Maybe I’m in a bubble. But I see plenty of people looking at these Uber-Grubhub-Doordash delivery services and seeing, well, a bubble, and calling it out as not just a failing business model but one that’s ultimately bad – yet they’re still wildly successful.
Ranjan Roy has a good deep dive on some of their business practices but this part really sums up the long term concerns:
You have insanely large pools of capital creating an incredibly inefficient money-losing business model. It’s used to subsidize an untenable customer expectation. You leverage a broken workforce to minimize your genuine labor expenses. The companies unload their capital cannons on customer acquisition, while this week’s Uber-Grubhub news reminds us, the only viable endgame is a promise of monopoly concentration and increased prices. But is that even viable?
All these models rely on losing a boatload of money to push everyone else out of the market so they can then jack up prices to start breaking even or become profitable. And this isn’t unique to delivery services, look at stuff like WeWork or the grocery delivery models as well.
The problem is, despite paying meh wages, shady business practices, and deals with restaurants that suck the lifeblood out of already thin profit margins, these things are STILL losing money. So any price hikes that come post monopolization are solely to prop up their bottom line or repay investors, not actually increase pay for their contract employees or create better deals for restaurants.
Solution? Call your favorite restaurants directly. If they offer their own delivery, do that and tip for the service. If they use another service or don’t offer delivery, consider curbside pickup if they offer it.
Missed this, but Uber floated a proposed takeover of Grubhub last week.