"Tony Xu is ready to do some Dashing. He’s wearing his bright red DoorDash T shirt. His water bottle is full. He’s got the Dasher app loaded on his iPhone."
Can you spot the difference b/w this scenario and Kosmo [0] who attempted this in 2000? [1]
Kozmo did not charge delivery fees and I believe had their own warehouses/inventory. I'm not sure what I think about the economics of these delivery companies, but those are two pretty fundamental distinctions.
"Kozmo did not charge delivery fees and I believe had their own warehouses/inventory."
I'd forgotten about the warehouses. Kozmo might have worked if the market was as big as it is now ... and possibly looked at ways to become profitable.
"in 1999 the company had revenue of $3.5 million, with a resulting net loss of $26.3 million.[5] The company raised about $250 million,"
There was a lot of VC money thrown around but the number of employees and scale... 1100 employees and 18 locations. I would have thought it would have been best to win high values cities then expand gradually.
The big question for all of the companies that want to be the last mile: can they run sufficiently profitable businesses without classifying their workers as 1099 employees?
Mark my words: most of the "on-demand" startups that are relying on contract workers are not going to be able to defeat the misclassification lawsuits they're facing. Some might have the funds to delay the inevitable by strategically settling the first cases they're hit with, but the laws and legal precedents in this area are quite straightforward.
I believe it will all end up owned by Uber (or similar) using self-driving cars. The vehicle is easily loaded at the supplier, and then you unlock a lockbox when it arrives to do the delivery. Dynamic pricing can be used to direct demand to low hours (eg delivery is $5 at midday but $2 at 2pm).
The remaining question is how soon. A company trying to make use of a self driving vehicle for most hours of the day across a wide customer/usage base will find it far easier to spread the capital costs, than single purpose or single customer vehicles. There are also big advantages to having a larger fleet (economies of scale). Consequently the moment the self driving vehicles are somewhat practical, I expect massive attempts to corner the market for using them. (Human driven vehicles can still be used for trickier locations and journeys until the self driving tech matures.)
Automated delivery in the last mile is definitely the future, but it will be largely commoditized. Nothing in the value chain is especially difficult to do or requires proprietary technology outside of the vehicular platform. The maps all pull data from open source databases like OSV, and logistics networks have been operating successfully for decades.
Regulation is going to be the thing holding everything back. I'm not talking about the disparate and protectionist taxi regulations that Uber just ignored until they were successful; I'm talking about real safety issues like air traffic control when everyone and their mother is flying things over populated areas. The regulatory environment around how all these drones will communicate needs to be developed and standardized -- that alone will take at least a decade because adequate bureaucracies need to be built up to develop, steward and enforce the regulations. Self-driving cars are even further off because they're going to be carrying human passengers.
We're at a point where the technology has overrun our ability to regulate it, and there really are things that need to be regulated -- Who is liable if two drones crash over your house and damage your roof? Do you force drone operators to carry insurance to cover damages in the event of mechanical failure? How do drones report their position to each other to avoid collisions? What data formats, units and auditing is required when communicating with other drones? There are thousands of questions, and none of them have even made it into the sphere of political discourse, much less legislative action. Current politicians don't even understand this stuff, so we have to wait for people who do to become old enough to get elected.
I'd say we're at least 15 years off from this future, if not 30. We'll probably see it happen elsewhere in the world much sooner than it will in the US and Europe. So any business starting up today will not be able to rely on self-driving cars or autonomous delivery to prop up their business model: it has to work with human delivery or it won't survive long enough to make it to the drone era. And for the ones who do, it'll become a race to the bottom with razor-thin margins.
There is no need for drones. This future does not need to be a single big step. Even if 1% of journeys can be automated at the start, it will be worthwhile commercially and that 1% will relentlessly increase as regulation and technology allow. ie steady evolution instead of big bang revolution.
There are other successful exits than being completely profitable and sustainable. There's always the "bought out by player with bigger pockets and/or competition" ending?
Are startup investors going back to profitability as their key measure? Some might hope so but I think traction and marketshare are far more visible right now...
