Something just doesn’t make sense with this story. Ok, it’s possible doordash has accidentally mispriced a pizza. But why would they misprice a pizza but then pay the correct price to the restaurant?
Doordash and Pizza Arbitrage
161–170 of 534 posts
Re: Doordash and Pizza Arbitrage
#162Keep reading the level of skullduggery these companies go through and keep saying to yourself "Tech is a meritocracy." Yeesh.
We have extended a tech company to mean any company that uses computers.
Re: Doordash and Pizza Arbitrage
#163Some background -
In my past life I started Crazymenu.com The idea initially started as a central place to host all the restaurant menus with the idea of eventually expanding it to SAAS tech layer for everything restaurant related. The idea ultimately pivoted into google maps for restaurant menus. Meaning companies would just pay me a service fee to incorporate these menus into their services (ordering food, review sites, restaurant apps, etc.)
I self-funded the idea and after my first beta launch (2006, I believe) I was pitching an angle investor (Mr. X) who years later became an early investor in Doordash.
Right away, Mr. X said why not go into online food ordering business and then may be do delivery, etc. I never liked the idea of dealing with all the transaction headaches and told him I wasn't sure about the idea and dealing with so many fragmented restaurant softwares. From what I could gather attending a few National Restaurant Association events in Chicago and speaking with lots of restaurant owners, I noticed two categories. Very small mom and pop operations, or small medium chains. All the small to medium chains already had invested into some technology layer (some were closed off) and unless you could integrate with them, there was no interest to working with you and the smaller mom pop entities were either too busy or they were so bombarded by all types of tech solution offerings that they didn't want to listen to you.
Years later when Mr. X had invested in Doordash I had private chat with him.
I told him in my opinion, restaurant delivery is restaurant business. Meaning that it'll be very hard to compete. On top of one huge exception. You never crave DoorDash, you crave pizza or burger or Chinese food.
When the OP says Dominos figured out the model as did lots of family owned Chinese restaurants. I can understand that.
I believe this is a very vertical business. For one thing it's mostly around the brand, and the brand experience. This is the same reason Starbucks avoided franchising (if you think about it, DoorDash is a bit like franchising a delivery business) as did In-N-Out. These smart people had already figured out the nature of building a food brand experience.
Getting a cold food, soggy pizza destroys the brand.
This is very different than Amazon or UPS delivering books. Because delivery of books or jackets doesn't impact the brand at the same level it does with food. Not to mention when you don't deal with risk of food getting cold you can really scale delivery by mastering routing and all the different things UPS can do with scale.
Ultimately, we either see a very vertical experience. Uber buying several popular food category chains (pizza, burgers, fried chicken, etc.) or the reverse, PEPSI's parent company buying UberEats/Grubhub or if there is a massive consolidations and Uber or Grubhub can charge in an economically sustainable way.
Re: Doordash and Pizza Arbitrage
#164Very important note (near the bottom of the post) on why Doordash did what they did: > Note 1: We found out afterward that was all the result of a “demand test” by Doordash. They have a test period where they scrape the restaurant’s website and don’t charge any fees to anyone, so they can ideally go to the restaurant with positive order data to then get the restaurant signed onto the platform.
It doesn't fully explain why they priced a $24 pizza at $16. I wouldn't be surprised if they're subsidizing purchases, but just skipping fees doesn't explain that.
Lets them inflate the order count for the pitch.
Re: Doordash and Pizza Arbitrage
#165I love this story, especially about ordering dough pizzas. It reminded me of this twitter thread: https://twitter.com/meslin/status/1225834920611848192?lang=e... In which the author tries to order the Uline "box of boxes", a box of twenty-five (25) 6" x 9" x 6" boxes, only to have Amazon deliver a 6" x 9" x 6" box containing some random product. The collection product from Uline has the same bar code as the box itsel…
The automated system should say "weight, that can't be right". Works fairly reliably in supermarkets, especially if you allow a bigger margin of uncertainty on sku weight. Or verify the volume/shape - or both, like volumetric weight that shipping companies use. I'm guessing amazon has some system to automatically assign boxes based on the dimensions of stuff that's being picked.
Re: Doordash and Pizza Arbitrage
#166Wow, that was great. And honestly good on them for profit-taking on this arbitrage.
