I'm not surprised. Most of the staff and ex-staff I know were told just this morning that they were limited to selling <10% of their shares, with another 10% in a few months if they've gone up 30% in price! Most of them had instructed to sell everything today. Hardly a vote of confidence.
So that all the employees and major stakeholders don't dump stock on day 1 and tank the price, often permanently affecting the company's perception in the eyes of investors
I don't think it's solely the "price-tanking", it ties them to the company for a while.
i.e. If I was an investor looking to buy, I'd be a bit worried if the dev team would all be made instant millionaires on the day I bought in, with no incentive aside from salary to carry on working. You might find you'd just bought shares in an empty office.
Selling 10% regardless of price is the logical and rational decision for any employee with a meaningful stake. If you have 6 or 7+ figure into the stock, slowly diversifying is the only sound thing to do, even if you still strongly believe in the company.
Perhaps, but that has so far been entirely sponsored by early investors. Deliveroo has never made a profit and it remains to be seen if it ever will. In a competitive marketplace where your competitors are well funded, it is very difficult to raise prices. That makes it kind of the opposite of a valuable company. The services it provides are also not extraordinary at all, home delivery has been a thing for decades.
In UK at least, they're seen as the 'premium' food delivery option (mainly restaurants, rather than takeaways) - and that's good. What's not so good, is that brand aside, I'm not sure what makes them unique. Speaking to their riders (and Uber drivers) their workforce isn't particularly loyal and have a few different phones for the few different gig-companies they work for. Somebody comes along and offers them more money (say a company that doesn't have to provide a return to investors) and their riders will vanish from the streets overnight - and everybody will seamlessly switch.
> In UK at least, they're seen as the 'premium' food delivery option
Indeed.
So premium that I now always check other services (particularly Just-eat) to see if the restaurant is on them, as the price differential has been as much as 25%. Over £10 on orders in the £40-50 range!
- The pandemic has meant more traditional chain restaurants embracing delivery (me personally in UK that has been Nandos, Wagamama being available to me via Deliveroo).
- There space for more premium restaurants to reach individuals at home, from what I have seen they prefer to own the whole chain (own website, driver network). Interesting if this expands and they decide to partner with provider. I would think Deliveroo would win here over JustEat (just my view).
- The whole driver situation is in a state of flux. There is a good paper here* that describes what's going on in gig worker fuelled platform companies as 'pre-automation'. Essentially they are keeping employees at arms length and 'taskifying' all activities with a long term view of automating away the human component with technology (Drones, Autonomous Cars...). This is where the margins start to look more attractive for companies like Deliveroo but the capital investment upfront along with political / legal issues means this will be painful.
Just popping in here with the customary reminder that even if the sector is growing rapidly, that does not make any individual company in that sector automatically a good investment. Just look at the giant graveyard of solar panel companies that went bankrupt.
Your analogy is apt. In both cases, excess capital drives unsustainable business models.
In the case of solar panels, we *all" owe a debt of gratitude to China for commoditising a market that we all needed. It's industrial policy, yes. But even more because the product is strategic in other ways too.
In the case of Deliveroo and the like, it's another example of capital markets still haven't figured out how to price the capital / tech-growth new calculus that started with Amazon.
Deliveroo may turn out to be a harbinger, or markets may revert to dumb credibility in eventual tech-growth.
If you want to buy, there are a number of stories you can tell yourself:
1. Deliveroo ought to be mad profitable, because (other than customer acquisition costs) they've offloaded all variable costs to drivers and restaurants. Taking one more order means the restaurant needs more ingredients and the driver needs more fuel. But Deliveroo just need one more row in a database. How can they possibly lose money?
2. The company has a moat, in the form of drivers/restaurants/brand recognition/customers/app installs. They could raise their prices and become profitable immediately if they wanted to, they're just investing all the money in growing the business.
3. Even if they're inherently unprofitable now, if they can buy enough market share eventually economies of scale, like drivers making more deliveries per route, will make them profitable.
4. If investors continue to subsidise their growth, one day so much order volume will go through them that they can shake down restaurants for an even larger cut of each order.
