I've never understood who their market is. Even with coupons, usually 40%-50% of the order cost is DoorDash + tip. I'm just not willing to pay that, I'll eat a can of beans or go back out into the cold instead. Am I just below income for their target market? Is everyone just OK spending this much money on delivery
What happens when the coupons and discounts dry up?
It’s young single people with more disposable income than patience to learn how to cook or motivation to pick up their food themselves. It’s particularly big in cities, where you might be craving a restaurant that is only a mile or two away as the crow flies but can be a huge pain to get to, with or without owning a car.
I agree with you though, the fees are outrageous. When our first kid was born, somebody gave us a Door Dash gift card. I tried to use it one night for a slightly upscale gastropub near us - it was going to be $65+ after all the fees and tips for two burgers to get delivered. Even with a gift card, I couldn’t do it on principal.
My buddy's daughter just moved out of the house for the first time. She has no car or license and doesnt live in a walkable city. She will uber to and from her job, and doordash food ALL THE TIME. I watch young adults on tiktok doordashing just ice coffee. The amount of money these youth are burning up in order not to do things is absurb and unsustainable.
Where is the convenience? The few times I tried it ended up being more hassle than it was worth.
I have a car and a bike. I can just go pick up my own food. It doesn't really take any more time.
The only major use case I can see is for parents with young children. You can't leave small kids home alone, and getting them in and out of cars is a huge hassle. Maybe also for disabled people who have mobility issues.
For me any time savings were negated by late orders messing up my time planning and the need for sometimes communicating with and following up on drivers to see what's going on with my order.
That is exactly why I quit not only food delivery, but grocery delivery as well.
My final Doordash delivery was almost 6 months ago. Only half the order arrived. DD got around to refunding half, but only after playing ping-pong with CS. The quality of their drivers certainly has gone off a cliff in the last year, with a nearly 100% failure rate to deliver the food complete and/or in a timely manner. DD clearly needs to add the ability to rate delivery quality AND hide tip status. They need to take immediate action on low performing drivers by booting them off the service if standards are not met. Right now, they have NO standards.
I also quit grocery delivery. 100% failure rate to deliver an order as charged AND complete ambivalence from management to correct their issues.
Yeah, I tried the curbside grocery thing a couple of times. It's somehow worse than just doing the shopping myself. Now, it could very much be the area I'm in, but I arrived at the prescribed time and still had to wait almost as much time as it would have taken me to do my shopping. And then I got incorrect items or "substituted" items when I said I didn't want the substitution.
I'm pretty wary of third-party delivery services. They give both the establishment and the delivery service outs on mistakes. They can point the finger at each other and not change anything. Places with delivery take on the reputational responsibility of delivering items correct in a timely manner.
There was a period of time in my life where we at home simply did not have the time or energy to cook or drive to pick up food at all, so we were big users of GrubHub. We knew we were spending (i.e., wasting) a ton of money on it, but considering all of the alternatives, it was still the right thing to do. We knew the premium we were paying, and luckily for us as time passed we started having more time again to cook and were able to resume both cooking more at home and also simply driving to pick up food.
At least for me, Uber gives me 5 30-40% off coupons every week. I get a free Uber Pass through my credit card. With plenty of places (some heavily mark up and others do not), you would be better off ordering delivery in the parking lot with those coupons rather than getting it from the counter.
So while I spend a lot on delivery, I save it on the food.
My company gives us credits to order lunch, as it's cheaper and easier than scheduling catering every day.
But yes, other than that I rarely use these services. Before my company offered this perk, for lunch we went to a nearby canteen, where we'd often pay less than half what we (well my company) pays now.
As a frequent DashPass user, the individual menu item prices for almost every restaurant is jacked up on DoorDash (as compared to their in-store price) and there is a service fee added on top that's separate from the comped delivery fee.
I hate this because I want to order take out, which DoorDash doesn't need to be involved in. A ton of restaurants around me no longer take phone orders and so my only options if I want take out is to walk up, order, and wait. Or just suck it up and pay. I mostly take the former (gives you a chance to go grab a six pack).
Maybe it has changed now, but when I was working with restaurants last year, DoorDash had a rule that take out prices had to match what you'd pay if you go into the store and order.
At least with Grubhub plus or whatever it's called, this isn't really true. They put "0 delivery fee" but then still include a "service fee" which is 15% of the order (this is not the tip). Can you confirm DoorDash does not do something similar?
I can value my time at $500/hour, but unless someone is willing to pay me that rate while I wait for my food, then it's just a made-up number. And I don't know about the rest of you, but I'm on salary, so valuing my time by an hourly rate is a pretty poor measure to begin with.
Just as a gut check, getting paid $2/minute would be an annual salary of $240,000 (assuming a 40 hour work week and two weeks paid leave).
On principle, I wouldn't pay $30 for delivery under almost any circumstances. I'm generally not working during the time the delivery would take place, so it's not like I'd be forgoing salary to go pick up take out.
If 1 minute is equivalent to 2 dollars, and you work an average 40 hour work week, that would imply you make $240 an hour. Not representative of nearly all Americans.
I actually did the math wrong. Assuming 8 hours of sleep, you have 350,400 waking minutes every year. So $2 a minute becomes "worth the time" if you make 700 grand a year.
You know Groupon is still alive. I think once these companies get listed they become vehicle for tax offsetting by booking losses. While early investors cashout massively and transfer forward risk to pension funds.
It's pretty convenient if you leave far from restaurants. Last night I ordered and yes it was about 15% more expensive. But I was pretty busy and didn't want to drive and wait in line to get my food.
LinkedIn reports ~42,000 total employees, "Operations" being ~70% of total headcount, "Engineering" being ~5%, "Sales" being ~3% and 20% is marked as just "Others".
As a one time door dash driver, this seems credible. Everytime I needed support, even under stressful circumstances, help was available with speed, ease, and solutions.
That said, driving for Doordash is/was closer to a taking out a loan on my car and time than a job/business.
That's hard to believe - I posted my experience above, but CS there seems to be very heavily automated and frequently an actual chatbot. Getting to CS requires going through a number of UI screens. If they are employing an Amazon-level of CS people, then they're horribly utilized.
There is another side of support that regular users won't interact with, the B2B side of things. Might be that those customers take up more time and CS is oriented towards that side.
This question comes up in every thread about most large tech companies.
I'm genuinely curious, is it impossible to figure out what all those people are doing? Have you worked in a large company before? If not, do you think most are doing nothing?
Article mentions 6%, not sure if that’s a mistake.
> The cuts will affect about 6% of the company’s workforce, a mix of US and non-US based staff, according to people familiar with the matter asking not to be identified as the matter was not yet public. By scaling back headcount, DoorDash aims to curb operating expenses, which topped $2 billion in the third quarter, largely due to stock-based compensation and the absorption of Wolt, the Finnish food-delivery company it acquired last year.
The article says "The cuts will affect about 6% of the company’s workforce, a mix of US and non-US based staff, according to people familiar with the matter asking not to be identified as the matter was not yet public"
“Immigration support: We will set the termination date for March 1, 2023, giving those with visa applications (and a desire to stay in the US) as much time as possible to find a new job”
Every company should do this to help employees on H1B that are laid off.
The standard terms are one of the horrific things about US immigration policy; suddenly uprooting families including kids attending school in the US.
That's by design, the H1B program is similar to illegal immigration like that. Create a underclass of workers that are more vulnerable with less rights and beat the domestic workers over the head with them to drive down wages.
While that might be what's happening in some regards - it definitely wasn't by design. Your giving too much credit to policy builders and far too much weight to cynicism.
Occam's razor can probably finesse your logic on this one. You are adding too much complexity to the origin's of H1B to push your narrative.
Again Occam's razor. Your are applying to much to it.
There's been no push to overhaul H1B as it has little political value for the politicians. I see what people are frustrated about especially those on H1B but I don't think it is some cynical reason by the politicians - its more that it has little to gain for them.
It's a non-voting group of people and it isn't a large enough issue for any of their voting base.
It is not some weird theory about keeping H1B an underclass and putting downwards pressure on domestic employees.
