DoorDash, GrubHub, Uber Eats, they’re taking blame almost like they’re Ticketmaster or something. McDonald’s jacks up their prices, then they charge even more via food delivery, and then both DoorDash and McDonald’s make more money and we’re just focused on DoorDash.
I think the “driver” aspect of it and wages there are probably a big part of the visceral reaction people continue to have. Though I personally don’t get it. Nobody was filing lawsuits on behalf of pizza delivery kids.
Truth be told outside of Uber (questionable) I don’t think any of them are good investment opportunities. Neither was Blue Apron.
Also just stop ordering takeout from subpar restaurants or food chains. Go out to eat with friends or cook at home. High prices for mediocre convenience services isn’t worth it.
Corporate GrubHub isn’t going to take a pay cut and they don’t run a non-profit. If Seattle wants to create legislation like they did here there is no sense in being surprised that prices have gone up.
The cuts Uber, DoorDash etc take are astronomical- that’s the real issue. Thirty percent! Nobody filed lawsuits about pizza delivery in the past because you didn’t pay a 100% premium for delivery!
I don’t do delivery services because for a family it is entirely unreasonable. I looked once- a $40 fast food order would be nearly $90 after inflated menu prices, fees, delivery, and tip.
It is optional, yes, but in the past, there were no internet based middlemen taking a 30% cut. You paid the local kid driving the pizza to your house, not some nameless software developer making 200k+ a year.
Tell me you don't know anyone disabled without saying you don't know anyone disabled.
"Getting food delivered" is nearly a necessity for some people, and a massive boon for others (eg, people who work enough hours that there's little time to make food or eat out, while also having enough time to, y'know, spend time with the family, relax, etc).
Just because delivery is purely a luxury for you doesn't mean it is for everyone.
I’m sure that the one and only way for disabled people to participate in regular life is for you to save money on your order in sushi. How lucky for you—-cheap sushi and righteous indignation. What a delicious combo!
We would also have accepted: it’s somehow necessary to save the planet or it’s a question of racial justice.
My company uses GrubHub. We get a fixed allocation each day to order lunch.
I pay for the grubhub+ and I often order from places close by that I can walk to and pickup. This saves on the extra tip for delivery and it also gives me some exercise.
But what I have noticed is that the prices are $3-$4 more per item on the grubhub menu for a restaurant than the prices shown on the menu at the restaurant.
It seems like restaurants are jacking up prices to pass on the grubhub fees to the customer.
>But what I have noticed is that the prices are $3-$4 more per item on the grubhub menu for a restaurant than the prices shown on the menu at the restaurant.
>
>It seems like restaurants are jacking up prices to pass on the grubhub fees to the customer.
This is exactly what they're doing. Restaurant margins are rather thin and most places can't absorb the fees Grubhub, Doordash, etc. charge. If they charge $7.50 for cheeseburger and fries,, which covers their cost and a reasonable profit; they can't pay $1 (or whatever) more when it's via a food delivery service. Grubhub (and the rest) charge the restaurant for hosting them and the customer for delivery -- they charge everyone.
Thank you for bringing up Ticketmaster! Seems the deal now is we are all playing a shell game of one company obfuscating blame by hiring another company to do their dirty work.
I can't believe how the majority of people (including our law makers) have fallen for the trick and are blaming Ticketmaster for Taylor Swift charging as much as she can for tickets.
I wonder if these food/grocery delivery apps are shooting themselves in the foot with how they balance pricing/fees vs marketing/promotional costs.
You can almost always find gift cards for these services that are 10-20% off. And once you stop using these services for a short while, they bombard you with 20-40% discounts to pull you back.
So it's likely the fees are too high because they need to offset the marketing spend, but then the reason why people avoid or use these services not very frequently is because of the high fees.
Maybe there is a world in which spending less on marketing and lowering the fees could result in lower acquisition cost and higher retention.
I doubt getting rid of the discounts would ultimately help. Price discrimination and the psychological allure of a discount are powerful tools.
When I worked in Singapore, the whole office had an Uber Eats account and every day we could order lunch from anywhere with no consideration of any fees. There are plenty of price insensitive users like that who make it worth while to keep your base fees high.
And I also know plenty of people who compulsively order things whenever there's a promotion, but would rather starve than pay "full price".
