, are they really going to go away like Groupon did? I don't think so, the underlying product is just too valuable. So, I don't agree with this claim. There's a real partnership here. It just hasn't settled down.
As long as the business space is real, DoorDash and Uber Eats and the others are just going to fight tooth and claw to win it. That means discounting the real price, that means raising money at whatever valuation they can get, that means turning the screws on all partners to squeeze out more money. All of this seems like craziness, and it is, but it's craziness in pursuit of winning a prize that really does exist.
Some industries, like the music industry, once they settle down it turns out that one of the players has very little pricing power. I think that might happen here for drivers and for the sort of restaurant that isn't differentiated. But like music, it won't just go away, it'll be a new business structure that perhaps dominates the industry.
Example: I order a pizza through Deliveroo. The driver doesn't care about either the restaurant or me, so he chucks the pizza vertically in his box, ruining it. I get a shitty pizza, I won't order anymore from the restaurant.
Compare this with me calling up the restaurant and having one of their employees delivering the pizza: the restaurant has all the incentives for me to enjoy the pizza, since they suffer if they lose me as a client.
And no, it doesn't help using something else as deliveroos: the deliverers are all the same (they use multiple apps) and they don't give a shit about the quality of the service (and rightly so, since they are paid peanuts)
As someone who sometimes orders from Deliveroo and who has had this exact experience I agree with your premise but not your conclusion.
When this happens I understand that this is the delivery guy's responsibility and I don't blame the restaurant for it. This may put me off using Deliveroo but not the restaurant if there is another way I can order from them.
Now if this happens with an in-house delivery guy then yes, that would put me off ordering from the restaurant again.
Interestingly when this happened to me it was partly because the Deliveroo guy was riding a bike. Thus I put the 'blame' on Deliveroo and their organisation and process because trying to deliver a pizza by strapping it on the back of a bike can only end badly...
+ DoorDash actually does refund quite frequently for food issues.
I used Deliveroo for the first time in London a few months ago. It was the worst delivery experience I have ever had. Deleted after two tries.
My experience with Caviar, UberEats and ChowNow have been immeasurably better. As evidenced by their having live chat and phone support to Deliveroo’s e-mail only two-day turnaround support.
That is why you review the driver and food separately.
Not my experience for takeout.
Before: I called in an order, they told me how long it would take, I would arrive, it would be done.
After: I submit an order via the app. I receive confirmation and an estimated time. Arriving at the time is optimistic, so I arrive 5 minutes later. I find staff juggling half a dozen (often more) devices, one per app, and converting them to whatever their internal order system is. Frequently they have entirely missed my order and who can blame them because they've gone from phone & counter "inboxes" to more than you can count on one hand. You can ask staff which app tends to be most reliable and they'll tell you which one they pay the most attention to and that has a hope of reaching parity with phone orders.
Delivery's a little different of a beast, apps have made the market for that kind of service more "liquid" and responsive, but it remains to be seen exactly what the models look like without growth capital subsidies.
> But like music, it won't just go away, it'll be a new business structure that perhaps dominates the industry.
If this is the comparison, then be afraid, because streaming has both destroyed a huge amount of value in recordings and redirected a significant portion of remaining value towards new middlemen.
Counterpoint: streaming didn't destroy value, it exposed how much value was fictional or an artifice of a dearth of consumer options.
Apps have done something similar. They have exposed that many customers, in many cases, don't actually care all that much about things that restauranteurs believed they did. The supposed value largely didn't exist.
One example is supposed relationships between vendor and customer. Most people don't have strong, deep, and enduring emotional attachments to relatively generic pizza shops. They do not deeply bond to an artist they kinda like one song from, but otherwise find interchangeable with several dozen other artists on their lofi playlist.
To me, it seems that DoorDash et. al. are delivering negative value to the consumer.
My recollection is that most restaurants with takeout also had a delivery option, usually at a smaller percentage cost than DoorDash takes. But, more than that, delivery worked better.