But it will cause them a loss from the big donors that do benefit from H1-B people having less negotiating power, which is why the cynicism is warranted.
“Occam’s razor” is for situations where something is happening unintentionally. There exists intention here, however indirect.
Occam's razor: "It is generally understood in the sense that with competing theories or explanations, the simpler one, for example a model with fewer parameters, is to be preferred."
The mass of people who provided popular, democratic support for visa restrictions were motivated by the nativist concern of protecting American workers from foreign competition. You can always attribute popular sentiment to mustache-twirling elites pulling the people's puppet strings, but there's no getting around the widespread, populist fear that American workers would lose their jobs to foreign, racial others who were inhumanly smart and/or inhumanly hard-working and/or willing to live in inhuman conditions.
Liberal economic elites would have preferred unrestricted, laissez-faire access to technically skilled immigrant labor rather than being forced to deal with the caps, lotteries, and bureaucracy associated with the H1B program.
> The mass of people who provided popular, democratic support for visa restrictions were motivated by the nativist concern of protecting American workers from foreign competition.
Why would they support H1-B then? It is literally increasing supply of workers who have less negotiating power than the “mass of people” I presume you are referring to. Surely they would be better off with immigrants whose legal status was not tied to employers.
A common refrain you will hear is "Americans don't want to do those jobs", but what that misses is if you gave a immigrant the same rights and opportunities as a citizen they won't want to do that job either (at the price and on the terms offered). Relatively open ended immigration programs with minimal restrictions are defensible, but this caste system is not.
> It is literally increasing supply of workers who have less negotiating power than the “mass of people”
It restricts the number of workers that are able to work in the U.S., and forces companies to jump through hoops to hire them. The idea was that companies would be forced to hire American workers whenever they were available, and only rely on foreign workers as a fallback. Obviously corporations were able to somewhat neuter the law so that it wasn't as much of an obstacle as it was sold as.
> less negotiating power
Protectionists were convinced that foreign workers would undercut them by working harder for less money in worse conditions; the idea of foreign workers actually helping improve working conditions would have sounded ridiculous (if not faintly sinister) to them.
> It restricts the number of workers that are able to work in the U.S., and forces companies to jump through hoops to hire them.
Restricting workers would be denying them entry into the country to work in the first place. And forcing companies to jump through hoops simply means instead of lower paying employers taking advantage of the visa, higher paying employers take advantage. Either way, there is going to be an increase in labor supply of people willing to work for lower wages (since they cannot shop for other employers), and that negatively effects all workers.
I think you're talking about the truth of the matter, but I'm talking about what motivated the creation of the program in the first place. Economic liberals wanted unrestricted access to labor regardless of borders, protectionists in the U.S. did not want to compete against labor from other countries, and the H1B visa program came out of that conflict.
I admire this approach, but I am a bit worried that making big public announcements of doing so will trigger a crackdown (especially if Stephen Miller or his ilk are ever in charge of US immigration policy again).
> Immigration support: We will set the termination date for March 1, 2023, giving those with visa applications (and a desire to stay in the US) as much time as possible to find a new job.
I wonder if USCIS will be satisfied with this termination date in 3 months without any actual employment relationship in between with DoorDash
I have the same thought. As an immigrant, as much as I appreciate this, I wonder if
- it is borderline illegal and get attention from USCIS. By extension, does this mean that companies can set arbitrary last date
- if it opens up possible loop hole where employee can demand for more severance stating the severance should start after last date
On further thought, the proof of employment is generally through the Paystub. So employers can probably set the last date until the last day of severance.
In the very immediate term: announce the same time you block access. Leaving people in limbo overnight is a shitty move.
In the longer term: announce layoffs ahead of time. Ask if anyone wishes to take voluntary redundancy. In general, make sure people aren’t going to be totally blindsided by losing their job.
> In the longer term: announce layoffs ahead of time. Ask if anyone wishes to take voluntary redundancy. In general, make sure people aren’t going to be totally blindsided by losing their job.
This isn't a great idea from a management perspective. The people who are willing to take severance voluntarily are the people who are most confident that they can find something else, which means they're the people you want to keep. It also assumes that layoffs are overall headcount reductions and not targeted in specific areas. For example with the Amazon layoffs, they wouldn't want people in AWS to leave since they're primarily targeting the Alexa/Echo divisions.
And if you went into Alexa/Echo and said "so we need to reduce headcount in Alexa/Echo, any volunteers?" you'd cause massive panic and distraction in that division.
Management saying "we're going to announce layoffs in a month" means that in addition to the pain that comes with getting laid off, there's also an additional month prior to that where people are stuck in limbo, "am I safe? am I on the chopping block? Should I start job hunting?" And since you're still employed, you still have to do your normal full-time job for 40 hours a week, on top of searching for a new job. It'd be incredibly stressful.
The reality is that there is no scenario where an employee who gets laid off will feel good about it. Getting a respectful, professional termination notice with generous severance is about as good as it gets.
I'm surprised Microsoft 365 and friends don't offer "layoff mode" where you can mark an account as "laid off" and immediately it is read-only and all access to everything is removed except the ability to read one email; the layoff email.
Good in theory, but most people at these companies are accessing their work email through a work-controlled device, and that work device should be locked and inaccessible to employees when they're laid off. So they'd have to log into their work email on a personal device, which if you've set up MFA can be a nightmare, especially if people set up their MFA using a work 1Password/Lastpass/etc account, since they no longer have access to that, either.
Logistically it's a lot easier to just have a personal email on file where you can send the termination notification.
Even the setup that locks a work device (and I feel the dirty secret these days is often people are using personal laptops for work or work laptops for personal use) should be able to display an email-length message.
Yes - anything that locks the device entirely should replace the login screen with a banner - update this basically: https://i.stack.imgur.com/eFcDS.jpg
I know I've seen one with a contact email for if it's lost.
Gonna be very unpopular here, but the sooner gig companies like Uber and DoorDash collapse, the better. The business model of these so-called unicorns is effectively a Ponzi scheme where the end goal is for early investors to cash out with the IPO. However, unlike a Ponzi, these companies also rip off their contractors so most restaurants and drivers actually lose money by being involved with their "service". Straight-up middlemen who skim off the top behind a veneer of tech that can't even turn in a profit.
Build a real business. If you can't be profitable without eliminating all the competition by first undercutting them, then jacking up prices on users, then you shouldn't exist
Will just focus on Uber, but I don't agree with this at all.
Has everyone had amnesia about how horrible the general taxi model was before Uber? I can't count the number of times I was blatantly overcharged (e.g. in DC with their braindead "zone" system before they switched to meters) or took an egregiously out-of-the way route, or the cab was filthy, or it just didn't show up when I had scheduled (and I had no way to see where the cab even was), etc. With no feedback loop/rating system there was 0 incentive for cabs to improve their service.
I agree that the VC funding model has resulted in things being grossly mispriced, but even if rides got significantly more expensive, the improvements Uber brought to the rides-for-hire model were huge and everyone just forgets how much people generally hated the taxi experience before they showed up.
Totally agree on Uber/Lyft. Taxis were / are awful in pretty much every place I've been (maybe not Germany). I don't agree with all the shitty tactics that these companies use to seduce drivers or the opaque pricing systems they have but they have improved on the taxi experience.
For DoorDash and the ride-sharing companies I really wish there were some sort of localized non-profits that provided these services with none of the underhanded and sleazy tactics these companies use to try and achieve profitability.
> For DoorDash and the ride-sharing companies I really wish there were some sort of localized non-profits that provided these services
In Austin, TX there actually was, it was called Ride Austin. In 2016 Austin voters passed a resolution requiring drivers to be fingerprinted, so Uber and Lyft left until the city was overruled by state government about a year later (this happens all the time - Austin passes some liberal ordinance that the conservative state government later rescinds).
In the time that Uber and Lyft were gone, we had lots of services that popped up to try to take their place, and Ride Austin was probably the best known. I liked it - it paid drivers better and there was an option to contribute to local charities. It was a non-profit but I believe it was essentially kicked off by a local tech billionaire (Joe Leimandt, who has been featured on other stories on HN). But that said, the app and service were never as good as Uber/Lyft, and though I tried to support them when Uber/Lyft came back, they weren't really able to compete and eventually closed down.
