by lunchbreak on 5/18/20, 12:23 AM with 514 comments
by JumpCrisscross on 5/18/20, 6:21 AM
I texted the owner about being miffed they hadn’t told me they were on DoorDash. He replied. They aren’t. We compared pricing, and found the prices advertised are way off from what the restaurant charges.
So I placed a $5,000 order to the neighbourhood homeless shelter. DoorDash paid him over $20,000, and I get free pasta for the rest of the year. (My neighbours have also partaken.)
Glad to know it’s scaling. SoftBank has assembled a unique concentration of stupidity for itself.
by inquiryaccount on 5/18/20, 2:50 AM
A friend of mine works for a restaurant group in NYC and they like many they have had to respond by offering delivery to folks in order to keep some revenue flowing. He and I were chatting and he mentioned that lately, a large majority of high value ($500+) orders were fraudulent with the fraudster ordering things that can be resold such as high-value wine, liquor, etc that isn't necessarily perishable. He says that the scams work like this:
1. The order comes in via Caviar usually with a ridiculous amount of booze. It is usually a courier delivery but he says looking back, some have been picked up by 'customers'.
2. There are some instances where the order gets canceled either by the scammer within the 2 min grace period post ordering of from the actual customer who had their account phished/received some sort of alert/and stopped the transaction.
I am intrigued by this because there is obviously someone on the receiving end that's ending up with a boatload of high-end booze and then offloading it somehow while Caviar eats the dispute later on and still pays the restaurant out.
Literally, thousands of dollars a week of fraudulent booze orders are being fulfilled to people fraudsters using phished accounts with valid cc's. The consumer eventually realizes the charge, disputes it, and gets their money back leaving Caviar with the bill.
by ChuckMcM on 5/18/20, 4:24 AM
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 itself, so the pick up robot would scan the shelf for the box, find something that SOME OTHER VENDOR had put into a 6x9x6 Uline box, and pick that to satisfy the query.
Adding automation to a process that any human with visibility to the whole process would say, "Wait, that can't be right." ends up in misbehavior.
by bransonf on 5/18/20, 2:14 AM
But this was far more interesting. The fact that Doordash scrapes prices, and apparently doesn't verify... how does this happen?
I'm not familiar with the reimbursement model. I'm assuming the driver pays with a credit card, and Doordash reimburses this amount. Regardless, there will now be database entries for a customer paying $160 and Doordash reimbursing $240.
What happens in a company that allows $80 to vanish like that? Unless this is an incentive (I'm doubtful this was deliberate). Wouldn't one of the first things you do is validate your financials? In which case, is the driver getting screwed here? (They charge the customer $160, and reimburse the driver for only that amount)
If not, this opens up a huge potential for fraud. There is a semi-popular YouTube video where some young British folks set up a 'restaurant' in their home kitchen and successfully list on a delivery app. They deliver several orders (reimbursing the customer of course). If it's trivial to get listed, and potentially with the wrong prices, then it's trivial to launder money this way.
Set up a fake restaurant, deliver little/nothing to a known party, profit. Now, maybe it would become obvious if you made the same orders or within the same time frame. But again, trivial to generate randomness.
What protection do these companies actually have against fraud? By nature, they're assuming trust, and this is exploitable.
by rootusrootus on 5/18/20, 2:20 AM
by kevindong on 5/18/20, 2:18 AM
> 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.
by cletus on 5/18/20, 4:42 AM
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.
by imgabe on 5/18/20, 2:49 AM
Let's say you hire drivers as employees and pay them $15/hr plus tips and reimburse them for mileage. You charge a $4.99 delivery fee. Drivers work set shifts and are paid hourly whether they are making deliveries or not.
That means each driver needs to be making at least 4 deliveries an hour or you're losing money. That's not even really counting for mileage or any other benefits like health insurance or retirement (not that jobs like this usually provide this, but people seem to think that they should).
When I lived in DC, driving anywhere could take at least 15 minutes. Getting 4 different trips from a restaurant to somewhere reliably every hour would be difficult. Obviously, drivers can pick up multiple orders and take them in one round trip, but you're at the mercy of what orders happen to come in and where they happen to be located. It seems like it would be very hard to make that sustainable.