Exactly. The reason UPS and FedEx ceded last mile mail and package delivery to the USPS is that they weren't interested in dealing with the complex logistics of last mile delivery. Its unpredictable and unprofitable. They are interested in the meaty part of mail delivery: charging customers $20 to carry an envelope across the country on a plane, which has a marginal cost approaching zero for them.
Time will tell, but my theory on these last mile businesses that are springing up is that they are cramming into the market at precisely the places where there is the least money to be made, but offers the most convenience to customers. In other words, VC's are subsidizing luxuries that customers themselves have shown they won't pay for. This would be a great business if customers were willing to pay $20 to have food delivered, but the truth is that they aren't. At that point they will look for businesses that have delivery baked into the business model (ie, Dominos), or just go pick it up themselves.
There seems to be an inherent assumption somewhere that these businesses that don't offer delivery are out of touch or not tech-savvy, but the article touched on an important point with this quote: “There were many pages of orders, not just one or two,” he says. Finally, when spotting this phenomenon at a Palo Alto macaroon store on day, Xu asked why these orders weren’t being delivered. The answer was that the owner has opened his bakery to bake, and not deliver stuff. He got similar answers from people in other businesses, ranging from toys to furniture, to restaurants.
Maybe those businesses aren't interested in delivery for a reason. Just because you can build software for a smartphone doesn't mean the fundamental laws of P&L don't apply.
I'm not sure which issue you're referring to. Both FedEx and UPS have a partnership with the USPS to have USPS deliver a large percentage of their parcels for which they pay a fixed rate. They deliver the parcels in bulk to a mail distribution facility and USPS brings them to your door.
The USPS isn't mandated by the Constitution, it is an exercise of discretionary powers granted the Congress by Article I, and Congress could, Constitutionally, choose not to exercise that power, just as it chooses not to exercise its power to issue letters of marquee and reprisal.
Its not going away because while members of Congress who would have liked to have killed it could sell quasi-privatization, various accounting mandates, and other hostile policies to their constituents as efficiency measures, they can't take the political backlash they'd expect from killing it outright.
It doesn't take a Constitutional Amendment to kill it, just Congress deciding that they want to badly enough to actually do it and take the political heat.
I think they're all playing musical chairs to see who's left with a seat when the employees can be realistically replaced with automated delivery. Whether that's van, scooter, drone, etc.
Most of the players in the industry are loudly (Uber) or quietly (everyone else) planning on eventually using fully automated delivery systems such as self-driving cars or UAVs, making the question moot.
This looks to be a big risk for the contracted delivery people since they're only getting paid the delivery fee plus the tip. Even working pizza delivery, you are still an employee and must make at least minimum wage. If you work for DoorDash you're absolutely dependent on tips.
This leads me to a further line of thought- if DoorDash is classifying all of their delivery people as contractors do they have a robust vetting system for people who deliver for them? Heck, even with a robust vetting system I can see there being potential for serious altercations between a DoorDash contractor who just spent an hour taking a big order to a far-flung delivery address and the person who made the order who completely stiffs them on the tip.
That's how it works for the most part on Grubhub/Seamless & Delivery.com (if it still exists). Seamless defaults to a 10% tip or $2, whichever is greater. Grubhub & delivery.com both asked the user to enter a tip amount or select a predetermined amount of 10, 15 or 20%.
I was a bike messenger doing food delivery for awhile. For the most part people tipped between 10-20%. The delivery person sees the tip in advance for the most part and can decide drop-off order based on that.
Additionally, most people who've told me their tipping practices for food delivery usually have a predetermined amount regardless of service/time/basket size.
Tip is actually hardly related to quality of service. Michael Lynn's[1] research shows that people reveal their prejudices through tipping more than anything else. Being a young busty blonde female gets you way more in tips than being a middle aged black male, regardless of the actual quality of service.
In regards to that, I don't think tipping is a good system unless what you want is pushing discrimination in the workplace even further. Service should just be included in the price. But at least, the blind tipping model of these apps eliminates that bias. If you don't know who will deliver, you are less likely to tip the busty blonde girl more than the black man.