Well there’s so much customer churn in part because many aren’t willing to pay for the actual cost of the service. Food delivery does work in some cases—Dominos or the Chinese place in a probably urban location.
But it seems tough in general. Personal services even by fairly low-paid workers are pretty much luxuries in much of the West.
Pizza and Chinese places that deliver normally either have it built into the price or charge a flat delivery fee. My local Chinese restaurant charges a flat $3 delivery fee on a minimum order -- it's $3 whether you order $15 worth of food or $50 worth. Dominos ran a promotion where they'd give you a discount if you came in and picked up the pizza; they weren't losing oney, they were just giving you the delivery cost.
Or it might just be price discrimination. The people who are just mindlessly ordering are probably not that price sensitive, so you can charge them higher, whereas the deal hunters that would actively seek out and stock up on 20% off gift cards likely weren't going to pay the inflated asking price to begin with.
As we all know, the true minimum wage is $0, as if a job isn’t viable and can’t make a profit it simply no longer exists. Maybe we’ll settle on deciding food delivery shouldn’t exist. I was between jobs and DoorDash was a joy to work, I’d just catch up on my reading with a nice Carl Jung audiobook while driving around. Literally the easiest job I’ve worked in my life.
DoorDash is certainly expensive, although I was happy to pay $40 for some chips and ice cream the other day because I had a long day at work and wanted to be an absolute couch potato.
The document details the gross profits of DoorDash, but isn’t setting up menus, coordinating with restaurants, all of this an intensely difficult, non automatable problem? There’s zero insight gained by reading this about how DoorDash spends its money. I’d assume engineers and people tweaking menus are expensive? This document doesn’t actually answer the question of “why DoorDash fees are so high” at all, as I suspect the person writing the document doesn’t know why.
Maybe the answer is just “oh they’re super greedy” but I’d hazard it’s more complex than that.
Isn’t the menu managed by the restaurants themselves? I thought doordash just supplied an (automated) website where the restaurants can enter their offerings. What’s there to manage?
I'm guessing the complexity of configurable menu items (pick any 2 of X, add Y for $Z), promotions like discounts or BOGO, scheduling those promos and making all of that easy for the restaurant manager to tweak (from my outside perspective, most restaurants are terrible at it, but maybe that's by design on their part)
on the flip side, there's no intrinsic reason for apps to repeatedly tweak this part of the design. in an ideal world, designers, engineers and product managers sit down, figure it out, and ship. it's not like restaurants are continuously evolving in a meaningful way... but organizations tend to breed this sort of self-fulfilling prophecy where we need more resources to support the increasing need for resources, to paraphrase that quote
This analysis is pretty weak. DoorDash is running a net loss overall - gross margin isn't covering their fixed costs - especially marketing to obtain customers. In their most recent 10-K https://www.sec.gov/ix?doc=/Archives/edgar/data/1792789/0001..., they have a non-gaap measure contribution profit per order which is -0.8%. So yeah, it's not surprising that they're trying to increase fees.
I don't know what the app/driver split is, but in developing countries, the total fees are typically $1-2 for food delivery on Grab, Food Panda, Gojek, etc.
If those apps can make enough from that, then there's no reason they need anywhere close to what they're charging in the US and similar countries. The app costs (ignoring what's paid to drivers) shouldn't differ much between markets.
> I don't know what the app/driver split is, but in developing countries, the total fees are typically $1-2 for food delivery on Grab, Food Panda, Gojek, etc.
But how much are the drivers making? If labor is dirt cheap there it's not surprising at all that they can offer delivery for $1-$2. I find it strange how you went from "developing countries, the total fees are typically $1-2 for food delivery" to "there's no reason they need anywhere close to what they're charging in the US and similar countries" without at least doing a cursory analysis of the labor costs.
Because even if we assume the labor costs are zero in the developing countries, that means the platform is only earning a couple dollars per order.
But the original article suggests that Door Dash is making over $10 an order (after labor costs), which is 5x over the best case scenario for the developing countries' apps.
> Because even if we assume the labor costs are zero in the developing countries, that means the platform is only earning a couple dollars per order.
1. That's gross profit, and doesn't cover stuff like marketing spend, which presumably is also more expensive in developed countries. If you look at the linked financial report, just under "Gross Margin" (and is cropped out) is "sales and marketing", which is nearly half of the gross margin.