Of course, Domino's and lots of other places do it, but they probably aren't paying $15/hour and they also have one central location and more predictable demand. It's more feasible if drivers always go back to one central hub rather than having to get orders from random different restaurants all over the city.
by alteria on 5/18/20, 2:44 AM
Grubhub has been operating in the space forever, is public, and generally had been profitable until VCs came to town. How is DoorDash doing anything than Grubhub? Wouldn't this capital do better in other investments?
From the outside it seems like they've duped investors into burning hundreds of millions of dollars to hopefully build a monopoly in a structurally iffy market.
by craigc on 5/18/20, 3:03 AM
I can’t help but wonder if movie theaters could have exploited a similar loophole with MoviePass before they went bankrupt. Something like this:
1. Movie theaters buy up MoviePass subscriptions
2. They use those subscriptions to pick different movies to see every day at their location
If they picked 30 movies a month that would be approximately $450 a month in revenue (at $15/ticket), $440 of which would have been pure profit.
by victor106 on 5/18/20, 6:08 PM
>Doordash was causing him real problems. The most common was, Doordash delivery drivers didn't have the proper bags for pizza so it inevitably would arrive cold
What this means is that the restaurants really care about their customers. The delivery really really don't care.
I spoke with a few restaurant owners in NYC and they all universally hate the delivery companies. The restaurants are charged anywhere between 30% - 40% which is a ridiculous amount.
There's another company in India called Swiggy. I used to travel to India and would frequent a few bars in Bangalore and Hyderabad. All of them absolutely hated them for the same reason.
by yftsui on 5/18/20, 10:11 AM
Its even better, DoorDash is doing this without even switching boxes.
by ngngngng on 5/18/20, 2:56 AM
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?
by dvduval on 5/18/20, 2:16 AM
by dangoldin on 5/18/20, 2:35 AM
If amazon, a "real" business with a reputation built on ruthlessly cutting margin can't get it to work why would anyone else?
by dvduval on 5/18/20, 2:19 AM
by zeckalpha on 5/18/20, 11:49 AM
by three14 on 5/18/20, 6:34 AM
Curious if doing so would survive a lawsuit. On the one hand, DoorDash could argue that it's unfair competition, but only by admitting that their deliveries are priced too low, which itself is unfair competition. I don't know how unfair competition is regulated.
by neap24 on 5/18/20, 1:48 PM
by 5revive on 5/18/20, 2:03 AM
by mietek on 5/18/20, 12:12 PM
“(…) What sphinx of cement and aluminum bashed open their skulls and ate up their brains and imagination?
Moloch! Solitude! Filth! Ugliness! Ashcans and unobtainable dollars! Children screaming under the stairways! Boys sobbing in armies! Old men weeping in the parks! (…)”
by _bxg1 on 5/18/20, 5:12 AM
by x3blah on 5/18/20, 4:22 AM
How did we get to a place where billions of dollars are exchanged in millions of business transactions but there are no winners? My co-host Can and my restaurant friend both defaulted to the notion "delivery is a shitty margin business" when discussing this post.
You have insanely large pools of capital creating an incredibly inefficient money-losing business model.
It's used to subsidize an untenable customer expectation.
Third-party delivery platforms, as they've been built, just seem like the wrong model, but instead of testing, failing, and evolving, they've been subsidized into market dominance.
The more I learn about food delivery platforms, as they exist today, I wonder if we've managed to watch an entire industry evolve artificially and incorrectly."
A contrary view, from 4 days ago, arguing third party food delivery market is not created by VC, the startups are not over-funded and that they are delivering splendid returns to investors.
by bambax on 5/18/20, 11:12 AM
If you do this over and over, obviously you can use the same dough and boxes, so costs are just what you pay Doordash.
by sherlock_h on 5/18/20, 2:18 AM
by ed312 on 5/18/20, 2:03 AM
by lambentor on 5/18/20, 8:26 AM
This is it! I've been involved with Foodpanda and Delivery Hero. The name of the game is, indeed, becoming the #1 player in the market. The tool of the game was M&A. That's what you see everywhere with Delivery Hero, Takeaway Group, Just Eat trading positions across the world. They are effectively cutting and slicing the world into countries and regions where each of them is #1 and the others don't compete. Such "collusion" creates incredibly profitable markets, as the #1 doesn't need to share 30% of top-line with Facebook and Google, can charge a 15% take rate to restaurants AND additionally, a delivery fee to consumers.