The author likes to pin this on zero-interest rates ("ZIRP") and that certainly explains why the system is awash with cash but I'd say he's missing a key point here.
When I moved to NYC (~10 years ago) I didn't order delivery at all. Honestly it's a huge pain. To call someone up and try and communicate an order to someone who probably doesn't have the best grasp of English (no offense intended here). I just couldn't be bothered.
What changed was Seamless came along and suddenly I could order food and not have to talk to anyone. It was (and is) amazing. In NYC at least the restaurants are still handling deliveries (with Seamless anyway) so there's still that control. Seamless/Grubhub seem to charge exorbitant fees but that's another issue.
As an aside, this is a key factor in my use for Uber/Lyft: the fact that the process is seamless (pardon the pun). You order a car without talking to anyone, it arrives and it drops you off. There's no awkward payment step. No dealing with a machine that's broken. No card skimming. It just reduces friction.
This is the promise of food delivery platforms: they benefit the consumer in terms of discovery, convenience and the seamlessness of ordering and payment. You might point out that people get cold pizza because UberEats drivers don't have the bag and you're right. But that's not an unsolvable problem.
Oh and this is the first I'd heard of Grubhub replacing Yelp phone numbers with their own call center. More evidence that Yelp is a cess pool that needs to be flushed. It's sad Grubhub is engaging in this. We have enough rent-seekers. Thanks anyway.
Re: Doordash and Pizza Arbitrage
#167I don't understand why doordash, uber eats, deliveroo, and similar business are starting to exist. Restaurants have been running successful delivery operations independently for ages. And there are many software offerings to help businesses get set up with delivering food. Why do we need a centralized on? Is it just the benefit of being able to browse in one app/website everything available for be delivered to you?
One selling point is ordering from places that don't offer deliveries, like McDonald's or Burger King. Essentially pay someone else to order and collect for you.
That can backfire, as with the article here...
McDonald's is now partnering with Uber Eats, but in the wild west days there were a few apps which let you order from pretty much anywhere.
Re: Doordash and Pizza Arbitrage
#168Wow, that was great. And honestly good on them for profit-taking on this arbitrage. The author likes to pin this on zero-interest rates ("ZIRP") and that certainly explains why the system is awash with cash but I'd say he's missing a key point here. When I moved to NYC (~10 years ago) I didn't order delivery at all. Honestly it's a huge pain. To call someone up and try and communicate an order to someone who probably…
I honestly don't know if I'm living in a different world than everyone else but I've been ordering food and taking cabs all my life and I've never had to deal with any friction. Like, you call the pizzeria, tell them what you want and then some college student delivers your stuff, and if you order for more than 20 bucks it doesn't cost you anything. Not even being facetious, but what problem do these apps solve?
I also don't know how "not having to talk to someone" is a perk.
Re: Doordash and Pizza Arbitrage
#169Earlier quoted context omitted.
Anyone know if it would be considered fraud and/or illegal to exploit this? I would consider doordash and grubhubs tactics of falsely representing themselves as restaurants to be more unethical. It would be great if someone could scale a solution that would take those arbitrage opportunities and pass them on to the drivers and the restaurants.
Yes, it's fraud. In general, knowingly obtaining money, goods or services you know you are not entitled to is fraud/illegal. Here's an example of someone going to jail for knowingly exploiting a glitch: https://www.inquirer.com/philly/hp/news_update/20071026_N_C_...
Your case is more clear cut because that is a glitch in the website. It seems that in this case Doordash is offering a promotion. Calling that fraud would be like calling taking advantage of reward points fraud.
Re: Doordash and Pizza Arbitrage
#170Very important note (near the bottom of the post) on why Doordash did what they did: > Note 1: We found out afterward that was all the result of a “demand test” by Doordash. They have a test period where they scrape the restaurant’s website and don’t charge any fees to anyone, so they can ideally go to the restaurant with positive order data to then get the restaurant signed onto the platform.
It doesn't fully explain why they priced a $24 pizza at $16. I wouldn't be surprised if they're subsidizing purchases, but just skipping fees doesn't explain that.
"My second thought: I knew Doordash scraped restaurant websites. After we discussed it more, it was clear that the way his menu was set up on his website, Doordash had mistakenly taken the price for a plain cheese pizza and applied it to a 'specialty' pizza with a bunch of toppings."