2. The $10/order profit figure in the report includes restaurant fees as well. If you exclude that, their revenue (ie. all fees charged), and their profit (ie. revenue minus whatever they paid to the driver) drops by two-thirds.
Taking the two factors into account the doordash premium (for lack of a better term) over the Asian delivery companies decreases significantly. If you factor other expenses (eg. customer support/admin) and/or factors (eg. whether the Asian delivery companies are currently trying to gain marketshare as opposed to trying to take profits) probably decreases the discrepancy even further.
Is there some sort of barrier preventing those Asian competitors from entering Western markets? If it's as simple as you make it out to be, they should be swooping in and eating the incumbents' lunch with their lower overall costs.
They don't have the venture capital to burn at start... It all begins with dumping. First prices and intro offers are unsustainable... You can not start competing when other side started by burning massive piles of money.
Right, but investors were happy to fund those intro offers with the hope that they'll be rewarded in the end with market share. In fact they were funding multiple competing companies (eg. uber eats, doordash, grubhub). If the Asian competitors are fundamentally cheaper than their Western counterparts, then it'd be a non-brainer investors to invest in them instead, because over the long term they'll have a cost advantage.
The problem is that almost every kind of company entering markets to compete would have to spend an ungodly amount of money for advertising (you have to let people know you exist and drivers that you are offering a job) and the setup cost are high too.
It is simply expensive to ENTER the market and you will have to have high prices for at least the first period but with them there is no incentive to use you.
And if you give an artificially low price for your service (let say on the long term you can pay the initial fees maintaining lower prices)then the whole thing is still super risky.
It can be done, there are just more safe endeavors.
First mover network effects. Also, not knowing the market. It’s hard for a company without at least a cursory local presence to get local restaurants to sign up for things. There is a significant burden on the restaurant to get onboarded for a delivery company, so there has to be a good reason to do so.
But, there is definitely a margin to be had here… if you could have a lower cost delivery service that managed the white label backend like DoorDash, I’m sure you’d see companies flock to it for their in-app delivery. (Think McDonalds delivery ordered in the McD app)
Out here in the developing world of South Africa, it's more like $1-2 as delivery cost, another $1-2 as the "platform fee", on top of the inflated platform menu prices (which they take a cut of) , and increasingly they insist that we tip drivers a percentage of the meal.
Is this kind of like US pharmaceuticals where the prices are very high in the US because they can be and that “subsidizes” the development of these apps so the fees can be cheaper in other regions.
US apps like this were cheaper for awhile too while they were still lighting investor money on fire in order to gain customers quickly. I think DoorDash is out of this mode now, and there may be less investor growth money being poured in in the US at this point since it’s no longer early days and the market there has matured.
No other business is subject to this scrutiny. A food service business increasing their prices based on labor cost is well documented in the different Big Mac prices across the country.
Who is out there telling McDonalds to keep their prices down because the gross margin on post mix soda is 98%?
> Who is out there telling McDonalds to keep their prices down because the gross margin on post mix soda is 98%?
McDonalds generally has "employees" in the jurisdictions they operate in and thus should be following all the local laws that come with that term. The gig economy companies have a long public history of skirting labour laws.
So when they say "DoorDash has claimed that the new fees they’re charging are a necessary result of raising pay for workers" (according to this page anyway) they invite this type of analysis.
>The gig economy companies have a long public history of skirting labour laws.
>So when they say "DoorDash has claimed that the new fees they’re charging are a necessary result of raising pay for workers" (according to this page anyway) they invite this type of analysis.
The two paragraphs don't follow each other. Are you saying mcdonalds gets a free pass on price increases (on which they at least partially blame on rising wages), because they have employees rather than contractors? Why should be this the case? As the consumer, shouldn't I be equally angry if mcdonalds is jacking up prices to pump their profits under the guise of "higher labor costs"? Sure, there's plenty of reasons to hate on companies using gig labor, but hating on them for price increases specifically seems closer to bitch eating cracker syndrome[1] than any sort of rational analysis.
> Are you saying mcdonalds gets a free pass on price increases (on which they at least partially blame on rising wages), because they have employees rather than contractors?
