Ask HN: What is the fundamentally wrong with food delivery tech business model? Food delivery tech is really a challenging and real problem to be solved. It really have a potential revenue model and solution. why multiple startups fail after spending lots of money on it? If we can't build a sustaining business model why this is being built? From US to India most food techs crumbled. |
What I found repeated over and over again was that the food delivery services specifically Seamless, but also others, take too much of a cut ( 1/3 ).
Restaurants tend to operate on razor thing margins, especially in cities with high rent costs. If your product or service is going to be a significant cost to the restaurants bottom line, they most likely will not use it.
- Competition is fierce. There are at least a dozen food delivery services in my metro area. They are all spending a bunch of money on search advertising and free promos.
- Drivers aren't paid for shit. I was averaging less than $6/hr on a 12 hour shift as a contractor. This was before Uber, so you had better figure out a way to pay your drivers at least as well as Uber otherwise they will just go and be Uber drivers.
- Barrier to entry is low. Any schmuck can put up a landing page with their phone number and be in the food delivery business.
There are big problems with food delivery service business models. At their core, they are just a razor-thin profit margin middleman for lazy people. Is that the business you really want to be in?
1) It seems to be too expensive. When we go to the store we only see the costs of the food we buy. We don't take into account the time and other expenses such as gas, wear and tear on the car and the frustration that goes along with getting the food. Show people that it really is not as expensive as it seem and people will be more willing to sign-up.
2) Lots of packaging material that ends up in the trash. Hard to see that stuff go in the dump every time a delivery comes. Delivery companies aren't taking this into account enough. Look at Apple, they make sure you know how environmentally responsible they are. It may not be 100% reality but they act as if it's true and convince the customer of it.
3) the hardest to overcome. People aren't used to getting food delivered. People's behavior can change but it's not going to happen in internet time but in people time. I'm thinking a generation or 2, 20-40 years. Look at internet retail, only now is it coming to fruition yet it's been around for at least 20 years.
But if you are going to make this a viable business model, you might do the following: enlist anyone into the process. If I am walking downtown at the moment and there is a delivery along my route anyway, I could pick it up and go. It would result in having many more workers who are earning less each. They are not employees by any argument, just people doing random tasks for a minimal part of their day. With a star rating, of course and possibly some upfront online training.
To scale 'push a button to service x' - do we need more human workforce ?
Are margins on each service delivery low ?
Does your country have minimum wage guidelines ?
Public transit is an example. The postal service in some countries, lab-grown hamburgers, and most mobile apps are good examples.
Food delivery will be sustainable and profitable soon, when robots are delivering the food. Uber might actually be making money at it, for all I know.
I know, but that has nothing to do with my point.
My point is that it's a money-losing public service, not a profitable business in the vast majority of (or all?) cases.