5. Even if the company never becomes profitable in its current form, the future is robot kitchens/drone deliveries/driverless cars, and their moat will let them dominate that market.
6. Even if the company never becomes profitable in its current form, in the future nobody will cook or even have a kitchen. Their moat will let them dominate that market.
Of course, it's possible none of the stories above are true:
1. If they have a moat, how is it Just Eat, Deliveroo, Uber Eats, DoorDash and half a dozen smaller competitors are all in the same market?
2. If they'll be profitable through economies of scale, why hasn't the last 12 months done that? Delivery has been absolutely dominating the prepared food landscape. In-person dining is closed. Lots of people are looking for work - while people who've been lucky enough to work from home have saved loads of cash they would have been spending in the hospitality industry. If this unprecedented advantage hasn't been enough for them to make a profit, will anything be?
3. Is it really likely that a company smart enough to develop self-driving cars or workable delivery drones will be unable to launch a competing app? Even though they'll be able to offer much lower prices? Oh, some delivery companies might claim they're developing drones themselves, but everyone knows 99% of drone delivery PR have no tech behind them, and a manual pilot hiding behind the camera.
* Deliveroo lost money last year that probably provided the best possible business environment with many people willing to work for them and ordering from home during a pandemic.
* Deliveroo has basically no assets
* What is the barrier to entry for other companies? Neither riders, restaurants, or customers have any reason to stay with them.
* Deliveroo heavily depends on "self employed" couriers which quite likely courts will find are workers (edited, was: "employees") which the company needs to compensate accordingly
Going by what they use I'd say the one thing Deliveroo has going for it is the big square bag things. All my Uber Eats and Just Eat deliveries come in a Deliveroo backpack
In the UK at least this equipment is not supplied, it has to be bought before you start working. That's why there's so many about, everyone who worked for them at some point has one lying around.
You have to provide evidence of owning a long list of equipment as part of the application process.
I think you're not mandated to use their box (you need one, but can use the one on your bike), but if you don't have one of course they'll sell you their branded one)
It's a very appealing service to the public, and it is quite popular, indeed.
But as a business it's tough because consumers are not willing to pay much for delivery, which is a very low productivity activity (a delivery 'rider' cannot do many deliveries per hour in most cases).
If you're ordering for 2, you're often paying ~10% on delivery with them. On top of that they're taking large commission from the restaurant on all sales.
It is my understanding that the stock price of IPOs is often inflated through different mechanisms - maybe another commenter who knows more than I do can explain what these are.
At any rate, if they really released at pricing levels determined by transparent and efficient markets we wouldn't see these pops, would we?
You could actually say IPO pops (and drops) are a temporarily more extreme price discovery process when a company transitions from relatively inefficiently traded private entity to a more efficiently traded public one.
> Deliveroo heavily depends on "self employed" couriers which quite likely courts will find are employees which the company needs to compensate accordingly
This issue has been raised in France but it turns out most couriers are "micro-entrepreneurs" and appear to be quite content with both the social benefits and the flexibility (as reported by Deliveroo and as independently assessed by the Sénat in 2020).
Anecdata, I had a couple of chats with some couriers and it seems to correlate with the Sénat finding. TBH I expected it to be otherwise.
Uber drivers need to be allowed to set their own prices, but stay contractors, imo. The UK is different to the US in that you don't need health insurance, so the employee distinction is less expensive of a change.
> Uber drivers need to be allowed to set their own prices
Yikes this seems terrible for the drivers. There would be a race to the bottom surely with the most desperate drivers who perhaps just need to make a mortgage payment today undercutting everyone else.
A large company like Uber is going to be relatively stable in terms of cash-flow, access to credit, etc day-to-day. If they do sell under cost it's usually part of a longer-term plan.
An individual driver may have a loan-shark threatening to break their fingers for a repayment that day.
I think individuals are going to be much more volatile and so create a worse race to the bottom.
Maybe let drivers set a price above a floor? Could be like their own surge pricing.