I don't think the decision of which roles are tipped (vs paid a piecework/wage) ever had any actual incentive-aligning logic behind it.
Super Duper Burgers, for example, has zero table service, and you're expected to bus your tray. They still have tip jars and a tip field on the credit card slip.
Convenience stores now have tip jars too.
Don't try to reason with it, just follow established practice as best you can.
These days everyone just rely on an API for the background check. Be scared when the push for faster and more dense data results in a new world where anytime you engage with another person you run a background check, credit check, and medical history check before uttering a single word.
eBay bought Shutl for similar reasons. If you want to see what a bankrolled start-up looks like doing last-mile deliveries then Shuttle is a good test case. I personally don't think this model has legs.
It does seem like any business that relies on labor being its one and only way accomplish its business better be able to answer the question if it has employees or contractors.
I do not like the idea of the future where no business has employees and everyone is a contractor. Something seems wrong there.
That's most likely a temporary worry. The future will be largely businesses tasked reduced to processes that have been automated via robots/drones/etc.
This seems like a huge liability waiting to happen. By donning the jersey and working at least once a month as a participant in their marketplace they blur the distinction between employee and market participant, thereby opening themselves up to having those that participate in the market more than 40 hours a week claiming that they are full time employees and are entitled to things like benefits.
I wanted this to become something much more. I think their sights are too low in terms of the ability of their product.
For example, I would turn this into a deliver anything platform that would eventually be integrated with stores/restaurants...etc. Instantaneous shipping. A mix between Peapod (for those who haven't used peapod its a grocery delivery service), and Homejoy except with delivery drivers.
There's many more routes they could take, oh and the employee/marketing associate discrepancy is a little messed up.
I don't want this company anywhere near the last mile to me. DoorDash sent a flyer to my house false advertising a coupon code. I spent half an hour creating an order only to realize that the coupon they sent me was different from what the flyer said. When I called to complain they acknowledged their error but said they wouldn't do anything and that I should just place an order anyways.
33 comments
[ 2.9 ms ] story [ 67.8 ms ] threadCan you spot the difference b/w this scenario and Kosmo [0] who attempted this in 2000? [1]
[0] https://en.wikipedia.org/wiki/Kozmo.com
[1] hint: phone & market size.
I'd forgotten about the warehouses. Kozmo might have worked if the market was as big as it is now ... and possibly looked at ways to become profitable.
"in 1999 the company had revenue of $3.5 million, with a resulting net loss of $26.3 million.[5] The company raised about $250 million,"
There was a lot of VC money thrown around but the number of employees and scale... 1100 employees and 18 locations. I would have thought it would have been best to win high values cities then expand gradually.
So really they're a courier service paired with a lead gen service instead of kozmo wanting to be a store that delivers.
The only other model that works is a pizza shop where they can make the products and deliver too.
Waiter.com here in Silicon Valley must be so pissed that ten years in the game they're still outshined.
Mark my words: most of the "on-demand" startups that are relying on contract workers are not going to be able to defeat the misclassification lawsuits they're facing. Some might have the funds to delay the inevitable by strategically settling the first cases they're hit with, but the laws and legal precedents in this area are quite straightforward.
The remaining question is how soon. A company trying to make use of a self driving vehicle for most hours of the day across a wide customer/usage base will find it far easier to spread the capital costs, than single purpose or single customer vehicles. There are also big advantages to having a larger fleet (economies of scale). Consequently the moment the self driving vehicles are somewhat practical, I expect massive attempts to corner the market for using them. (Human driven vehicles can still be used for trickier locations and journeys until the self driving tech matures.)
Regulation is going to be the thing holding everything back. I'm not talking about the disparate and protectionist taxi regulations that Uber just ignored until they were successful; I'm talking about real safety issues like air traffic control when everyone and their mother is flying things over populated areas. The regulatory environment around how all these drones will communicate needs to be developed and standardized -- that alone will take at least a decade because adequate bureaucracies need to be built up to develop, steward and enforce the regulations. Self-driving cars are even further off because they're going to be carrying human passengers.