Thus, as much as I like the idea of a local nonprofit providing this service, I think the Ride Austin example is as good a one as any to show why it's not really feasible.
While they may be an exception, taxis in Las Vegas are legit from my experience.
I usually use Uber/Lyft because it works most places, but the ride-share experience in Vegas was horrible. However, every casino/resort has a taxi queue. And those guys don't fuck around. They'll get you where you want to go, avoid major traffic, and the taxis were in decent shape.
Will just focus on Uber, but I don't agree with this at all.
I actually agree with both of you! If I'm evaluating Doordash and the Uber Eats services, I think the OP is completely correct that the world would be better off without them.
If I'm evaluating Uber the ride sharing service, I think you are completely correct that it has improved ride service dramatically.
>Build a real business. If you can't be profitable without eliminating all the competition by undercutting them then jacking up prices, then you shouldn't exist
This was a major part of the playbook of Standard Oil; I would consider them a real business.
>The business model of these so-called unicorns is effectively a Ponzi scheme
"Ponzi scheme" has been thrown around flippantly lately, and I think your comment is perfect example of that.
I think it's a safe assumption that significantly more people order food from local restaurants than they did before DoorDash existed. So they did create a real market with a real product. It's not a 'box' that SBF would be proud of.
>but the sooner gig companies like Uber and DoorDash collapse, the better.
This I agree with, but for different reasons. These apps price their services artificially low by charging high fees to restaurants, underpaying drivers (forcing them to live on tips), and by- at times- subsidizing prices with investor money to keep them artificially low.
Overall, I think it's a crappy business model that doesn't deliver much value. But that's just my opinion.
> eliminating all the competition by undercutting them then jacking up prices
Standard Oil resulted in lower prices for consumers. They had a patent on railcars designed for hauling oil so their competition had to load and unload barrels on to standard railcars and that was much more expensive to do. Any monopoly they had was explicitly enabled and enforced by the US government, via the patent office. After they were broken up, prices for consumers went up.
>I also think Standard Oil shouldn't exist. In fact, so did the US government in a landmark antitrust case that you may have heard of.
Agreed, but "should/shouldn't exist" wasn't the argument. The initial argument was "if you use this strategy, you're not a real business" which I think is false.
Distasteful, destructive, and something that should be illegal- sure.
Ponzi scheme, doomed to fail, not a real business tactic- no.
At this point we're both mostly into semantic territory. You focused on the beginning of the statement ("real business"), I focused on the end ("shouldn't exist"). I don't think a business that is only viable due to illegal pricing schemes is a real business, but that's also just semantics.
Speaking of.
> should be illegal
Predatory pricing for the sake of driving competitors out of business to establish dominant market power is illegal, setting aside that the gradual erosion of enforcement means that antitrust law functionally no longer exists in the US.
The original argument is
"If you can't be profitable without eliminating all the competition by first undercutting them, then jacking up prices on users, then you shouldn't exist"
Standard oil was profitable and they were able to afford undercutting the competition. That maneuver was too gain complete control over a diverse, vibrant market. Gig economy companies have never been profitable, and the only way they can be profitable is to increase prices to the point where consumers will stop using them.
Also, unlike Standard Oil, these unicorns are a Ponzi scheme. They provide a real service, sure. But the only way they were able to provide that service was to keep increasing their private-market valuation, with the next investor saying "I'm in, because next time they raise, it'll be at a higher price". What happens after every one of these gig companies went public? The private investors cash out, and the stock collapses.
>This was a major part of the playbook of Standard Oil; I would consider them a real business.
True, and unlike modern VC-bacjked companies they didn't lose money in the others. BUT they were hit pretty hard with anti competitive legislation and were broken up as a result of these practices.
>Ponzi scheme" has been thrown around flippantly lately, and I think your comment is perfect example of that
We can agree to disagree, and I welcome you to a post about the subject from 2017 that pretty well explains my viewpoint (not my article) [1]. It's about Uber, but applies to all the recent IPO darlings
> it's a safe assumption that significantly more people order food from local restaurants than they did before DoorDash existed
What's your assumption based on? I figure it's either flatline or maybe had an impact on dining rooms. Either way, I have no data to back it up, but if you do I'd very interested.
>This I agree with, but for different reasons.
How is it different? They run an unprofitable business that rips off everyone involved and is subsidized by investors who were suckered into thinking this is a real business.
Anecdotal. Seeing restaurants that no longer do sit down and only do delivery, plus the creation of the ghost kitchen market. I also have no data, so I can't really defend this point. Just an observation.
>How is it different? They run an unprofitable business that rips off everyone involved and is subsidized by investors who were suckered into thinking this is a real business.
The point I was making is that the food delivery marketplace is a real business that delivers real value, just a sucky one with unclear value. Your comment seems to outline that you think it's built on hype and sucking in future money to pay past investors.
The fact that Lyft can, at times, be profitable disproves your point.
>"Anecdotal. Seeing restaurants that no longer do sit down and only do delivery, plus the creation of the ghost kitchen market. I also have no data, so I can't really defend this point. Just an observation."
Can you say what city you are seeing restaurants that don't do sit down and only do delivery? Are these brand new restaurants? I can't imagine anyone that was already paying rent for a dining room turning people away. I also find it hard to imagine that a delivery only restaurant would be operating in a place that has good foot traffic as that is usually factored in to the rent since it means access to walk-in customers.
Lastly has the "ghost kitchen" market actually taken off? What brand recognition is there in that market?
> "Ponzi scheme" has been thrown around flippantly lately, and I think your comment is perfect example of that. [...] It's not a 'box' that SBF would be proud of.
Even SBF's magical box is not technically a Ponzi. Often times these scams are simply pump-and-dumps.
>"I think it's a safe assumption that significantly more people order food from local restaurants than they did before DoorDash existed."
Why is it safe to assume that? Do you have actual data that backs that up? The presence of delivery drivers says nothing about the number of people that previously picked up their orders.
>'"Ponzi scheme" has been thrown around flippantly lately, and I think your comment is perfect example of that.'
How is that a flippant comment when the article we are commenting on states:
>"Competition in the sector has only intensified and the company has spent heavily to sustain growth by expanding its footprint in non-restaurant categories like convenience store items, groceries and alcohol. Last year, DoorDash spent $8 billion to acquire Wolt to increase its international presence."
The article then further states:
>"Under generally accepted accounting principles, however, DoorDash is unprofitable. The company reported a loss of $296 million compared with $101 million a year earlier during the third quarter."
How are those sums of money sustainable? Isn't that one of the defining characteristics of a ponzi scheme is that it is not sustainable?
>"So they did create a real market with a real product."
It's increasingly looking like that "market" was created by the pandemic. From a Deutsche Bank analysis of the company:
>"Deutsche Bank says that DoorDash drivers made 44% more deliveries in an hour at the height of last year’s pandemic lockdowns compared with three years earlier."[1]
And:
>"An average DoorDash order during the pandemic cost the customer almost $36, out of which the delivery company made less than $1 in profit."[1]
I think if you consider these paper-thins margins and the eye-popping sums being spent by Doordash to "sustain" growth" all while losing hundreds of millions of dollars a years, then "ponzi" is maybe not such a flippant comment.
I'm guessing they don't have another $8 billion to spend in order to acquire more growth which is why they are doing layoffs. Current market conditions would also suggest that would have trouble getting access to that kind of capital given those numbers above.
> Build a real business. If you can't be profitable without eliminating all the competition by undercutting them then jacking up prices, then you shouldn't exist
It's all so amazing to me. You take a incredibly profitable aspect of small businesses, turn it into a big business, lose all the profitability and hurt almost everyone involved, with the end goal being the ponzi cash-out or the automation of the entire sector leading to massive unemployment issues.
There should be some reasonable limits on this type of dumping. It might be just allowed for first 3 or so months in new area. Or once a quarter limited duration campaigns.
