Comment by SeeDave | Hacker News Reader

Comment by SeeDave | Hacker News Reader

Parent Full thread

UberEats is a real head-scratcher as almost all of the key players, from my perspective, have expressed dissatisfaction to some extent:

1. Restaurants as UberEats charges a fee often greater than the restaurant's own profitability

2. Restaurants as there is a real fear that Uber is gathering data for customer tastes/habits to then give priority to CloudKitchens™ or some other variant on commissary kitchen/virtual restaurants

3. Customers who are shocked by the fully-loaded cost (menu, fee, delivery, tip)

4. Drivers as they barely earn a living wage and put considerable wear and tear on their vehicles

5. Potential investors due to heavy losses generated by subsidizing this entire operation

6. White collar Employees as they are baited/strung along with generous RSU grants to then be overworked at a pace which would make a full vesting impossible

This is really strange because the Indian Dabbawala[0] industry has been operating continuously for 100+ years and one would think that across-the-board PPP/COL adjustments would allow for similar sustainability.

Is there any other industry where almost 100% of everyone involved is currently miserable or are at risk of being disappointed by long-run results?

[0] https://en.wikipedia.org/wiki/Dabbawala

Dabbawala isn't a fair comparison.

- The person making the food in the case of Dabbawala, is usually someone's wife. That's basically unpaid labor. Its not fair for the wife, but that's a different discussion, staying on topic.

- Delivery routes are pre-determined so routes can be planned efficiently.

- There's established routines such as the Dabbawala arriving around the same time to pick up food.

- The dabbawalas usually use trains and bicycles. So they don't pay for the cost of a car, fuel, insurance and maintenance.

- Dabbawalas, AFAIK, only exist in Mumbai, which has very high population density and enough economies of scale to sustain the business.

- Dabbawalas don't have a middle man tech company which pays expensive software engineers, and tech executives.

So these factors make dabbawalas profitable while food delivery services don't make a profit.

We recently started calling restaurants and asking if they have in-house delivery, and avoid UberEats/Doordash/OtherDeliveryService. The other day we ordered Thai food, and the owner of the restaurant delivered the food personally and she was truly grateful that we called them instead of ordering online.

This made me wonder, what if restaurants in a city formed Co-op, and started a food delivery service ?

- Multiple co-ops across different cities could form a LLC and hire Software engineers to build an App & maintain backend services.

- The same app would work across many cities

- Each co-op is responsible for hiring its own delivery drivers in the city.

This would eliminate a profit-seeking middle man, and keep costs low. I sense that there would be many obstacles, but I think its still possible, and potentially be even better for the consumer and the restaurants.

That's why the standard comparison in the US would be something like Domino's Pizza, which makes money on delivery while being cheap. I think the answer is somewhere along the lines of route/logistic efficiency.

Aside from your first point, this seems like less an unfair comparison than just an unfavorable one.

yes, the logistics problem--delivering cost-effectively at-scale--is the one-and-only big hurdle in any delivery service, not technology or even marketing, although those things can help solve the core logistics problem.

having fixed routes & schedules sounds like it solves the logistics problem for dabbawalas, insofar as it becomes cost-effective that way.

with that said, i'll repeat my strategic positioning argument about ubereats: it's a flanking product meant to maintain supplier power (power over drivers), so it does not need to be profitable by itself. combined with the additional revenue, ubereats just needs to lower supplier costs enough via lock-in to make its existance worth it.

+ the people doing delivery are carrying 15+ meals, not 2 medium size pizzas

> The dabbawalas usually use trains and bicycles

Sounds like Deliveroo here in the UK.

Delivery services work very well in places with very high income inequality. You need to pay a small amount to the courier and then sell an expensive service to someone that's price insensitive. Simply adjusting by PPP doesn't guarantee the model works elsewhere. You need to adjust by demographics of who is buying and who is providing the service in each country to figure out if you can balance it out. So far it seems most Western countries can't make that work and investment money is filling in the gap.

Maybe the gig economy is just "too early". Like maybe the whole industry is actually a giant bet on income inequality getting worse :(

That seems incredibly grim, and I hope most investors are just waiting to see if anyone can pull a rabbit out of a hat somewhere (bootstrapping economies of scale, automation, etc).

The whole industry was a bet on automation -- self driving cars -- and broke-ass uber drivers are just a way to grab market share until that happens. Uber is explicitly betting on self-driving cars, and it's why they're okay hemorrhaging money in the short-to-middle term.

>Delivery services work very well in places with very high income inequality.

This is true of any personal services that depend on relatively low-skill labor. Being able to "timeshare" (e.g. Uber/private cars vs. full-time driver) helps to a degree. But, in general, until you get to quite high wealth levels, relatively few people can really afford to constantly shell out for cooks, cleaners, handymen, nannies, etc. on a day-to-day basis in the West.