The implementation I have seen is that there is a minimum price, but drivers can set higher prices, if they like. (Which in reality means that they can't set the price at all)
The same laws of supply and demand also explain the price of employee labour, no? The big question is whether one price beats flexible pricing. It's not obvious that having a single price for all Uber drivers would benefit everybody, presumably it would have deadweight costs by pricing some drivers out of the market.
The difference is most people aren't providing their labour with a pricing model this dynamic.
If I look for Ubers and one is offering rides for 50p I'd take it, because the result should be the same as anyone else offering something more expensive and I have no relationship with my Uber driver.
If a gardener stats to offer gardening services for 50p an hour I wouldn't go with that, because I have a relationship with my existing gardener and I'm suspicious how quality someone can be for 50p an hour.
I see your point. It sounds as if you agree that in Uber's case, flexible pricing is appropriate. Or do you think that Uber should price its cabs flexibly but pay a flat rate to its drivers?
So far all the courts in the Netherlands have done the same for deliveroo employees (no longer gig workers). They keep appealing and losing so we have to wait another year or so for the final verdict.
Just for accuracy, they were actually recognised as "workers"[0], which is a different formal employment status to "employees"[1] and doesn't confer the full set of employment rights in law. Worker status does come with the rights to minimum wages, breaks and holiday pay, though, so it's still a reasonable concern that if/when Deliveroo riders are granted the same status it will increase the company's operating costs considerably.
That's because this is always presented in a certain (negative) way in the media so that people have come to believe that all Deliveroo riders or Uber drivers are unhappy.
Of course the reality is a bit different, not least in a country like France that has high structural unemployment (and a very closed taxi industry). The 'gig economy' has no doubt allowed people to get work, and in a rather empowering way.
The real winners in this scam are the founders, VCs and Amazon (Who will eventually acquire them) and some of the employees (Not riders). As expected the general public who got in late always lose even when the big investors warned them they would sell very early. Some did and some backed out altogether.
I don't know how one could fall for this ad in the UK [0] and actually become a very late 'retail investor' in Deliveroo's IPO day in which not only the share allocation isn't guaranteed, you are now locked in to waiting until the general public can trade it.
If a retail investor who bought into this pump and dump sells on the day of trading, it is at a loss. Ignore the initial hype entirely, wait for it to die down and probably buy it low.
IPOs typically outperform in the short term. While I agree retail investors shouldn’t go anywhere near an IPO based on an ad in a food delivery app, in other ways it is rational.
EDIT: also, WeWork was somehow a tech company. Until it wasn't...
When I order with Just Eat the food is generally delivered by a driver employed/paid directly by the restaurant.
When I order with Deliveroo the food is generally delivered by a driver employed/paid by Deliveroo.
(There do seem to be exceptions to the above for some restaurants)
Some of the current debate touches on the commission that gets charged which I guess is similar for the two, however much seems to be about treatment of the delivery drivers which would be more of a difference if Just East don't (usually/always?) employ/pay them directly.
The barrier to entry isn't the tech (which is why I don't think that this is really a tech firm). The barrier to entry is the relationships with the restaurants and the riders (and advertising to get people to use it)
Which means there is no barrier to entry. The riders will go to any platform which takes a lower share of commission, since they are limited by the number of workable hours. And because restaurants host themselves on all platforms, there isn't any loyalty there. And customers go to platforms only looking for deals that cheapen the prices, since otherwise they have to pay 20ish% extra.
That’s not enteirly true. In London all my favourite places are only on Deliveroo, and not on Uber Eats (at least in my area). Maybe the have some kind of exclusive contracts?
It used to be this way in Paris as well until it wasn't, now almost all these restaurants are on Uber as well. It seems Eats can just pulverize these deals anytime they decide so.
I find that the Deliveroo prices are heavily inflated for some of my favorite places. And that the info number listed in a restaurant's info page allows one to call the restaurant directly and order the same food for significantly less.
Also, network effects don't really compound outside of individual cities. Deliveroo being the best delivery service in Leeds doesn't make it more competitive in Manchester. A competitor can easily pop up, dominate a single city, and expand from there.
