How did something like this even get funded? I mean, I could understand if the development costs were being funded by VC money, but actual deliveries? Even if one company were to actually dominate the market, it would still need to continue subsidizing variable costs and there is no moat to protect them from competition.
(And, as eru points out, they might be able to establish a regulatory moat to prevent any new entrants from arising once they're established, like the drug and medical device companies. Did you know the first clinical implantation of a cardiac pacemaker was in 01958, only two years after the transistor was invented? The patient died—in 02001, 43 years later. How long do you think it takes an incrementally improved new pacemaker design to get regulatory approval today? Much less a totally new kind of medical device?)
Keep in mind, though, that "VCs are betting" doesn't mean that the VCs think this is the most likely outcome, even the ones who did invest. It just means they think it's sufficiently plausible that if it does happen they want to own a piece of it.
That's due to network effects, not because they're operating a two-sided marketplace. And then you list an example where that moat failed (Argentina - and it's not just Argentina).
I suspect that on this particular market, network effects won't have as strong of an effect and the local players have better market insight since they're far closer to the customer.
Two-sided markets are kind of like Willie Sutton's banks. The buyers have to go to, say, Amazon, because that's where the products are. The sellers have to go to Amazon because that's where the buyers are. Amazon does whatever they think they can get away with to keep those relationships exclusive, which is the genius of Fulfilled by Amazon.
I suspect that you're right about the food delivery market. Probably most of the VCs investing in it also suspect you're right. They just aren't sure.
BTW I had to upvote your comment because some dumb fuck downvoted it.
I think it might happen via ghost kitchens. Distributed food preparation and couriers picking from small restaurants is inefficient. Larger kitchens, optimized for quick pickups, same people preparing food under many different brands.
Maybe one can also rethink how the apps work, to bring bit more efficiency (if you control the larger part of the production chain). Most of the time when using these apps I'm hungry and I just want to eat. I would be actually quite happy, if the app could provide some decent recommendations on what could be delivered quickly.
I'd argue that if we went down the rabbit hole of delivery startups to find where the thought originated that these kinds of businesses "must work somehow", we'd find irrationality.
Recently, I've come to realize that maybe all that's bad in the world is simply that at one point in the value supply chain someone favored an irrational over a rational thought. In case that person was very influental, we get cases like this where food is delivered through a permanently unprofitable strategy.
I wish we could just further rationalize the whole business to find the actual product's value and its market fit. Intuitively, it probably lays within canibalizing the actual business heavily and by e.g. not really delivering food on demand anymore. People just want the convenice of getting food quickl yand a wide variety + a threshold of quality.
Delivery drivers are one option to a huge solution space.
But those companies and investors can't afford to backtrack anymore. They now have to die to make space for a more adjusted solution. It's absurd.
The moat might come: there's always pressure for more regulation. Once a company is established, it can yield to that pressure and even actively invite more regulation.
Thanks to regulatory capture, regulation often acts as a moat for incumbents.
I believe that it's "too much money sloshing around".
Which seems to miss that even if they succeed at doing that to the incumbents, they're then vulnerable to the next investor's subsidised business doing the same to them.
It happens rarely nowadays unless they change something notably about their offering or the next investor is a major corporation that couldn't buy out the smaller player.