I agree with that. But the market expectation is very different. In businesses like groceries there is a general expectation that deliveries will continue to grow even though there's no reasonable expectation that the unit economics will improve dramatically. The market keeps growing though, with all those deliveries subsidized by the regular store sales.

>The market keeps growing though, with all those deliveries subsidized by the regular store sales.

You can only grow subsidies so far. I expect as things hopefully get back to come semblance of normal and VC subsidies evaporate, a lot of these delivery options evaporate as most people decide they'd just as soon keep their money and spend a few minutes picking up their own groceries or their own takeout.

Given the failure of businesses like Webvan--and the fairly limited growth of Peapod--I'm not sure I see the continuing growth.

> I'm not sure I see the continuing growth.

You're probably thinking of startups only. Traditional retailers are growing their delivery services pretty much everywhere in the world.

Not so much startups only but, yeah, I was thinking primarily of fast local deliveries of perishables of various types.

For delivery more broadly I agree outside of some categories. While online shopping is still a fairly low percentage, it's growing. One also suspects that many will come out of the current situation thinking "That delivery stuff worked pretty well. Maybe I don't need to run some of those errands I normally do."

> Delivery services work very well in places with very high income inequality

It needs density more than inequality. This is true for many professional services.

Density helps if you're delivering a bunch of small things that you can easily batch together. The kinds of things being tried by these VC funded attempts are not where density helps the most as you either have a delivery that requires too much interaction (e.g., groceries with a fixed time slot) or are aiming for speed (e.g., hot food quick delivery). So there's no reason you can't have a postal service in a very equal society as delivering mail and small packages in urban areas is efficient and you can cross-subsidize nationally. Once you get into multi-temperature deliveries in fixed slots and very fast fulfillment and delivery really cheap labor in comparison to the service price is needed to balance the books. Some of that could be fixed by cutting an order of magnitude from the delivery time by use of lockers and other unattended delivery methods but then you have a chicken-and-egg infrastructure problem.

Densities help for deliveries because they're more efficient in denser areas. But there are a lot of personal services that aren't all that dependent on density.

Doesn't this create a perverse incentive to increase income inequality? And more so it is self reinforcing: if the entire economy was built on ubereats there would be an inescapable difference between the service provider and consumer. Maybe this is at odds with the idea that these schemes can scale.

I don’t know. I think it’s saying that personal delivery services are not viable in more equal societies. The US would be one of those, where every party is losing money from the transaction.

On the other hand a friend of mine loves driving for Uber Eats, his friends who drive also love the company, and he thinks he has been especially well treated by the company during COVID. As soon as deliveries were allowed to resume in New Zealand Uber gave drivers a significant temporary increase in earnings to help them make up for lost earnings during our lockdown when food delivery was banned.

As far as I know customers were not charged more so I guess VCs were funding New Zealand drivers.

The detractors might argue friend is being taken advantage of and just doesn't realise it. He thinks otherwise.

You're not wrong about VCs funding the New Zealand drivers; the fact that there's an "excess driver incentives" line item in the Uber 10-K is proof enough!

My flatmate is an Uber Eats driver and didn't receive anything extra from Uber during or after the lockdown. Do you have any further info about the "significant temporary increase in earnings" that Uber provided?

I was just thinking about the Dabbawala industry a few hours ago. I'm mainly wondering how to reduce all the plastic waste from food delivery. See some thoughts and notes here: https://www.evernote.com/l/ACoza00i6aRGT48ylqD7ylr5fkziGJbQC...

I think the main problem to solve here is that the drivers and kitchen staff barely earn a living wage. Personally, I would be very happy to pay much more for a service that uses reusable containers and pays everyone involved a living wage, plus a decent profit margin for the restaurant owner. So I think this might need to be a very niche service for relatively wealthy people.

Unfortunately, I think history shows that there isn't way to convince the average consumer and restaurant owner to take part in a system like this. It might work in Australia or New Zealand, where they already have a reasonable minimum wage. But these countries generally have a very low population density, and also a very different attitude towards food delivery. (Most people cook most meals at home, so it's not something you order 2-3 times a day.)

Well, i think the main factor is Ubers cost of operation.

Why does Uber need 20k employees (this does not inlude drivers!) to keep the platform running? Even if you want your fancy data science team, have 100 people PR team and the usual nonsense i don't see how you need 20k people to make this work

Global operations, global deployments. Plus a host of marketing, legal, and other folks that need to be tailored to each environment.

And Uber's big play is to automation and self-driving cars. That's a long range goal and involves building totally new technologies while they hemorrhage cash in the meantime.

Aren't most Dabbawala type services using family labour, i.e. an unpaid wife or child is doing the delivery?

Fee is greater than profitability? They make a loss?

Reply on news.ycombinator.com