But otherwise it should result in banning operations for a while.
The unit economics never made sense. None of the founders of these companies could ever explain how these things were supposed to be profitable without the hand waving. And it was up to everybody else in the company to make them be. Speaking from the first hand experience. So I too can´t wait for this gig economy bubble to pop.
Autonomous delivery isn't quite hand-waving, but it also still seems to be a ways off. I can certainly see an argument for "autonomous drones will pick up food and deliver it without the expense of a human driver" ... I'm not as sold on "we have to build a food delivery brand with human drivers and lose billions so we'll have an established brand once autonomous delivery becomes a reality".
I've never understood why everyone says this. What's so costly that delivery and rideshare services can never be profitable?
The cost to Uber or Doordash to provide one delivery must be practically nothing. Sure, they have large overheads, but once they have all their infrastructure going, each delivery is what, for them - a few database requests? How is that so expensive?
Here’s what people miss (for a crowd so anti-MBA, they could benefit from a few online classes)
Where these businesses aren’t profitable at the unit economics level it’s because they are trying to gain share of the total addressable market
Someone who lives in a city and tips generously on orders/rides is certainly profitable, but there’s only so many of people like that and in the current environment, incentives are skewed to be a large high-share company.
So these companies then try and make the service work for people in the suburbs, people who are more cost conscious, etc.
The general rule of thumb for consumer tech businesses is that as you grow, the quality of the incremental user gets worse and more expensive to acquire, but due to economies of scale, that can sometimes work out (a great metaphor for this is the mainline airlines missing out completely on the Southwest/Spirit/Frontier/RyanAir market segment)
So to your point, Uber and DoorDash can 100% be profitable businesses (much to the chagrin of GP), but from a strategic standpoint, management needs to run the company in a way that strikes the balance between gaining as much share as possible without burning too much cash (which leads people to believe that unit economics are broken when they are certainly not).
That’s not to say some businesses don’t have broken unit economics, but anyone who actually track DASH and UBER isn’t worried about whether the core product can ever achieve profitability (they already have), it’s just a question of how big is the market for customers with good unit economics (probably less than previously assumed!)
> Here’s what people miss (for a crowd so anti-MBA, they could benefit from a few online classes)
> Where these businesses aren’t profitable at the unit economics level it’s because they are trying to gain share of the total addressable market
I don’t think anyone’s missing that. That’s just a restatement of what people in the thread have been describing as broadly using VC money to undercut people with actually profitable unit economics and drive them out of business.
>Gonna be very unpopular here, but the sooner gig companies like Uber and DoorDash collapse, the better. The business model of these so-called unicorns is effectively a Ponzi scheme where the end goal is for early investors to cash out with the IPO. However, unlike a Ponzi, these companies also rip off their contractors so most restaurants and drivers actually lose money by being involved with their "service". Straight-up middlemen who skim off the top behind a veneer of tech that can't even turn in a profit.
Build a real business. If you can't be profitable without eliminating all the competition by first undercutting them, then jacking up prices on users, then you shouldn't exist
There is no moat. How many people are "loyal" to uber/dd/etc? Most people just order from whoever is cheapest.
Therefore, it is a race to the bottom and you have to spend tons of money on marketing/promotions to gain customers. The app with the deepest investor pockets will win out.
If there was only one app for delivery and they didn't have to spend any money on marketing/promotions then I bet they could offer a profitable service for a reasonable price.
There’s a moat, but not a big one: Smaller restaurants aren’t going to have the appetite to integrate with many different delivery services. If (big if) you can get a critical mass of those, then you can sell that service to chains that would otherwise do their own delivery.
What's expensive for them is a bunch of things that really shouldn't be part of their business anyway.
Marketing.
Setting price markups.
Researching new technologies to do God knows what.
The only expense that makes much sense is app development, and honestly, that sounds like it should be done by another company. Just expose an API and let restaurants and their partners handle the UI layer. There are tons of lightweight ordering platforms that could easily plug into a delivery service service.
Doordash doesn't even do a good job at it. The tech is awful. The website is slow; on mobile, it's so slow it's unusable. Payment issues require you to open dev tools to see actual actionable errors returned by the server.
Strongly agreed that these gig companies, at least in their current form, can die as quick a death as possible.
Why do folks have such different experiences with these things? Me and some friends I regularly hang out with regularly use door dash to get food for all of us. We're all web devs and fairly picky about website speed and no one has ever had any problem with the doordash app. Maybe some weird things with edge cases with restaurants that have combinations of sides/options that don't fit the doordash ui well, but not general slowness.
I would most definitely not want Doordash to die a quick death and I'm sad that you do! If not for their existence it would probably be too much trouble to do the research about restaurants in our area that are open, what their food is, how to order, then place the order via whatever novel phone or buggy online ordering system they've set up. We'd probably just end up ordering Domino's every week instead of what we do now which would be worse for everyone!
If you're using the app, that might explain the difference. I'm using the mobile web interface and it's so slow that they've lost sales from me before - not because I got frustrated and stopped, but because it took 10+ minutes to put together an order and the restaurant stopped taking orders before I could get it in. This has happened multiple times.
The desktop web interface is slow enough to be irritating but not so slow it's unusable.
Finding open restaurants with Google Maps is pretty easy. They have a specific option for "is currently open", and menus are frequently linked right from the business's listing.
Agreed their tech is awful. Website is painstakingly slow. I order on mobile using their website directly instead of the app, and they have some lame bugs on their homepage.
Cannot comment on gig companies dying out but this company is so overrated.
And yet still can't turn a profit, it's really amazing.
It would be one thing if I were sitting here going, "Well that makes sense you can't deliver a $12 hamburger for $10" but every time I use DoorDash it's "Somehow this $12 hamburger is listed as $18 and when I went to check out with service fees and tip it's going to be $40..."
You do see the difference, right? Two of those things are properties of the restaurant itself.
DoorDash is an entirely separate party. Technically, without any one of those parties, DoorDash doesn't work but network effects can force one party to use a substandard service. Hell, even two of the parties.
But if it's bad for all three. And there's other services like DoorDash? How does DoorDash stay afloat?
I wouldn't ask for Uber to collapse since they have different verticals now. One of my friends currently works at Uber and has disclosed to me that their business lines are doing good even in this sluggish market.
The problem with these food delivery apps is, there are way too many parties to be paid a reasonable amount of money here and customers aren't willing to go beyond a specific limit of premium. Turning a profit is hard - even after punishing restaurants with 30%+ commissions, pushing "service fee" and other regulatory fee upon customers, and even after "stealing" drivers' tips.
This company shouldn't have grown so much really. It all feels so hyperbolical with them raising so much investor money and hiring thousands of tech workers. AFAIK they've always relied upon investor money to pump and inflate numbers and acquire new customers with massive marketing spend.
While there are some that will disagree, that is really not an unpopular opinion, aussuming
> like Uber and DoorDash
stays in there as a caveat, with
> If you can't be profitable without eliminating all the competition … first … then you shouldn't exist
being the salient point.
Disrupting by being better, and the market evolving to account for the new method being better, is fine. That is one of the ways we improve over time. Disrupting by killing everything else even if your method is not generally better in the long run is a different proposition entirely.
---
As side note: I do object to “ponzi scheme” becoming a phrase that just means any scam where someone wins and everyone else likely loses. This may be scammy behaviour, but it definitely isn't a ponzi scheme.
the selling point to VCs and investors was that they would burn cash to acquire a customer base and then self-driving cars would allow them to cut their costs and print money. That obviously didn't work out and even if it had the big players like Google or even Tesla would have eventually rolled out cloned delivery programs with their own self-driving tech and beat them
they really never should have been valued as tech companies, they are basically commodity transport companies like airlines who will at best have razor thin margins
Door Dash is a fake company that couldn't even be profitable when we were all stuck inside our homes with no restaurants to go to., but that huge number is obviously inflated to include all of the actual active dashers. Pretty much every Uber, Lyft, GrubHub driver also is a registered dasher.
It turns out that it's expensive to have someone on a living wage wait on you hand and foot and satisfy your every convenience. Consumers aren't willing to pay what it actually costs when the investors start wanting to see a profit.