Restaurants typically only offered delivery within a few miles of the store. So there was a "critical mass" effect that drivers could learn the territory, and usually had fewer problems finding an address (especially after you ordered more than once). That is especially true if Google maps has the location or entrance pin wrong for your address.
Practically, that few mile radius isn't a big limitation for most take-out food because the food will get cold if driven a longer distance than that. Kitchens were also better able to prevent cold food by batching orders to have all of a driver's orders ready at one time.
I think these are solvable issues, but, to date, for me as a consumer, DoorDash/Grub Hub/Uber Eats do not deliver positive value compared to restaurants with captive drivers.
Bandwidth is the biggest problem small restaurants have in managing a delivery service. If you don't have enough drivers to meet peak demand, you have to either decline orders or make customers mad when their order takes >1 hour to arrive (and disgruntled customers don't typically re-order or tip well). If you have too many drivers, they are making less in tips and you are probably spending more to bring their tipped wage up to minimum wage - and if it happens often they are going to quit.
I remember my dad disconnecting the phone at the store when they got too may orders to handle. We ended up using my mom and siblings as the flex/surge delivery capacity. If delivery apps had existed at the time, he would have gladly traded the headache of employing drivers and managing capacity for the ability to make and sell as many sandwiches as he could. In todays' world, if he got 12 orders going to different parts of town at the same time, he could accept all of them and know that if he could make the food, someone would be able to deliver it.
Delivery networks also increase courier efficiency by adding the ability to batch deliveries from multiple restaurants and avoiding the need to round-trip every order back to the restaurant when you are done. Couriers on Eats/DD can drop off one meal and be dispatched another from a restaurant nearby, and don't need multiple people who live near each other to order from the same restaurant at the same time in order to have efficiently batched trips.
There are efficiencies in the network model that can't easily be replicated by individual restaurants with their own drivers. The gold standard is Dominos but they are a behemoth that can't compare to any other restaurant - they are singlehandedly as large as Doordash.
I know it's not a short term solution, but the US seems to have painted itself into a bit of a corner by separating commercial and residential areas so much...?
There is this corrosive process of these gig-economy companies, they end up making life just a little bit more shit for everyone. You'll turn a blind eye to the desperate delivery drivers, to the stress of the restaurant owner as he struggles to make payroll (it's a hard enough business already) as the delivery company pushes him to lower prices with the threat of being dropped. Then you'll notice that the quality of the food starts to drop, or one day that restaurant falls off the app, huh, you'll think, wonder what happened to them, never mind. And the deliveries will start to take a bit longer and make more mistakes as the company squeezes the drivers harder and harder...
Try paying a fair price for fair value and taking pleasure in seeing businesses owned by your neighbours thrive. It really is a better way to live than spending your time on earth with your face buried in an app exploiting the poorest.
With no more MFC clauses, retailers can charge a flat out %3 tax to all credit card users and pass the fee down properly to incentivize them to not use credit cards. Restaurants can list on doordash with the extra fees baked into prices. A %10-30 discount might be enough to incentivize people to call in, etc.
I'm not a law maker, so I don't know how many industries would be screwed up by this. Does anyone think making MFC clauses illegal would screw over society or industries other than organizations that abuse them? Are MFC clauses needed because otherwise useful services would die from prisoner's dillemas? A classic one is the 'maid on order' or 'dogwalker on order' kind of startups because people collude and quickly just create a direct relationship to save money, and you lose benefits like getting ratings and other such things. It makes me wonder.
[0] https://en.wikipedia.org/wiki/Most-Favoured-Customer_Clause
If you can make better food than your competitors, you'll thrive - the delivery services make that more true, not less. Stick to your USP and outsource everything else.
But regarding drivers I feel that we're confusing causes and consequences: If being a delivery drivers for these guys is so bad then why do they seem to still find so many people willing to do it? So it seems to me that these apps are not destroying anything there. The destruction happened before and these apps are picking up the pieces and providing jobs.
Also, it's not like being an old-style delivery driver for a pizza joint was ever a very good job...
That's because people keep opening extra restaurants until that's true.