We're at a point where the technology has overrun our ability to regulate it, and there really are things that need to be regulated -- Who is liable if two drones crash over your house and damage your roof? Do you force drone operators to carry insurance to cover damages in the event of mechanical failure? How do drones report their position to each other to avoid collisions? What data formats, units and auditing is required when communicating with other drones? There are thousands of questions, and none of them have even made it into the sphere of political discourse, much less legislative action. Current politicians don't even understand this stuff, so we have to wait for people who do to become old enough to get elected.
I'd say we're at least 15 years off from this future, if not 30. We'll probably see it happen elsewhere in the world much sooner than it will in the US and Europe. So any business starting up today will not be able to rely on self-driving cars or autonomous delivery to prop up their business model: it has to work with human delivery or it won't survive long enough to make it to the drone era. And for the ones who do, it'll become a race to the bottom with razor-thin margins.
Are startup investors going back to profitability as their key measure? Some might hope so but I think traction and marketshare are far more visible right now...
Time will tell, but my theory on these last mile businesses that are springing up is that they are cramming into the market at precisely the places where there is the least money to be made, but offers the most convenience to customers. In other words, VC's are subsidizing luxuries that customers themselves have shown they won't pay for. This would be a great business if customers were willing to pay $20 to have food delivered, but the truth is that they aren't. At that point they will look for businesses that have delivery baked into the business model (ie, Dominos), or just go pick it up themselves.
There seems to be an inherent assumption somewhere that these businesses that don't offer delivery are out of touch or not tech-savvy, but the article touched on an important point with this quote: “There were many pages of orders, not just one or two,” he says. Finally, when spotting this phenomenon at a Palo Alto macaroon store on day, Xu asked why these orders weren’t being delivered. The answer was that the owner has opened his bakery to bake, and not deliver stuff. He got similar answers from people in other businesses, ranging from toys to furniture, to restaurants.
Maybe those businesses aren't interested in delivery for a reason. Just because you can build software for a smartphone doesn't mean the fundamental laws of P&L don't apply.
[1] http://fedexdriverslawsuit.com/
More detail can be found here: http://www.wsj.com/articles/u-s-mail-does-the-trick-for-fede...
Its not going away because while members of Congress who would have liked to have killed it could sell quasi-privatization, various accounting mandates, and other hostile policies to their constituents as efficiency measures, they can't take the political backlash they'd expect from killing it outright.
It doesn't take a Constitutional Amendment to kill it, just Congress deciding that they want to badly enough to actually do it and take the political heat.
This leads me to a further line of thought- if DoorDash is classifying all of their delivery people as contractors do they have a robust vetting system for people who deliver for them? Heck, even with a robust vetting system I can see there being potential for serious altercations between a DoorDash contractor who just spent an hour taking a big order to a far-flung delivery address and the person who made the order who completely stiffs them on the tip.
In regards to that, I don't think tipping is a good system unless what you want is pushing discrimination in the workplace even further. Service should just be included in the price. But at least, the blind tipping model of these apps eliminates that bias. If you don't know who will deliver, you are less likely to tip the busty blonde girl more than the black man.
[1] https://sha.cornell.edu/about/directory/instructors/wml3
edit: grammar and typos
Super Duper Burgers, for example, has zero table service, and you're expected to bus your tray. They still have tip jars and a tip field on the credit card slip.
Convenience stores now have tip jars too.
Don't try to reason with it, just follow established practice as best you can.
I do not like the idea of the future where no business has employees and everyone is a contractor. Something seems wrong there.
For example, I would turn this into a deliver anything platform that would eventually be integrated with stores/restaurants...etc. Instantaneous shipping. A mix between Peapod (for those who haven't used peapod its a grocery delivery service), and Homejoy except with delivery drivers.
There's many more routes they could take, oh and the employee/marketing associate discrepancy is a little messed up.