McDonalds follows labour laws (whether you think they are fair is immaterial) so they are not in the news with quotes like
"As we have repeatedly make clear in recent months, the ill-conceived, extreme minimum pay rate for food delivery workers in New York City will have significant consequences for everyone who uses our platform"
or
"“Merchants may experience significant declines in order volume as well as negative impacts to service,” the aggregator said in its announcement."
whenever they are forced to follow a new labour law.
> As the consumer, shouldn't I be equally angry if mcdonalds is jacking up prices to pump their profits under the guise of "higher labor costs"?
This post is about worker wages remaining the same (according to their analysis) while DoorDash is out in public claiming the price increase is because of labour laws.
> Sure, there's plenty of reasons to hate on companies using gig labor, but hating on them for price increases specifically seems closer to bitch eating cracker syndrome[1] than any sort of rational analysis.
They are being "hated" on (in this instance) because they are out in the media saying "we had to raise prices because the labour laws are making us pay more" and this post is saying "you do not seem to be raising the wages, so despite what you say there must be another reason".
Not to put words in their mouth, but I read that as basically "when DoorDash says they need to raise prices to pay their workers, I don't believe a word of it."
They have a history of breaking laws, being hostile to labor, and doing whatever they can to maximize profits at everyone else's expense. Why would they balk at lying about the reasons for increasing prices?
Why on Earth would it be a bad thing to subject any multi-billion dollar business to as much scrutiny as we please? Companies aren't our friends, they're sociopathic runaway AIs that would blend you and I into a fine blood-slurry if it made an extra buck for its executives.
By all means, subject McDonalds to as much scrutiny as you want, you won't hear me crying about it.
I interviewed at DoorDash way back when, could've been about employee #12 or something. But when I sat down to interview with a couple of the cofounders, it seemed to me they were some kind of sociopaths. I have no regrets whatsoever not calling them back. All of my friends that work in the service industry (at the actual restaurants, not delivery drivers) absolutely despise DoorDash. I refuse to use it.
That's too simplistic. The interesting part is this imho:
> DoorDash chose not to reduce the psychological impact of added fees for customers, as they typically do — instead they announced those fees through ads and in-app pop-ups
> In fact, DoorDash on average takes almost half of total fees
on each order. In other words: worker pay is only about half of the total fees DoorDash collects from customers and restaurants.
> The average order in the sample totaled $59.08 before taxes and tip, with an advertised food
subtotal of $44.68. Of that total payment:
● $37.98 went to the restaurant after they paid restaurant fees to DoorDash for the order
● $14.40 was charged in customer fees paid to DoorDash
● $6.70 was charged in restaurant fees paid to DoorDash
Of that total of $21.10 charged in restaurant and customer fees:
I think the “driver” aspect of it and wages there are probably a big part of the visceral reaction people continue to have. Though I personally don’t get it. Nobody was filing lawsuits on behalf of pizza delivery kids.
Truth be told outside of Uber (questionable) I don’t think any of them are good investment opportunities. Neither was Blue Apron.
Also just stop ordering takeout from subpar restaurants or food chains. Go out to eat with friends or cook at home. High prices for mediocre convenience services isn’t worth it.
Corporate GrubHub isn’t going to take a pay cut and they don’t run a non-profit. If Seattle wants to create legislation like they did here there is no sense in being surprised that prices have gone up.
I don’t do delivery services because for a family it is entirely unreasonable. I looked once- a $40 fast food order would be nearly $90 after inflated menu prices, fees, delivery, and tip.
From a few years ago:
https://smallbusiness.chron.com/much-profit-margin-pizza-621...
Cost to make a pepperoni and sausage pizza: $1.90. Average sale price: $14.00.
I know rents are high in the Bay Area, but IIRC they're much higher in NYC?
Could be wrong, but that would be my guess.
“Getting food delivered” isn’t a right or basic necessity. It’s just an expensive convenience.
"Getting food delivered" is nearly a necessity for some people, and a massive boon for others (eg, people who work enough hours that there's little time to make food or eat out, while also having enough time to, y'know, spend time with the family, relax, etc).
Just because delivery is purely a luxury for you doesn't mean it is for everyone.
Yup, seen that rhetorical trick before.
"Non-central", that's a new one. A very detached way of making sure you never have to consider the situation of people who aren't as lucky as you.