They need to really work on some things. I had DashPass basically from the beginning of COVID until a month or so ago.
The first year or so it was decent. But the past year to year and a half I started having way more issues with dashers and restaurants, either stealing items or forgetting them from an order. Not exaggerating on the stealing; there were a couple times I followed the dasher to their car and saw them drinking or eating the item from my order and they wouldn't respond to me. It was pretty ridiculous. And then at some point Doordash changed their customer support to be at least partially automated and it meant sometimes when they would credit me it wasn't the same amount of whatever I didn't get, and I had to jump through hoops to get that resolved.
Super odd to see the company slashing jobs when they had block buster IPO last year. Puts into question what did DoorDash do after generating huge amount of funds during the IPO. They should have stored the funds to weather through the storm right now instead of slashing jobs and hindering company's growth!
> They should have stored the funds to weather through the storm right now instead of slashing jobs and hindering company's growth!
This makes no sense. The whole reason DoorDash is cutting jobs is because, like pretty much everyone else cutting, they originally hired a lot to maximize growth potential during the environment that existed last year. That environment turned out to be temporary, so now they are laying people off because they fundamentally can't support a workforce that size in today's environment.
No company wants to be overstaffed (and, honestly, working at an overstaffed company sucks) if they don't think there will be a quick ramp up in business to give those people something to do.
Who knew that remote work benefits tech companies, as their own end users get to spend more on their own apps. Yet there are tech companies advocating against remote work.
> They should have stored the funds to weather through the storm right now instead of slashing jobs and hindering company's growth!
Maybe they're doing both, storing the funds and slashing jobs; what's left to "grow"? They followed the stereotypical model thus far
1. Operate at a massive loss on VC funds under the guise of user growth and acquisition
2. IPO at the peak
3. Figure out how to become profitable with a realistic business model or watch your valuation plummet
They're at Step 3 right now and they haven't figured out how to make a profit yet
Most of their funding has been shadow funding in the form of the residual value of their drivers' cars. It's a gigantic invisible input, an aspect of the business shared with Uber and Lyft.
This isn't feudal Japan and you don't have to commit seppuku for a mistake. The executives report to the CEO and the CEO to the board, and the board to shareholders. There is a process to hold management to account.
I use doordash too much. But last night I ordered $20 food and it came to $50, and I have dashpass. I don't know what they are doing but they aren't going to last long like this
Has anyone had a horrible time with DoorDash recently? Every single time I order stuff is missing, order is MUCH later than promoted, and customer service is awful. I had a dasher leave an order leave a pile of stuff outside my building, and customer service won't help because the incident was more than 3 days ago.
CS also seems to be _heavily_ automated - you can tell that you're rarely talking to a human being. It used to be the best delivery app, now it's streets behind Uber Eats.
I just call my orders in and pick up now. The prices in-restaurant aren't even close to what is on door dash and the likes menus anymore, it's gotten ridiculous. Then there's all the fees and tips added on top. If it's just myself ordering (which it usually is, if I'm with friends we actually just go out to eat!), the overhead on a single-person order is around 40%. I hate all these online platforms now, it feels like a constant ripoff, like Airbnb and all the cleaning fees..
They’ve just pivoted to what prices need to be to be a profitable business. Previously everything was being subsidized to promote growth. It would appear those Hindenburg days are sone until a new food delivery startup with a fresh gimmick is able to convince investors to subsidize growth again.
Food delivery and courier services have both existed for a long time and worked quite well. The business model is entirely sustainable if you don't position yourself as a VC startup and light cash on fire in the way that VC startups are expected to.
The service wasn't being subsidized. The company was.
Yes, but as you’ve pointed out not at their desired multiples.
The history of the concept goes line this:
1) Some restaurants begin offering delivery for a fee as a service to busy customers.
2) Restaurants figure out free delivery is a great loss leader and make it up on volume.
3) Seamless figures out they can centralize the menus of these companies using the Web. Restaurants still handle the delivery themselves and pay Seamless a small referral fee.
4) DoorDash innovates on this by vertically integrating the delivery aspect themselves allowing scale and access to restaurants that did not previously offer delivery.
5) DoorDash begins the process of “delivery arbitrage” betting people will pay more for individual items if delivered.
6) Ghost Kitchen are invented to vertically integrate the restaurant into the service. This bets that people are price sensitive to delivery fees/arbitrage.
It's because DoorDash didn't want to be a courier service, they wanted to run arbitrage on restaurant food. The courier service was just a way to get you to use their app with their prices.
> Every single time I order stuff is missing, order is MUCH later than promoted, and customer service is awful.
How much of that is Doordash specific though. Sounds like restaurant issues. I could see the underestimate (I believe, at least, with some systems the wait time is manually controlled by the restaurant) as a means to get people to pick Doordash thinking it leads to a quicker meal.
So, they are unlikely to grow the market (it is more likely to shrink as people cut back on this relatively expensive way to get food), they are unlikely to grow market share (they are already one of the biggest players in the restaurant delivery market), and they are currently unprofitable, and always have been. I don't see what is going to keep them from just burning through the cash they have, then eventually shutting down. What am I missing?
I too found it surprising. DoorDash has always been _fundamentally_ unprofitable with their business model. The fact they are doing layoffs rather late into the first layoff cycle seems like it's completely on a whim. Not much of their macro vision of continually losing money has changed.
The fact that DoorDash was unable to turn a profit during the height of the pandemic is very telling: it's just a bad business model. Maybe they should get into people-carrying business to diversify? /s
On a more serious note, there is real value-add for small restaurants as it allows them to offload the delivery part of their business - and focus on the food preparation. But that could be localized and/or turned into a SaaS product.
Can someone clarify why DoorDash and Uber can't turn a profit?
My guess is that paying enough for drivers on top of food delivery makes the food so expensive, there's no margin left to turn a profit from. If you charge enough to make a profit, no one will order food delivery since it's too expensive. Is that correct?
1) Delivery businesses only make sense in dense urban markets. Think vertical Asian cities. You can deliver on foot, bicycle, or moped to multiple customers at once.
2) Low prices to drive growth at all costs instead of a fair price and slow growth as they serviced a small set of niche customers.
1. Is spot on, these types of businesses really only make sense in a few North American markets, ie NYC.
The other issue is that to actually provision enough service to meet customer expectations on availability and speed, you need to economically over provision your workforce.
Cities used to restrict the supply of taxi drivers intentionally in order to maintain driver wages.
What are y'all talking about? There's been food delivery in the suburbs for pretty much as long as we've had phones and cars. It's perfectly viable as a business. It's just not a 100 billion dollar business.
It’s been a fairly limited enterprise to specific cuisines with limited competition. Flooding the market with supply and including restaurants who aren’t oriented directly towards a delivery model destroys margins.
They can rot in hell. I ordered a pizza the other day, and it went from a $15 pizza, to a $40 + tip endeavor. Fuck that. First and last time I used their service.
I just don't understand a comment like this. They show prices up front. The way to combat this business model is to not use these services, but you still paid $40 for a pizza.
I was sick, couldn't leave my room, all the deliveries in my area were pointing to use the doordash app since now they were a "Proud Partner of doordash". A normally $15 pizza ended up being $40 (More than double). I paid for it because I HAD NO OTHER OPTION.
Just because the price was upfront, doesn't mean they are not terrible practices that fuck their consumers.
What happens when the coupons and discounts dry up?
I agree with you though, the fees are outrageous. When our first kid was born, somebody gave us a Door Dash gift card. I tried to use it one night for a slightly upscale gastropub near us - it was going to be $65+ after all the fees and tips for two burgers to get delivered. Even with a gift card, I couldn’t do it on principal.
I have a car and a bike. I can just go pick up my own food. It doesn't really take any more time.
The only major use case I can see is for parents with young children. You can't leave small kids home alone, and getting them in and out of cars is a huge hassle. Maybe also for disabled people who have mobility issues.
