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In March 2019 a good friend who owns a few pizza restaurants messaged me [...]. For over a decade, he resisted adding delivery as an option for his restaurants. He felt it would detract from focusing on the dine-in experience and result in trying to compete with Domino's.
But he had suddenly started getting customers calling in with complaints about their deliveries.
Customers called in saying their pizza was delivered cold. Or the wrong pizza was delivered and they wanted a new pizza.
[...] He realized that a delivery option had mysteriously appeared on their company's Google Listing. The delivery option was created by Doordash.
[...] 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. It led to his employees wasting time responding to complaints and even some bad Yelp reviews.
But he brought up another problem - the prices were off. He was frustrated that customers were seeing incorrectly low prices. A pizza that he charged $24 for was listed as $16 by Doordash.
[...] He called in and placed an order for 10 pizzas to a friend's house and charged $160 to his personal credit card. A Doordash call center then called into his restaurant and put in the order for those 10 pizzas. A Doordash driver showed up with a credit card and paid $240 for the pizzas.
We went over the actual costs. Each pizza cost him approximately $7 ($6.50 in ingredients, $0.50 for the box). So if he paid $160 out of pocket plus $70 in expenses to net $240 from Doordash, he just made $10 in pure arbitrage profit. For all that trouble, it wasn't really worth it, but that first experiment did work.
[...] But we did realize, if you removed the food costs this could get more interesting.
[...] The order was put in for another 10 pizzas. But this time, he just put in the dough with no toppings (he indicated at the time dough was essentially costless at that scale, though pandemic baking may have changed things).
[...] 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. If we had to pay a customer fee on the order, it would've further cut into our arbitrage profits (though maybe we could've incorporated DashPass as part of the calculation).
(Score: 4, Interesting) by bradley13 on Tuesday May 19 2020, @06:49PM (4 children)
Companies like this cannot go out of business soon enough. While they will go out of business, the longer they linger, the more carnage they will leave in their wake.
The thing that I find shocking is how utterly stupid the investors are. They think that something like DoorDash is a technical company. They think that they can corner a market and win big with "massive multiplication". But it isn't and they can't. The techie get-insanely-rich dreams are based on the idea that you provide a purely technical solution, and when your customers multiply by 100, you only have to increase your server capacity a bit. Classic example: Google.
As soon as you involve human labor, this dream fails.
When you need human labor to service a customer, 100 times as many customers require 100 times the labor. There is no "massive multiplication". The "gig" economy is an attempt to cheat, to put all the risk onto the employees, while keeping the profits for the company. Regulators are catching on to this game, and this cheating won't last much longer. But even with the gig economy - if your company is making this kind of losses ($450 million loss on $900 million revenue), then your company is never going to make a profit. Do Silicon Valley investors have so much cash that they can afford to throw it away like this? Apparently...
Everyone is somebody else's weirdo.
(Score: 4, Interesting) by meustrus on Tuesday May 19 2020, @07:02PM (2 children)
I'm pretty sure DoorDash and every other car-based tech company is just trying to build the infrastructure and customer base to be in the right position when self-driving cars finally work.
The VCs don't know when it will happen, but they believe it will. It's just a matter of time. If they have an ownership stake in the company that has the right app and the right brand recognition, the "massive multiplication" will suddenly be a reality and they will be billionaires.
Until then, they just have to keep the loss leader afloat. The big boys will make their business plan work eventually.
If there isn't at least one reference or primary source, it's not +1 Informative. Maybe the underused +1 Interesting?
(Score: 3, Interesting) by sonamchauhan on Tuesday May 19 2020, @10:26PM (1 child)
Not at this burn rate, they're not. Half a bil a year! The economy can sustain only that many Ubernicorns.
Also, a future automated economy should also be a software agent / API-enabled economy. Your agent won't care that much for your DoorDash and Amazon order history. It will work for you, without bias to then-present big boys, their ad spend, or their apps on your phone.
But VCs may certainly be big boys, you got that right. With toys.
(Score: 2) by meustrus on Wednesday May 20 2020, @04:10PM
A beautiful vision of the future. Probably completely unrealistic though.
It's not in anybody's best interest to open up their APIs. You're not going to have a portable profile that uses everyone else's software. You're going to have profiles on their servers, which they control, with your data locked behind their opaque APIs and designed to only work with their frontend that doesn't implement copy/paste.
Of course, all that is a side show to the real game: market control. DoorDash is clearly trying to get businesses to sign exclusive contracts before a better game arrives in town. Why else would they hemorrhage money like this to deliver a known poor customer experience?
...anyway, by "big boys", I meant actually successful businesses like Google and Tesla that are actually working on self-driving cars. Not leeches like VCs and their "Ubernicorns" that are just waiting for somebody else to invent their killer app.
If there isn't at least one reference or primary source, it's not +1 Informative. Maybe the underused +1 Interesting?
(Score: 2) by ChrisMaple on Thursday May 21 2020, @01:28AM
Doordash is engaging in fraud. I hope they try this trick on someone rich enough to sue them for civil damages, and who finds some state attorney who'll file criminal charges against the executive officers.