We would also have accepted: it’s somehow necessary to save the planet or it’s a question of racial justice.
I pay for the grubhub+ and I often order from places close by that I can walk to and pickup. This saves on the extra tip for delivery and it also gives me some exercise.
But what I have noticed is that the prices are $3-$4 more per item on the grubhub menu for a restaurant than the prices shown on the menu at the restaurant.
It seems like restaurants are jacking up prices to pass on the grubhub fees to the customer.
This is exactly what they're doing. Restaurant margins are rather thin and most places can't absorb the fees Grubhub, Doordash, etc. charge. If they charge $7.50 for cheeseburger and fries,, which covers their cost and a reasonable profit; they can't pay $1 (or whatever) more when it's via a food delivery service. Grubhub (and the rest) charge the restaurant for hosting them and the customer for delivery -- they charge everyone.
I can't believe how the majority of people (including our law makers) have fallen for the trick and are blaming Ticketmaster for Taylor Swift charging as much as she can for tickets.
You can almost always find gift cards for these services that are 10-20% off. And once you stop using these services for a short while, they bombard you with 20-40% discounts to pull you back.
So it's likely the fees are too high because they need to offset the marketing spend, but then the reason why people avoid or use these services not very frequently is because of the high fees.
Maybe there is a world in which spending less on marketing and lowering the fees could result in lower acquisition cost and higher retention.
When I worked in Singapore, the whole office had an Uber Eats account and every day we could order lunch from anywhere with no consideration of any fees. There are plenty of price insensitive users like that who make it worth while to keep your base fees high.
And I also know plenty of people who compulsively order things whenever there's a promotion, but would rather starve than pay "full price".
But it seems tough in general. Personal services even by fairly low-paid workers are pretty much luxuries in much of the West.
DoorDash is certainly expensive, although I was happy to pay $40 for some chips and ice cream the other day because I had a long day at work and wanted to be an absolute couch potato.
The document details the gross profits of DoorDash, but isn’t setting up menus, coordinating with restaurants, all of this an intensely difficult, non automatable problem? There’s zero insight gained by reading this about how DoorDash spends its money. I’d assume engineers and people tweaking menus are expensive? This document doesn’t actually answer the question of “why DoorDash fees are so high” at all, as I suspect the person writing the document doesn’t know why.
Maybe the answer is just “oh they’re super greedy” but I’d hazard it’s more complex than that.
on the flip side, there's no intrinsic reason for apps to repeatedly tweak this part of the design. in an ideal world, designers, engineers and product managers sit down, figure it out, and ship. it's not like restaurants are continuously evolving in a meaningful way... but organizations tend to breed this sort of self-fulfilling prophecy where we need more resources to support the increasing need for resources, to paraphrase that quote
If those apps can make enough from that, then there's no reason they need anywhere close to what they're charging in the US and similar countries. The app costs (ignoring what's paid to drivers) shouldn't differ much between markets.
But how much are the drivers making? If labor is dirt cheap there it's not surprising at all that they can offer delivery for $1-$2. I find it strange how you went from "developing countries, the total fees are typically $1-2 for food delivery" to "there's no reason they need anywhere close to what they're charging in the US and similar countries" without at least doing a cursory analysis of the labor costs.
But the original article suggests that Door Dash is making over $10 an order (after labor costs), which is 5x over the best case scenario for the developing countries' apps.
1. That's gross profit, and doesn't cover stuff like marketing spend, which presumably is also more expensive in developed countries. If you look at the linked financial report, just under "Gross Margin" (and is cropped out) is "sales and marketing", which is nearly half of the gross margin.
2. The $10/order profit figure in the report includes restaurant fees as well. If you exclude that, their revenue (ie. all fees charged), and their profit (ie. revenue minus whatever they paid to the driver) drops by two-thirds.
Taking the two factors into account the doordash premium (for lack of a better term) over the Asian delivery companies decreases significantly. If you factor other expenses (eg. customer support/admin) and/or factors (eg. whether the Asian delivery companies are currently trying to gain marketshare as opposed to trying to take profits) probably decreases the discrepancy even further.
Someone has to pay to lease those beautiful downtown SF offices!
It is simply expensive to ENTER the market and you will have to have high prices for at least the first period but with them there is no incentive to use you.