My final Doordash delivery was almost 6 months ago. Only half the order arrived. DD got around to refunding half, but only after playing ping-pong with CS. The quality of their drivers certainly has gone off a cliff in the last year, with a nearly 100% failure rate to deliver the food complete and/or in a timely manner. DD clearly needs to add the ability to rate delivery quality AND hide tip status. They need to take immediate action on low performing drivers by booting them off the service if standards are not met. Right now, they have NO standards.
I also quit grocery delivery. 100% failure rate to deliver an order as charged AND complete ambivalence from management to correct their issues.
I'm pretty wary of third-party delivery services. They give both the establishment and the delivery service outs on mistakes. They can point the finger at each other and not change anything. Places with delivery take on the reputational responsibility of delivering items correct in a timely manner.
Their growth stalls and they fire 1,250 employees as they rethink their business plan starting next week.
So while I spend a lot on delivery, I save it on the food.
It's hard to see how these services would viably bring in customers without the discounting.
But yes, other than that I rarely use these services. Before my company offered this perk, for lunch we went to a nearby canteen, where we'd often pay less than half what we (well my company) pays now.
It all adds up.
Still, the model seems broken for me. I can get unlimited 5,9€ deliveries for 0.8€ and 10€/month... How does that make any business sense...
Subtotal $24.45 (total cost of the items as listed on the store page)
Delivery Fee $0.00 (would've been non-zero without Dashpass)
Service Fee $1.22 (annotated as "This reduced service fee of 5.0% with DashPass helps us operate DoorDash." Would've been $3.18 without Dashpass.)
Estimated Tax $2.56
Dasher Tip $3.50
Total $31.73
I can afford it, sure, but am I going to pay a 50% premium for it? No
I consider 1 minute ~= $2. So if Doordash saves me 15 minutes, then that's worth $30.
On principle, I wouldn't pay $30 for delivery under almost any circumstances. I'm generally not working during the time the delivery would take place, so it's not like I'd be forgoing salary to go pick up take out.
1. Stomping out Grubhub and similar with massive spend.
Then...
2. Somehow profiting off of DashPass
Or is it that you have a cheaper alternative?
EDIT: https://www.macrotrends.net/stocks/charts/DASH/doordash/numb...
Looks like in 2021 they had ~8600 employees, and the article says the layoff is only ~6% of employees - meaning they had ~20,000?
Their 2021 10-K document says "HUMAN CAPITAL Employees As of December 31, 2021, we had over 8,600 employees worldwide"
I'm genuinely curious, is it impossible to figure out what all those people are doing? Have you worked in a large company before? If not, do you think most are doing nothing?
> The cuts will affect about 6% of the company’s workforce, a mix of US and non-US based staff, according to people familiar with the matter asking not to be identified as the matter was not yet public. By scaling back headcount, DoorDash aims to curb operating expenses, which topped $2 billion in the third quarter, largely due to stock-based compensation and the absorption of Wolt, the Finnish food-delivery company it acquired last year.
Every company should do this to help employees on H1B that are laid off.
The standard terms are one of the horrific things about US immigration policy; suddenly uprooting families including kids attending school in the US.
Occam's razor can probably finesse your logic on this one. You are adding too much complexity to the origin's of H1B to push your narrative.
There's been no push to overhaul H1B as it has little political value for the politicians. I see what people are frustrated about especially those on H1B but I don't think it is some cynical reason by the politicians - its more that it has little to gain for them.
It's a non-voting group of people and it isn't a large enough issue for any of their voting base.
It is not some weird theory about keeping H1B an underclass and putting downwards pressure on domestic employees.
But it will cause them a loss from the big donors that do benefit from H1-B people having less negotiating power, which is why the cynicism is warranted.
“Occam’s razor” is for situations where something is happening unintentionally. There exists intention here, however indirect.
Liberal economic elites would have preferred unrestricted, laissez-faire access to technically skilled immigrant labor rather than being forced to deal with the caps, lotteries, and bureaucracy associated with the H1B program.
Why would they support H1-B then? It is literally increasing supply of workers who have less negotiating power than the “mass of people” I presume you are referring to. Surely they would be better off with immigrants whose legal status was not tied to employers.
>Relatively open ended immigration programs with minimal restrictions are defensible, but this caste system is not.
Yes, that was my point. The only population benefiting from H1-Bs reduced negotiating power due to their immigration rules is business owners.
It restricts the number of workers that are able to work in the U.S., and forces companies to jump through hoops to hire them. The idea was that companies would be forced to hire American workers whenever they were available, and only rely on foreign workers as a fallback. Obviously corporations were able to somewhat neuter the law so that it wasn't as much of an obstacle as it was sold as.
> less negotiating power
Protectionists were convinced that foreign workers would undercut them by working harder for less money in worse conditions; the idea of foreign workers actually helping improve working conditions would have sounded ridiculous (if not faintly sinister) to them.
Restricting workers would be denying them entry into the country to work in the first place. And forcing companies to jump through hoops simply means instead of lower paying employers taking advantage of the visa, higher paying employers take advantage. Either way, there is going to be an increase in labor supply of people willing to work for lower wages (since they cannot shop for other employers), and that negatively effects all workers.
Personally, I find the health benefits extension to be much more meaningful
I wonder if USCIS will be satisfied with this termination date in 3 months without any actual employment relationship in between with DoorDash
On further thought, the proof of employment is generally through the Paystub. So employers can probably set the last date until the last day of severance.
In the longer term: announce layoffs ahead of time. Ask if anyone wishes to take voluntary redundancy. In general, make sure people aren’t going to be totally blindsided by losing their job.
This isn't a great idea from a management perspective. The people who are willing to take severance voluntarily are the people who are most confident that they can find something else, which means they're the people you want to keep. It also assumes that layoffs are overall headcount reductions and not targeted in specific areas. For example with the Amazon layoffs, they wouldn't want people in AWS to leave since they're primarily targeting the Alexa/Echo divisions.
And if you went into Alexa/Echo and said "so we need to reduce headcount in Alexa/Echo, any volunteers?" you'd cause massive panic and distraction in that division.
I know, I don't really care. It's more about caring on a human level.
The reality is that there is no scenario where an employee who gets laid off will feel good about it. Getting a respectful, professional termination notice with generous severance is about as good as it gets.
Logistically it's a lot easier to just have a personal email on file where you can send the termination notification.
I know I've seen one with a contact email for if it's lost.
Build a real business. If you can't be profitable without eliminating all the competition by first undercutting them, then jacking up prices on users, then you shouldn't exist
[Edited the last sentence for punctuation]
Has everyone had amnesia about how horrible the general taxi model was before Uber? I can't count the number of times I was blatantly overcharged (e.g. in DC with their braindead "zone" system before they switched to meters) or took an egregiously out-of-the way route, or the cab was filthy, or it just didn't show up when I had scheduled (and I had no way to see where the cab even was), etc. With no feedback loop/rating system there was 0 incentive for cabs to improve their service.
I agree that the VC funding model has resulted in things being grossly mispriced, but even if rides got significantly more expensive, the improvements Uber brought to the rides-for-hire model were huge and everyone just forgets how much people generally hated the taxi experience before they showed up.
For DoorDash and the ride-sharing companies I really wish there were some sort of localized non-profits that provided these services with none of the underhanded and sleazy tactics these companies use to try and achieve profitability.
In Austin, TX there actually was, it was called Ride Austin. In 2016 Austin voters passed a resolution requiring drivers to be fingerprinted, so Uber and Lyft left until the city was overruled by state government about a year later (this happens all the time - Austin passes some liberal ordinance that the conservative state government later rescinds).
In the time that Uber and Lyft were gone, we had lots of services that popped up to try to take their place, and Ride Austin was probably the best known. I liked it - it paid drivers better and there was an option to contribute to local charities. It was a non-profit but I believe it was essentially kicked off by a local tech billionaire (Joe Leimandt, who has been featured on other stories on HN). But that said, the app and service were never as good as Uber/Lyft, and though I tried to support them when Uber/Lyft came back, they weren't really able to compete and eventually closed down.
Thus, as much as I like the idea of a local nonprofit providing this service, I think the Ride Austin example is as good a one as any to show why it's not really feasible.
