I've given this a whopping 5 minutes of thought, so maybe someone else who actually knows the economics can weigh in on a thoughtful discussion...
Seems to me like this would be a very hard business to scale quickly. Consumers don't want to pay a delivery charge and don't care about the middle man - their relationship is with the restaurant, not uberGrubCart. The restaurants want to control their costs too... so feels like the only way this whole delivery business can work is if it's a third party, white-label service serving local restaurants, getting paid by the restaurants, and it is then up to the restaurants to figure out how to burry the costs into their pricing so the consumer doesn't see it.
I really don't get this. You could say the same thing about anything:
* Consumers want to buy from brands/sellers directly instead of through amazon
* Consumers want to buy from food producers directly instead of through a supermarket
* Consumers want to buy movies directly instead of deal with Netflix
* Consumers want to buy apps directly from developers instead of dealing with Apple/Google
These are all non-white-label middle-men.
These food delivery services are providing a marketplace & all the logistics. The restaurants don't have to do anything except setup the menus. They provide convenience for both restaurant and customers.
I really don't understand all the hate these services are getting here.
All of these examples provided immense benefit to consumers and immense benefit to sellers.
Food delivery really doesn't provide an immense benefit to consumers, and restaurants don't get enough real business through it to justify its cost.
On one hand, if the food is too local, people will just say "I'll just pick it up myself and save the ridiculous fee." If it's too far away, the food will take forever and will likely be cold anyway. This is why pizza delivery was always local - it is one of the few places where delivery makes sense, and the fees were low, like 1 buck. So there's a small range where it's just far enough to be inconvenient but close enough that the food is still relatively good, which in most cases doesn't exist.
On top of that, you need to pay money to the driver. It's just a whole lot of overhead for very little gain.
>I really don't understand all the hate these services are getting here.
I'm not hating them at all - in fact, I think I've only used them twice and I really don't have an opinion...In fact, having not used them extensively, I'm looking at them with the eyes of an outsider...
Where I disagree with you above is the question of value vs business model. In each of the examples above, there is value being added and a business model that works. In the case of these delivery services - there is value being added, but the business model seems off and that's what's causing it to not be profitable.
In all of your examples, the big company provides a service in that it offers better discovery options in a single place. When it comes to restaurants, that's not quite the same.
Maybe if UberGrubCart let users order delivery from famous restaurants in another state that might be a real value add - but in a hyperlocal market like restaurants they have an uphill battle to fight.
On a per-restaurant-basis, it'll likely not work. The attractive part of an aggregator is that you don't need to keep a few people per restaurant to make deliveries. And you need to have them available whether people order or not, because predicting demand is hard, and if you disappoint once, you might not get another chance.
If you have the drivers work for an aggregator, it gets much easier. That doesn't have to be a for-profit corporation though, it could be restaurants getting together and cooperating.
Why can't you aggregate? It's just whether the aggregator is making the deal with the restaurant or the customer. Making the deal with the restaurant has a lot of advantages.
Oh, you mean have it separated where the aggregator basically just works as a delivery service for the restaurant? The user orders from the restaurant, they dispatch to the aggregator who handles pickup & delivery?
That could work, and would certainly shift the power towards restaurants.
> which wouldn't get the same buzz or VC valuation.
But a local, profitable delivery service wouldn't need to be a VC-funded business. It could start out very small, serving just a handful of restaurants in a single neighborhood. If it caught on, other restaurants could join in and it would grow.
It wouldn't need "buzz" either, since it would only need to market itself to restaurants, not to consumers (who would deal directly with the restaurant in the proposed scenario).
>But a local, profitable delivery service wouldn't need to be a VC-funded business. It could start out very small,
Which might not be sexy, might not make you rich overnight if ever, but gosh darn it might send the next X generations of your family to college debt free and put a pool in the backyard. We spend so much time in this world chasing financial engineering rather than focusing on business fundamentals.
It almost reminds me of how Flywheel is an attempt to compete with ridesharing by providing a better UX frontend for traditional taxi cab companies. I wonder how they're doing.
Seems to me like this would be a very hard business to scale quickly. Consumers don't want to pay a delivery charge and don't care about the middle man - their relationship is with the restaurant, not uberGrubCart. The restaurants want to control their costs too... so feels like the only way this whole delivery business can work is if it's a third party, white-label service serving local restaurants, getting paid by the restaurants, and it is then up to the restaurants to figure out how to burry the costs into their pricing so the consumer doesn't see it.