(That's doesn't mean restaurant workers will always be just scraping by. There lot depends on what other employment options are available.)
I think I've seen this vulture capitalism self-cannablize itself in my Lifetime in the US in so many industries its become the norm and I not only expect it I plan for it: things aren't meant to last anymore. Everything is made to be disposable.
Industries and Communities alike are not immune, especially large urban sprawling ones and specifically speaking the tech based ones I've lived in the US where you have large swaths of diasporas coming in waves.
All of which is some how strongly encouraged in order to be a part of the 'disruptive wave' and make your mark for the entrenched players who benefit from this model, that is until you finally get fed up with overpaying for old, cramped and often poorly kept housing situations and you finally decide to return to where you came from in the East Coast, Rust Belt or Midwest where Life seemed more 'normal' only to see that too has been hallowed out and been devastated by substance abuse as a result of large amounts of displaced/under or unemployed workers.
This is now the norm, and while California is in a bad place many people who came to the Valley from outside CA and isolated themselves in its bubble are in for a very sobering realization of what many of their Industries have done now that they have the option to work from home and they return to their home states in most of the US.
I think this is the big take away from the article:
> When a multi-billion dollar tech company takes a hidden audit regulatory exemption, that's on all of us. They're going to keep doing it. Building a business model that relies on a permanent underclass under the doublespeak of "entrepreneurship" and "freedom", and then spending tens of millions to make sure that you will never have to provide health insurance to your workers will always continue on if it's allowed. As a formerly famous person once said, "they let you do it. You can do anything".
I've been in the culinary Industry in the US and in Europe, and sadly I thought prior to COVID the US was finally making significant inroads (outside of California and NY) to Asian and European standards of culinary culture, wherein a restaurant and restaurateur is a proud beacon of a vibrant community. A hub for locals to gather and enjoy each others company and patronage alike in a mutual beneficial manner that helps embody and nourish itself.
Instead, what has happened is that these low margin businesses that struggled to make payroll and keep the lights on unless they had outside investment(s)/investors are bending at the seams and the rest just gave way to the weight of well funded commercial chains and what I'm now convinced will be the re-structuring to make the Ghost Kitchen Model the new de-facto way most people get their meals when 'going out.'
As a former chef, biodynamic farmer and proponent of farm to table business models as way of making environmentalism viable (read: profitable) I felt we were robbed of many more years (possibly decades) of experimentation and progress, but the truth is that the model was always joined at the hip to a very precarious, exploitative and quite frankly unsustainable Industry: restaurants/hospitality.
I'm still close with my old Team and have many friends with (struggling) restaurants and while they were all apprehensive of the disruption they understood why I welcomed it and how it would be indifferent to their acceptance either way. And to me Doordash is just the 21st embodiment of the same model, the advent being logistics and supply chain management are sold as a SaaS business model via a horrible/buggy app and system, wherein its ok to lose millions.billions so long as you have access to untapped labor in an ever growing underclass that can attract another round from a VC like Softbank flush with cheap/hot money that seems almost eager to lose money so long as you structure it correctly to keep the illusion of infinite growth via multi-billion IPOs going.
I'm glad to have had the opportunity to step away from Fintech for a period and got to work and live through what now seems like an unrepeatable period in the culinary Industry that spanned everything from Michelin star, James Beard awarded restaurants as well as my primary focus in agro-tourisms and farm to table models. I think it is an end of an era as more restaurants are forced to close their doors forever and are giving way to a handful of well financed players with access to immense amount of Capital in a race to the bottom to capture ever thinner margins and displacing anything that poses a threat.
The model that Roy Choi created after the 2008 financial crisis, that disrupted the culinary World with the advent of marketing via social media and food truck distribution in lieu of brick and mortars, may be the only viable model that the most well funded and equally daring cooks/chefs will have to aspire to moving forward if they have any chance of being independent.
I can only hope that they too learn the lessons from Roy, and his imperative to be involved in locally based community investment as a measure of their success instead of what are now at best gilded awards like Michelin stars and James Beard awards now that so much of the competition has been unfairly removed from the equation due to COVID.
