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Doordash and Pizza Arbitrage

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Re: Doordash and Pizza Arbitrage

#91

Post by 0xffff2 »

bvandewalle wrote: post #52

I said this in another post about Grubhub but similarly to this article I really don't get it. Those apps are all 25%+ expensive than ordering take out directly with the restaurant, they screw the restaurants and all those delivery companies lose millions. Did everyone really become THAT lazy that driving 10 minutes to get your meal is that much trouble?

I've probably only used each of the major delivery apps once or twice, so I'm not representative of their customer base, but yeah, every now and then I'm having a specific day where I'm feeling that lazy (and of course driving anywhere in the bay area around dinner time is likely to take a lot longer than 10 minutes round trip). Then again I'm living in the bay area and not making anywhere near FAANG money. I can definitely see the delivery fees being negligible compared to the value of my time if I was making 2-3x my current salary.

Re: Doordash and Pizza Arbitrage

#92

Post by perseusmandate »

bvandewalle wrote: post #52

I said this in another post about Grubhub but similarly to this article I really don't get it. Those apps are all 25%+ expensive than ordering take out directly with the restaurant, they screw the restaurants and all those delivery companies lose millions. Did everyone really become THAT lazy that driving 10 minutes to get your meal is that much trouble?

Meal delivery doesn't just exist because people are lazy. It has been around a long time via the much more inefficient process of calling a restaurant that you already knew about, having someone spend time with you on the phone getting your order and credit card # and then dispatching a delivery person they employed directly to deliver the order to you.

Re: Doordash and Pizza Arbitrage

#94

Post by dangoldin »

thewebcount wrote: post #83
dangoldin wrote: post #34

This quote summarizes it all for me: "Amazon just bailed on restaurant delivery in the U.S." If amazon, a "real" business with a reputation built on ruthlessly cutting margin can't get it to work why would anyone else?

I mean, think about it – Amazon can't run it like their current delivery service. They can't mark it as delivered, but then not deliver it until the next day. They can't drive up to the curb, throw it over your fence and then drive off. They can't claim to have delivered it but just not bothered. They can't say they're giving you a pizza from Pizza Hut and then actually give you a pizza some guy made in his basement.…

Yea for sure. At the same time they did acquire Whole Foods and are doing food delivery through prime. They do own the warehouses here rather than acting as couriers but I would not be surprised if they just found out the economics (especially given their strengths) to just not work out for them.

Re: Doordash and Pizza Arbitrage

#95

Post by perseusmandate »

MattGaiser wrote: post #47
alteria wrote: post #42

This is absurd. Can someone explain to me why DoorDash exists? They're #1 in share, but I get the impression that they basically bought their spot. Grubhub has been operating in the space forever, is public, and generally had been profitable until VCs came to town. How is DoorDash doing anything than Grubhub? Wouldn't this capital do better in other investments? From the outside it seems like they've duped investors…

DoorDash is winning in terms of market share for one thing. https://www.cnbc.com/2020/01/17/doordash-took-the-lead-in-th... I bet a big thing for DoorDash is DashPass. That would lead to people ordering food for anything as the price is basically the same as in restaurant then.

The thing that really allowed DoorDash (and UberEats) to pull ahead was investing in partnerships with chain restaurants vs focusing on independent restaurants. Which hasn't necessarily resulted int he best product

Re: Doordash and Pizza Arbitrage

#96

Post by wmab »

alteria wrote: post #42

This is absurd. Can someone explain to me why DoorDash exists? They're #1 in share, but I get the impression that they basically bought their spot. Grubhub has been operating in the space forever, is public, and generally had been profitable until VCs came to town. How is DoorDash doing anything than Grubhub? Wouldn't this capital do better in other investments? From the outside it seems like they've duped investors…

Grubhub for years were just a marketplace for customers to find food to order online / restaurants to find customers online. They'd charge a commission on order amount for fulfilling the match but the restaurant would have to deliver the food, manage their own delivery drivers etc. This is why they were profitable for years - they were a two-sided marketplace with a high commission percentage and low cost based since they didn't have any delivery costs.

DoorDash came along (after Postmates btw) and offered the same marketplace, but with delivery drivers too (a three-sided marketplace) - so that a restaurant didn't need to employ delivery drivers. This meant a higher cost base for DoorDash, lower for the restaurant, but similar commission fees. The simplicity of offering online marketplace ordering and delivery was very enticing for restaurants not wishing to manage this themselves, hence DoorDash's huge rise in market share, at the cost of Grubhub's over the last 2 years.

Grubhub has now for the past 3 years been busy spinning up delivery in its markets but is way behind DoorDash and Uber Eats. They have also admitted to falling behind in their Q3 2019 announcement[1] to the new competition (their late admission caused their stock to drop 43% in 1 day on the earnings announcement), and started also spinning up the non-partner side of the marketplace (adding restaurants without an agreement in place) to give customers more to order from (this is what Postmates then DoorDash pioneered). This is why they've started hemorrhaging cash and became loss making.

[1] https://s2.q4cdn.com/772508021/files/doc_financials/2019/q3/...

Re: Doordash and Pizza Arbitrage

#97

Post by dangoldin »

wmeredith wrote: post #55
dangoldin wrote: post #34

This quote summarizes it all for me: "Amazon just bailed on restaurant delivery in the U.S." If amazon, a "real" business with a reputation built on ruthlessly cutting margin can't get it to work why would anyone else?

I mean, they canceled their phone program too, you don't see Apple packing it up.

True. But that industry already has a duopoly with very strong network effects. Food delivery is extremely fragmented and it looks as if there's no one actually doing it profitably.

Re: Doordash and Pizza Arbitrage

#98

Post by alteria »

wmab wrote: post #96
alteria wrote: post #42

This is absurd. Can someone explain to me why DoorDash exists? They're #1 in share, but I get the impression that they basically bought their spot. Grubhub has been operating in the space forever, is public, and generally had been profitable until VCs came to town. How is DoorDash doing anything than Grubhub? Wouldn't this capital do better in other investments? From the outside it seems like they've duped investors…

Grubhub for years were just a marketplace for customers to find food to order online / restaurants to find customers online. They'd charge a commission on order amount for fulfilling the match but the restaurant would have to deliver the food, manage their own delivery drivers etc. This is why they were profitable for years - they were a two-sided marketplace with a high commission percentage and low cost based since…

Got it, this makes a ton of sense, and explains why Grubhub was able to do the impossible, make money.

Re: Doordash and Pizza Arbitrage

#99

Post by dangoldin »

LudwigNagasena wrote: post #50
dangoldin wrote: post #34

This quote summarizes it all for me: "Amazon just bailed on restaurant delivery in the U.S." If amazon, a "real" business with a reputation built on ruthlessly cutting margin can't get it to work why would anyone else?

There are many businesses Amazon doesn’t enter. I personally don’t see how Amazon’s strengths can help them compete against other food delivery services. After all, same day delivery is the norm there.

I do suspect their focus on logistics and having an existing network would make it easier for them than others. They are doing food delivery through Amazon Fresh and also have been hiring contractors to do package delivery. Food, of course, has it's own constraints but compared to many they would be in a decent spot.
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