by simias on 5/18/20, 10:50 AM
If that's really what happened (sounds plausible) that means that you should be able to trick DD even more by designing a website specifically in order to confuse the scraper. Have some cheap dish listed at $50 but in a way that would be scrapped as $5 or something. As long as a human would have no issue parsing the menu and understanding the actual price I don't really see how you could get into trouble, it's DD's fault for having crappy parsers.
by balls187 on 5/18/20, 3:52 AM
Yeesh.
by overthemoon on 5/18/20, 1:11 PM
These might be stupid questions, but... can this go on forever? No, right? Is there precedent for this? How long of a horizon do companies like this expect to be a money toilet? What happens to everyone else if companies like this collapse? Why hasn't it happened yet?
by saos on 5/18/20, 9:37 AM
Yeah and Amazon just plugged £500m into Deliveroo in the UK. They are going for UK food delivery market and potentially Europe with that investment. Deliveroo is pretty amazing.
1. I can track my driver in real-time 2. Communicate with drivers via Whatsapp 3. Great range of resturants 4. Super convenient. Order comes usually within 30 minutes
by exacube on 5/18/20, 2:09 AM
Cost per meal seems way too high for people to use it often. Maybe it make economical sense for larger party orders, but how often do those kinds of orders happen during considering the COVID situation?
by ram1981 on 5/18/20, 12:11 PM
by roystonvassey on 5/18/20, 7:04 AM
The other way to look at this is to think of it as a global capital transfer mechanism, from the super rich to the “real” economy. Sure, it is not sustainable in the long run but while it lasts there is significant transfer of capital which appears difficult to otherwise do, thanks to resistance to capital taxes. I really do not know what to make of the incentives for fraud though.
1 - https://yourstory.com/2019/12/foodtech-startup-swiggy-loss-r...
by xwdv on 5/18/20, 3:27 AM
by inquiryaccount on 5/18/20, 3:50 AM
by raverbashing on 5/18/20, 10:42 AM
Probably because Grubhub and Doordash are approaching this with the "holistic mindset" of a "visionary" mind like the WeWorks founders. Hence we get behaviour like this which is probably illegal in multiple ways.
Provide your work at a fixed price per order. Or you might take a (transparent, explicit, of those who actually signed up for the service) commission, fair enough.
Providing a good service is hard on itself, but it won't distract you from all the other crap and won't alienate the people that actually make your service work.
by azinman2 on 5/18/20, 7:26 AM
by kyleblarson on 5/18/20, 3:23 PM
by jaboutboul on 5/18/20, 2:14 AM
Once upon a time you started something and hoped to figure out how to scale and find product/market fit. These days with the cloud it’s become trivial to scale almost anything that’s not building cars or spaceships.
All these other BS startups have no hope for profit and no end game in sight. It’s kind of pathetic.
by karagenit on 5/18/20, 4:12 AM
by burroisolator on 5/18/20, 11:30 AM
by gandutraveler on 5/18/20, 11:28 AM
by olalonde on 5/18/20, 4:25 AM
by novalis78 on 5/18/20, 11:17 AM
by ww520 on 5/18/20, 3:15 AM
by noad on 5/18/20, 2:10 AM
Artificial growth for the sake of artificial growth, just so you can get to your exit and leave someone else holding the bag. Ponzi schemes at massive scale.
How did the startup/VC world become so entangled in all this bullshit capitalism?
by econcon on 5/18/20, 5:29 AM
And the restaurant/hotel the customer is dealing is responsible for arranging delivery and serving.
by et2o on 5/18/20, 4:34 AM
by monkeydust on 5/20/20, 12:44 PM
by crazygringo on 5/18/20, 4:23 AM
Domino's and Chinese are very specific high-margin businesses. Basically the highest-margin restaurant businesses.