It was big enough in tier-1 cities when it required someone at the restaurant writing down the order, hiring a delivery person and dealing with disgruntled customers. They have at least that market with economies of scale.
It's extractive because the service gains power by becoming the platform. Users go to the app to view food items and order. The app becomes the experience of the restaurant. The service also becomes a major centralized competitor to everyone in the region. How are you going to compete with a service which is fighting a war of attrition backed by millions from Softbank? Rather than many restaurants having delivery drivers, all the drivers then become gig workers. And perhaps this is just the beginning. Where else might this service expand once it has a solid logistics platform in your area?
I don't have to think much about winner take all in the social media space. Services like Door Dash, Grab, Uber, etc are taking winner takes all economics to your home town. They have the power to become transformative and we're placing a lot of trust in them to do things right. And they're doing this with questionable transparency, as the article pointed out. How do we know this isn't some massive scam which threatens to upend communities by imploding after they have transformed the way we work and our daily habits?
It's too much power IMO.
His perceived lack of objectivity doesn't mean he's wrong, and as a person who has been in the Industry and has many friends who own kitchens that have had to deal with their toxic relationship to make payroll his opinions resonate with my own.
What I mean is: you're neglecting the collateral damage. These companies, fighting tooth and claw to win the prize (whether imaginary or real), are destroying the business space in which they operate, and adding to misery of the local communities.
> Is DoorDash extracting money from its users, the restaurants and the delivery drivers? Or is it actually providing something of value?
The way I see it, they provide a big value to its users - convenience and decent ordering experience. At the same time, they also take away a different value - consistency of quality in delivery (and make you think it's the restaurant's fault). The users are probably net ahead, but there's no free lunch (pun intended)! DoorDash & Uber Eats are providing this value by burning through the supply restaurants and abusing delivery workers. They're strip-mining the industry.
(Personally, I'm surprised it's DoorDash that's winning. I was always betting on Uber Eats - because Uber has abuse and sociopathy deep in its corporate DNA, as they did all these things and more while building their international rideshare empire.)
In my area, there's a pizza shop that is doing well. They also sell on Takeaway.com. But if you order through that - like I initially did - they'll give you a small business card that says "Did you know that our prices on Takeaway.com are 15% higher to compensate for the fees that they charge us?" And on the back of the business card is their URL for ordering and their own phone number. I now always order directly from them and the service is insanely better than the best I ever got from Takeaway.com. Their long-term delivery employees will actually remember how to find my house on the 1st try while the Pizza is still hot. I've never ever had a <30 minute delivery from Takeaway.com. But those pizza guys reliably hit 20 minutes if I order directly from them.
So yes, the restaurant that I know that does best on online delivery platforms is the one that treats it like an expensive advertisement channel and that funnels customers off the platform as fast as they can.
DoorDash's biggest risk is that one of their "partners" might become successful enough to leave.
Possibly, buried in the fine print somewhere, but enforced by whom? Aside from the restaurants, only the drivers will see the food. Will they be ratting out the restaurants to their corporate overlords? I doubt it.
To use a meme, "por que no los dos?"
I hate both the player and the game. No one ordered Mr Xu to get into this business; there's no requirement that he abuse the living shit out of his workers and sell them up the river by helping pass prop 22. At every step in the decision process, he or people he hired and gave instructions to voluntarily made these decisions. From the pay scale to the inclusion of binding arbitration, they own every single one of those choices.
Along the same lines, we own not making the changes we claim to want, while wolfing down our ghost kitchen burritos with subsidized delivery. California voters absolutely own voting for proposition 22, and signing the petition to get it on the ballot. We're not reforming our labor laws to give some people the flexibility they want while not leaving everyone as an unrestricted free agent. We don't separate health care from employment. We gab about it, but little changes, and certainly not at the rate of the people exploiting those pressure points. As someone once told Captain Picard, "you talk and you talk, but you have no guramba."