And if you give an artificially low price for your service (let say on the long term you can pay the initial fees maintaining lower prices)then the whole thing is still super risky.
It can be done, there are just more safe endeavors.
But, there is definitely a margin to be had here… if you could have a lower cost delivery service that managed the white label backend like DoorDash, I’m sure you’d see companies flock to it for their in-app delivery. (Think McDonalds delivery ordered in the McD app)
US apps like this were cheaper for awhile too while they were still lighting investor money on fire in order to gain customers quickly. I think DoorDash is out of this mode now, and there may be less investor growth money being poured in in the US at this point since it’s no longer early days and the market there has matured.
No other business is subject to this scrutiny. A food service business increasing their prices based on labor cost is well documented in the different Big Mac prices across the country.
Who is out there telling McDonalds to keep their prices down because the gross margin on post mix soda is 98%?
McDonalds generally has "employees" in the jurisdictions they operate in and thus should be following all the local laws that come with that term. The gig economy companies have a long public history of skirting labour laws.
So when they say "DoorDash has claimed that the new fees they’re charging are a necessary result of raising pay for workers" (according to this page anyway) they invite this type of analysis.
>So when they say "DoorDash has claimed that the new fees they’re charging are a necessary result of raising pay for workers" (according to this page anyway) they invite this type of analysis.
The two paragraphs don't follow each other. Are you saying mcdonalds gets a free pass on price increases (on which they at least partially blame on rising wages), because they have employees rather than contractors? Why should be this the case? As the consumer, shouldn't I be equally angry if mcdonalds is jacking up prices to pump their profits under the guise of "higher labor costs"? Sure, there's plenty of reasons to hate on companies using gig labor, but hating on them for price increases specifically seems closer to bitch eating cracker syndrome[1] than any sort of rational analysis.
[1] https://en.wiktionary.org/wiki/bitch_eating_crackers
McDonalds follows labour laws (whether you think they are fair is immaterial) so they are not in the news with quotes like
"As we have repeatedly make clear in recent months, the ill-conceived, extreme minimum pay rate for food delivery workers in New York City will have significant consequences for everyone who uses our platform"
or
"“Merchants may experience significant declines in order volume as well as negative impacts to service,” the aggregator said in its announcement."
whenever they are forced to follow a new labour law.
> As the consumer, shouldn't I be equally angry if mcdonalds is jacking up prices to pump their profits under the guise of "higher labor costs"?
This post is about worker wages remaining the same (according to their analysis) while DoorDash is out in public claiming the price increase is because of labour laws.
> Sure, there's plenty of reasons to hate on companies using gig labor, but hating on them for price increases specifically seems closer to bitch eating cracker syndrome[1] than any sort of rational analysis.
They are being "hated" on (in this instance) because they are out in the media saying "we had to raise prices because the labour laws are making us pay more" and this post is saying "you do not seem to be raising the wages, so despite what you say there must be another reason".
They have a history of breaking laws, being hostile to labor, and doing whatever they can to maximize profits at everyone else's expense. Why would they balk at lying about the reasons for increasing prices?
Why on Earth would it be a bad thing to subject any multi-billion dollar business to as much scrutiny as we please? Companies aren't our friends, they're sociopathic runaway AIs that would blend you and I into a fine blood-slurry if it made an extra buck for its executives.
By all means, subject McDonalds to as much scrutiny as you want, you won't hear me crying about it.
Oh, what a surprise, so communism do not work in real life and Government is not your friend? Shocker.
> DoorDash chose not to reduce the psychological impact of added fees for customers, as they typically do — instead they announced those fees through ads and in-app pop-ups
> In fact, DoorDash on average takes almost half of total fees on each order. In other words: worker pay is only about half of the total fees DoorDash collects from customers and restaurants.
> The average order in the sample totaled $59.08 before taxes and tip, with an advertised food subtotal of $44.68. Of that total payment:
● $37.98 went to the restaurant after they paid restaurant fees to DoorDash for the order
● $14.40 was charged in customer fees paid to DoorDash
● $6.70 was charged in restaurant fees paid to DoorDash
Of that total of $21.10 charged in restaurant and customer fees:
● $11.07 was paid to the worker
But the correct answer is -- they are high because there is not enough competition to force them lower.