I usually use Uber/Lyft because it works most places, but the ride-share experience in Vegas was horrible. However, every casino/resort has a taxi queue. And those guys don't fuck around. They'll get you where you want to go, avoid major traffic, and the taxis were in decent shape.
I actually agree with both of you! If I'm evaluating Doordash and the Uber Eats services, I think the OP is completely correct that the world would be better off without them.
If I'm evaluating Uber the ride sharing service, I think you are completely correct that it has improved ride service dramatically.
This was a major part of the playbook of Standard Oil; I would consider them a real business.
>The business model of these so-called unicorns is effectively a Ponzi scheme
"Ponzi scheme" has been thrown around flippantly lately, and I think your comment is perfect example of that.
I think it's a safe assumption that significantly more people order food from local restaurants than they did before DoorDash existed. So they did create a real market with a real product. It's not a 'box' that SBF would be proud of.
>but the sooner gig companies like Uber and DoorDash collapse, the better.
This I agree with, but for different reasons. These apps price their services artificially low by charging high fees to restaurants, underpaying drivers (forcing them to live on tips), and by- at times- subsidizing prices with investor money to keep them artificially low.
Overall, I think it's a crappy business model that doesn't deliver much value. But that's just my opinion.
Standard Oil resulted in lower prices for consumers. They had a patent on railcars designed for hauling oil so their competition had to load and unload barrels on to standard railcars and that was much more expensive to do. Any monopoly they had was explicitly enabled and enforced by the US government, via the patent office. After they were broken up, prices for consumers went up.
I also think Standard Oil shouldn't exist. In fact, so did the US government in a landmark antitrust case that you may have heard of.
(on your other points, I'm pretty much entirely in agreement)
Agreed, but "should/shouldn't exist" wasn't the argument. The initial argument was "if you use this strategy, you're not a real business" which I think is false.
Distasteful, destructive, and something that should be illegal- sure.
Ponzi scheme, doomed to fail, not a real business tactic- no.
Speaking of.
> should be illegal
Predatory pricing for the sake of driving competitors out of business to establish dominant market power is illegal, setting aside that the gradual erosion of enforcement means that antitrust law functionally no longer exists in the US.
Standard oil was profitable and they were able to afford undercutting the competition. That maneuver was too gain complete control over a diverse, vibrant market. Gig economy companies have never been profitable, and the only way they can be profitable is to increase prices to the point where consumers will stop using them.
Also, unlike Standard Oil, these unicorns are a Ponzi scheme. They provide a real service, sure. But the only way they were able to provide that service was to keep increasing their private-market valuation, with the next investor saying "I'm in, because next time they raise, it'll be at a higher price". What happens after every one of these gig companies went public? The private investors cash out, and the stock collapses.
In what way is this not a Ponzi?
True, and unlike modern VC-bacjked companies they didn't lose money in the others. BUT they were hit pretty hard with anti competitive legislation and were broken up as a result of these practices.
>Ponzi scheme" has been thrown around flippantly lately, and I think your comment is perfect example of that
We can agree to disagree, and I welcome you to a post about the subject from 2017 that pretty well explains my viewpoint (not my article) [1]. It's about Uber, but applies to all the recent IPO darlings
> it's a safe assumption that significantly more people order food from local restaurants than they did before DoorDash existed
What's your assumption based on? I figure it's either flatline or maybe had an impact on dining rooms. Either way, I have no data to back it up, but if you do I'd very interested.
>This I agree with, but for different reasons.
How is it different? They run an unprofitable business that rips off everyone involved and is subsidized by investors who were suckered into thinking this is a real business.
[1] https://www.forrester.com/blogs/ubers-unicorn-ponzi-scheme/
Anecdotal. Seeing restaurants that no longer do sit down and only do delivery, plus the creation of the ghost kitchen market. I also have no data, so I can't really defend this point. Just an observation.
>How is it different? They run an unprofitable business that rips off everyone involved and is subsidized by investors who were suckered into thinking this is a real business.
The point I was making is that the food delivery marketplace is a real business that delivers real value, just a sucky one with unclear value. Your comment seems to outline that you think it's built on hype and sucking in future money to pay past investors.
The fact that Lyft can, at times, be profitable disproves your point.
Can you say what city you are seeing restaurants that don't do sit down and only do delivery? Are these brand new restaurants? I can't imagine anyone that was already paying rent for a dining room turning people away. I also find it hard to imagine that a delivery only restaurant would be operating in a place that has good foot traffic as that is usually factored in to the rent since it means access to walk-in customers.
Lastly has the "ghost kitchen" market actually taken off? What brand recognition is there in that market?
Even SBF's magical box is not technically a Ponzi. Often times these scams are simply pump-and-dumps.
Why is it safe to assume that? Do you have actual data that backs that up? The presence of delivery drivers says nothing about the number of people that previously picked up their orders.
>'"Ponzi scheme" has been thrown around flippantly lately, and I think your comment is perfect example of that.'
How is that a flippant comment when the article we are commenting on states:
>"Competition in the sector has only intensified and the company has spent heavily to sustain growth by expanding its footprint in non-restaurant categories like convenience store items, groceries and alcohol. Last year, DoorDash spent $8 billion to acquire Wolt to increase its international presence."
The article then further states:
>"Under generally accepted accounting principles, however, DoorDash is unprofitable. The company reported a loss of $296 million compared with $101 million a year earlier during the third quarter."
How are those sums of money sustainable? Isn't that one of the defining characteristics of a ponzi scheme is that it is not sustainable?
>"So they did create a real market with a real product."
It's increasingly looking like that "market" was created by the pandemic. From a Deutsche Bank analysis of the company:
>"Deutsche Bank says that DoorDash drivers made 44% more deliveries in an hour at the height of last year’s pandemic lockdowns compared with three years earlier."[1]
And:
>"An average DoorDash order during the pandemic cost the customer almost $36, out of which the delivery company made less than $1 in profit."[1]
I think if you consider these paper-thins margins and the eye-popping sums being spent by Doordash to "sustain" growth" all while losing hundreds of millions of dollars a years, then "ponzi" is maybe not such a flippant comment.
I'm guessing they don't have another $8 billion to spend in order to acquire more growth which is why they are doing layoffs. Current market conditions would also suggest that would have trouble getting access to that kind of capital given those numbers above.
[1] https://archive.ph/ELq0m#selection-861.0-861.139
Do you have any comprehensive evidence for this? I have very strong doubts.
It's all so amazing to me. You take a incredibly profitable aspect of small businesses, turn it into a big business, lose all the profitability and hurt almost everyone involved, with the end goal being the ponzi cash-out or the automation of the entire sector leading to massive unemployment issues.
But otherwise it should result in banning operations for a while.
The cost to Uber or Doordash to provide one delivery must be practically nothing. Sure, they have large overheads, but once they have all their infrastructure going, each delivery is what, for them - a few database requests? How is that so expensive?
Where these businesses aren’t profitable at the unit economics level it’s because they are trying to gain share of the total addressable market
Someone who lives in a city and tips generously on orders/rides is certainly profitable, but there’s only so many of people like that and in the current environment, incentives are skewed to be a large high-share company.
So these companies then try and make the service work for people in the suburbs, people who are more cost conscious, etc.
The general rule of thumb for consumer tech businesses is that as you grow, the quality of the incremental user gets worse and more expensive to acquire, but due to economies of scale, that can sometimes work out (a great metaphor for this is the mainline airlines missing out completely on the Southwest/Spirit/Frontier/RyanAir market segment)
So to your point, Uber and DoorDash can 100% be profitable businesses (much to the chagrin of GP), but from a strategic standpoint, management needs to run the company in a way that strikes the balance between gaining as much share as possible without burning too much cash (which leads people to believe that unit economics are broken when they are certainly not).
That’s not to say some businesses don’t have broken unit economics, but anyone who actually track DASH and UBER isn’t worried about whether the core product can ever achieve profitability (they already have), it’s just a question of how big is the market for customers with good unit economics (probably less than previously assumed!)
People show average unit economics and people assume that the average applied to every transaction, when it is actually a distribution.