And now, with COVID, we're watching our economy cleave into the starkest case of haves and have-nots in my lifetime. That split won't be permanent, but fixing it is going to happen when we least expect it and is going to be messy and painful.
To be fair they set a new record for money spent on supporting a ballot measure in state history ($225m) and it still only passed with 58%.
If you divide the $225m spent lobbying this by the 9,339,069 votes for it comes out to $23.98 per vote.
https://ballotpedia.org/California_Proposition_22,_App-Based... https://www.latimes.com/projects/props-california-2020-elect...
Meg Whitman spent something like $180M for the governor's race, and still lost badly. You can't sell voters something they don't want to buy.
I am really sad about this. It's going to be a literal depression for a significant portion of American society.
There's a clear imbalance of power there -- it costs the customer nothing to not tip or to leave a one star review. But those things could absolutely impact someone's earning potential as a worker.
Consider how many people seemingly enjoy being petty tyrants when given the opportunity, and the story gets worse and worse for the worker.
I always recommend that people always give five stars and a generous tip (until we outlaw typing). It's not my job to narc on your workers, Uber.
It’s the same issue with tipping. The larger the standard tip the more power you give to people that defect and tip nothing. Essentially, high tips simply subsidize freeloaders, it’s much better for society to avoid restaurants or services that use tips.
There are a lot of issues with this newsletter, but this bit at the end stuck out. The 'loophole' is for companies with
- total annual gross revenues less than $1.07 billion and
- less than $1 billion in non-convertible debt in the past three years and
- not a “large accelerated filer,” as defined in Exchange Act Rule 12b-2
The newsletter is trying to make this sound like it was meant for mom-and-pop shops, but how on earth can you have revenues of more than $1.07 billion without being a "multibillion-dollar" company?
Not sure about you, but my mom and pop definitely fall in that category.
Both Doordash and your mom and pop qualify (if your mom and pop decided to IPO).
Yandex, which never felt to such idiocy, then scooped their remaining business for a symbolic sum.
This is an excellent encapsulation of most of the gig economy in one sentence and explains why I hate the entire thing. It's only a valid business model by taking advantage of people and sidestepping regulations, all funded by VC money rather than actual profits.
The previous article should be required reading for anyone trying to understand how crazy this era is.
1 - Voters voted Prop 22 in their own self interest. It keeps prices lower. Similar to voters who vote for lower property taxes. (May harm others but not the voters)
2 - I deleted the app because the times not reliable. This is what will hurt them more than ballots.
However there is no other easy way to buy food without doing significant amount of research and then most of these companies are reliant on the online ordering for inbound sales anyways. It's a total cluster.
Probably a downvote here but I don't feel good making investment money on an extractive business like this - i.e. I'm not going to buy stock. Even though these services are lifelines during the pandemic, I wonder if they are a faustian bargain of sorts in the long-run understanding full well that in the short-run the alternative is to shutdown.
The sad future: I think the executives and staff will make off and the retail investors will be holding the bag as well as the shutdown restaurants and employees laid off.
The happy future: Some/most restaurants survive pandemic and ease off their online habits, stock stabilizes/investors take a hit and people go back into restaurants. Online delivery services companies market caps take a nose dive.
Wishing for self-driving cars is easy, building them not so much. But Pizza delivery unicorn based on some arbitrage?? Come on, at least develop a fleet of food trucks in which the pizza is cooked along the way. Baking a Pizza takes 6mins, add 2-3 for preparation so the order can be prepared along the way. No need to get back to the restaurant. This gives you 2x efficiency of the delivery person ($15/h). Equipping a restaurant is probably $200k+, a food truck closer to $50k which gives 4x capex efficiency. Perhaps in the future the pizza can be made by a robot saving you one person (50%) of the personnel. There is room for efficiency.
Here in Europe during Lockdown take away pizza was €2 cheaper, around €8 instead of €12+. I cannot imagine how someone selling it cheaper is anything but a pyramid scheme / attempt to corner the market.
They are out to extract market share from folks with less information, primarily drivers and owners.