That doesn't, in any way, prove that food delivery in general is not a loser. In fact, if you have to specifically pick the two highest-margin examples as your examples... maybe the industry in general isn't all that sustainable.
by spv on 5/18/20, 3:38 PM
by akeck on 5/18/20, 5:22 PM
by OwlsParlay on 5/18/20, 1:24 PM
by abrookewood on 5/18/20, 6:14 AM
by blackboxlogic on 5/18/20, 2:06 PM
by nelaboras on 5/18/20, 10:03 AM
1) find a sucker (aka retail investors) that buy a loss-making stock
2) become a monopoly and squeeze everyone to get higher margins (kind of how booking.com pushes hotels to increase their standard prices so that booking can offer a discount; which you also get if you call the hotel itself).
by bvandewalle on 5/18/20, 2:51 AM
Did everyone really become THAT lazy that driving 10 minutes to get your meal is that much trouble?
by salimmadjd on 5/18/20, 4:37 AM
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.
by vowelless on 5/18/20, 5:05 PM
by RobLach on 5/18/20, 10:10 AM
by WorldPeas on 5/19/20, 8:23 PM
by foobaw on 5/18/20, 4:19 PM
by SergeAx on 5/18/20, 6:00 AM
The modern Silicon valley venture capitalism is not about operational profit, it's about company valuation.
by linsomniac on 5/18/20, 1:31 PM
This is a common misconception... Capitalism is only designed to solve one problem: maximizing shareholder value.
by blackrock on 5/19/20, 10:06 AM
Granted, DoorDash can possibly be used for other kinds of delivery, like medicine and groceries.
It seems the cost of labor and transportation is too high to make it feasible.
But the actual play, might be robotic. To first take over the manual market, and then, conduct research into automated delivery services, like aerial drone delivery, or robotic dog delivery.
Once that technology is viable, then phase out the human delivery people, and replace them all with robots.
I actually never thought something like this would ever be economically viable. And then one day, a pandemic hit the entire world.
by lonelappde on 5/18/20, 3:32 PM
by geofft on 5/18/20, 5:25 AM
Simple. Capitalism is broken.
In order for capitalism to work, there has to be a meaningful profit/loss incentive. People who are doing the work must get rewarded if the work is done well and penalized if the work is done poorly.
We already started moving away from this many years ago with the growth of large corporations. When was the last time that you at your "capitalist" firm were aware of revenue and costs for the things you were working on in a more-than-superficial way? When was the last time you saw someone make a buy-vs.-build decision based on the actual numerical cost of the employees needed to run the project and not just handwaving? (When was the last time you even knew what the cost of the employees on your team was, given the widespread taboos about compensation?) When was the last time that someone who said "I saved the company X million dollars" got some proportion of those X million dollars? When was the last time that someone who needlessly made the company spend X million dollars in the first place paid for it?
The function of a big company is to abstract away the cold, unfeeling invisible hand of the market and protect people/groups who make unprofitable decisions. This is actually totally fine and good in the short term - nobody makes consistently good decisions, and insurance is a thing for a reason. You want people to take bigger risks on behalf of the company than they're willing to subsidize with their own paychecks, which is why individual artisans and professionals team up to form a company in the first place. But it's grown past that. As the article points out, some regional director somewhere is able to convince other people at the company that their work is profitable - with no hard link to whether the work is, in fact, profitable. And that scenario is entirely plausible for all of us; it's not specific to this one company in any way. If you're in the unlucky position where both you want to draw good charts and everyone around you wants to see good charts, there's no real way to figure out if you're wrong unless the company as a whole is dying, and there might be a host of reasons why it's not dying that have nothing to do with your decision-making.
And now venture "capitalists" have decided that this model needs to scale out from protecting teams to protecting entire companies. You can run a business for years without even attempting to make a profit and get acquired based on the potential of the business. No more messy realities of the market determining whether you are in fact profitable or not - what matters is whether you look profitable. And, again, this is genuinely good at small scale, because it allows new ventures to ignore bumps and potholes that would otherwise have ended a small company. But if you scale it up, it also allows new ventures to ignore driving straight off a cliff.
I expect capitalism to work very well if implemented right. But I don't know how we go from where we are today to actual, functioning capitalism.
by nie100sowny on 5/18/20, 6:21 AM
Unfortuanetelly looking what FED is doing, it won't happen soon :(