Expanding into new segments and markets almost always leads to temporary negative unit economics, but that's just what growth looks like.
The trick is to not take that too far and enter markets/segments with unit economics that will never be positive (like on-demand dog walking)
>Gonna be very unpopular here, but the sooner gig companies like Uber and DoorDash collapse, the better. The business model of these so-called unicorns is effectively a Ponzi scheme where the end goal is for early investors to cash out with the IPO. However, unlike a Ponzi, these companies also rip off their contractors so most restaurants and drivers actually lose money by being involved with their "service". Straight-up middlemen who skim off the top behind a veneer of tech that can't even turn in a profit. Build a real business. If you can't be profitable without eliminating all the competition by first undercutting them, then jacking up prices on users, then you shouldn't exist
[Edited the last sentence for punctuation]
Therefore, it is a race to the bottom and you have to spend tons of money on marketing/promotions to gain customers. The app with the deepest investor pockets will win out.
If there was only one app for delivery and they didn't have to spend any money on marketing/promotions then I bet they could offer a profitable service for a reasonable price.
Marketing.
Setting price markups.
Researching new technologies to do God knows what.
The only expense that makes much sense is app development, and honestly, that sounds like it should be done by another company. Just expose an API and let restaurants and their partners handle the UI layer. There are tons of lightweight ordering platforms that could easily plug into a delivery service service.
https://www.youtube.com/watch?v=KodqIPMbyUg
Strongly agreed that these gig companies, at least in their current form, can die as quick a death as possible.
I would most definitely not want Doordash to die a quick death and I'm sad that you do! If not for their existence it would probably be too much trouble to do the research about restaurants in our area that are open, what their food is, how to order, then place the order via whatever novel phone or buggy online ordering system they've set up. We'd probably just end up ordering Domino's every week instead of what we do now which would be worse for everyone!
The desktop web interface is slow enough to be irritating but not so slow it's unusable.
Finding open restaurants with Google Maps is pretty easy. They have a specific option for "is currently open", and menus are frequently linked right from the business's listing.
Cannot comment on gig companies dying out but this company is so overrated.
It would be one thing if I were sitting here going, "Well that makes sense you can't deliver a $12 hamburger for $10" but every time I use DoorDash it's "Somehow this $12 hamburger is listed as $18 and when I went to check out with service fees and tip it's going to be $40..."
Without drivers, restaurants, and diners, what does DoorDash do?
DoorDash is an entirely separate party. Technically, without any one of those parties, DoorDash doesn't work but network effects can force one party to use a substandard service. Hell, even two of the parties.
But if it's bad for all three. And there's other services like DoorDash? How does DoorDash stay afloat?
Fixed that for you. Some people made obscene amounts of money.
The problem with these food delivery apps is, there are way too many parties to be paid a reasonable amount of money here and customers aren't willing to go beyond a specific limit of premium. Turning a profit is hard - even after punishing restaurants with 30%+ commissions, pushing "service fee" and other regulatory fee upon customers, and even after "stealing" drivers' tips.
This company shouldn't have grown so much really. It all feels so hyperbolical with them raising so much investor money and hiring thousands of tech workers. AFAIK they've always relied upon investor money to pump and inflate numbers and acquire new customers with massive marketing spend.
Although I agree that some of these unicorns may be overvalued I don’t see how the Doordash business model is an effective Ponzi scheme.
While there are some that will disagree, that is really not an unpopular opinion, aussuming
> like Uber and DoorDash
stays in there as a caveat, with
> If you can't be profitable without eliminating all the competition … first … then you shouldn't exist
being the salient point.
Disrupting by being better, and the market evolving to account for the new method being better, is fine. That is one of the ways we improve over time. Disrupting by killing everything else even if your method is not generally better in the long run is a different proposition entirely.
---
As side note: I do object to “ponzi scheme” becoming a phrase that just means any scam where someone wins and everyone else likely loses. This may be scammy behaviour, but it definitely isn't a ponzi scheme.
they really never should have been valued as tech companies, they are basically commodity transport companies like airlines who will at best have razor thin margins
A modern day Hobin Rood, if you will.
Why on earth does DoorDash have 20,800 employees (if 1250 represents 6%)?
What are TWENTY THOUSAND PEOPLE doing all day for them?
They are bad for the gig workers and usually bad for both sides of the gig in the long run.
The first year or so it was decent. But the past year to year and a half I started having way more issues with dashers and restaurants, either stealing items or forgetting them from an order. Not exaggerating on the stealing; there were a couple times I followed the dasher to their car and saw them drinking or eating the item from my order and they wouldn't respond to me. It was pretty ridiculous. And then at some point Doordash changed their customer support to be at least partially automated and it meant sometimes when they would credit me it wasn't the same amount of whatever I didn't get, and I had to jump through hoops to get that resolved.
https://www.cnbc.com/2020/12/09/doordash-ipo-dash-trading-ny... https://www.nytimes.com/2020/12/09/technology/doordash-ipo-s...
This makes no sense. The whole reason DoorDash is cutting jobs is because, like pretty much everyone else cutting, they originally hired a lot to maximize growth potential during the environment that existed last year. That environment turned out to be temporary, so now they are laying people off because they fundamentally can't support a workforce that size in today's environment.
No company wants to be overstaffed (and, honestly, working at an overstaffed company sucks) if they don't think there will be a quick ramp up in business to give those people something to do.
Maybe they're doing both, storing the funds and slashing jobs; what's left to "grow"? They followed the stereotypical model thus far
1. Operate at a massive loss on VC funds under the guise of user growth and acquisition 2. IPO at the peak 3. Figure out how to become profitable with a realistic business model or watch your valuation plummet
They're at Step 3 right now and they haven't figured out how to make a profit yet
CS also seems to be _heavily_ automated - you can tell that you're rarely talking to a human being. It used to be the best delivery app, now it's streets behind Uber Eats.
The service wasn't being subsidized. The company was.
The history of the concept goes line this:
1) Some restaurants begin offering delivery for a fee as a service to busy customers.
2) Restaurants figure out free delivery is a great loss leader and make it up on volume.
3) Seamless figures out they can centralize the menus of these companies using the Web. Restaurants still handle the delivery themselves and pay Seamless a small referral fee.
4) DoorDash innovates on this by vertically integrating the delivery aspect themselves allowing scale and access to restaurants that did not previously offer delivery.
5) DoorDash begins the process of “delivery arbitrage” betting people will pay more for individual items if delivered.
6) Ghost Kitchen are invented to vertically integrate the restaurant into the service. This bets that people are price sensitive to delivery fees/arbitrage.
Going up to #3 was profitable.
They have like $8 delievery fees and $10 tips... You can skip the delivery fee with the $10 per month dashpass.. fine..
But then each individual item is marked up 20%.
End's up being like $20 for takeout from a place 1 mile away...
May as well get the fresh air!
How much of that is Doordash specific though. Sounds like restaurant issues. I could see the underestimate (I believe, at least, with some systems the wait time is manually controlled by the restaurant) as a means to get people to pick Doordash thinking it leads to a quicker meal.
On a more serious note, there is real value-add for small restaurants as it allows them to offload the delivery part of their business - and focus on the food preparation. But that could be localized and/or turned into a SaaS product.
What I still feel is missing is cheap platform for stores to list and sell their products.
My guess is that paying enough for drivers on top of food delivery makes the food so expensive, there's no margin left to turn a profit from. If you charge enough to make a profit, no one will order food delivery since it's too expensive. Is that correct?
1) Delivery businesses only make sense in dense urban markets. Think vertical Asian cities. You can deliver on foot, bicycle, or moped to multiple customers at once.
2) Low prices to drive growth at all costs instead of a fair price and slow growth as they serviced a small set of niche customers.
The other issue is that to actually provision enough service to meet customer expectations on availability and speed, you need to economically over provision your workforce.
Cities used to restrict the supply of taxi drivers intentionally in order to maintain driver wages.
The article doesn’t specify the regions with cuts.
Just because the price was upfront, doesn't mean they are not terrible practices that fuck their consumers.