I don't have an insight what kind of selections they provide these days.
I assume they either cut kitchen staff and only have a very basic (boring) offering to cut costs or add some fantasy label to make use of their kitchen and offer delivery themselves as new revenue stream. Then the deliveroo rider could ride on the elevator instead of their bike ;)
The riders are not exclusive. the restaurants arent either. Like uber, this is a bad position to be in. Maybe it works in some countries where taxis or delivery drivers don't exist, but in plenty of places there are already networks
1. DoorDash, GrubHub, Uber, are all massive money losing business, and all lost money last year. In fact, all of the share econ companies are massive money losers, this includes Lyft, AirBnB, and a whole bunch of others I've missed in Europe and Asia. Investors invest in them expecting growth, not dividends at IPOs.
2. You might have a very different definition of asset than everyone else's. Please explain.
3. The barrier to entry? Absolutely massive initial capital requirement.
4. Yes, just like every other sharing econ companies, unless you are operating exclusively out of California.
Without questioning it, I never understood how “sharing economy” companies lose money. Are they subsidising their “partners”? My base assumption was always that eg Uber passes costs and revenue to the riders. Or is it their bloated central operations, needed to justify the VC valuations?
Most of it is marketing, fighting legal issues and attrition of goods delivered / compensation. And also the insane discounts they have to provide to stay ahead of the competition. Airbnb is somewhat immune, since their only major competitors are old school hotels.
No no. I meant that the effective cost of a ride (paying contractor + tech costs + employee costs + marketing per ride) is $1 a mile, but they give a discount that makes it effectively $0.9 a mile, and doing this on scale is effectively making them run operations at a loss unless they have market monopoly. Even a duopoly situation is unfavorable for them.
I don't know if this is still true, but a few years ago Uber was losing money on every trip [1]. They also, five years ago, had 6000 employees, of which 2000 were engineers [2]. Apologies for the outdated links, there's probably more precise data out there.
I read the top article, it’s good. The pertinent bit to my question seems to be, they do subsidise drivers. Apart from fixed costs, they have “driver incentives” to shape supply and demand. Ie give out cash to subsidise trips when needed.
As they got cheap money from investors they typically go big in expanding. This means paying lots of marketing, competing with low prices, having localized phone hotlines, be generous to customers (not suppliers!) when handling disputes, ...
I just had a job interview with Deliveroo. There is over 100 programmers in central office, they pay better than some banks. I dont think problem they solve is that difficult.
Investors care about profits, not growth. Growth can lead to profits, but it can also lead to bigger losses, particularly in a company without large fixed costs. Also, there are reasons to think that the market for food delivery has already peaked. Where I live it's full of "riders" everywhere, it's quite annoying. I don't know if there's any room for more growth.
Deliveroo is not a food delivery company, it's a food company. Both DoorDash in the US and Deliveroo in the UK are now operating ghost kitchens that are restaurants owned exclusively by the "delivery companies". These are brands and restaurants that only deliver, and the quality of the offering are extremely high. In addition, the profit margins are even higher as these ghost kitchens share the same resources and operate out of areas with super low rent and centrally located among a wide delivery area. These companies are now moving up the food chain to become restaurant groups themselves, and soon, grocery, ingredient and meal prep delivery.
We may have reached peak food delivery, but we are nowhere close to peak food and peak delivery.
I have some ideas on what it might be their "secret sauce" (though I haven't really read their IPO docs)
- Matching delivery people to restaurants to deliveries (and giving them a route that serves 2, 3 people)
- Their app experience is really polished (both on the buyer and delivery people side). Delivery times are usually predicted accurately and it shows when your delivery person is near you.
- Network effects (obviously)
Of course nothing of that is too hard to replicate, but it takes time
The restaurants and drivers though ... they ll keep installing all of them. And demand for food will always be high, it's not like deliveroo invented hunger
Sounds about right. They take around 30% of restaurant revenue and many riders make less than £2/hr. Additionally, Uber have just been told to start paying drivers minimum wage (shock, horror!) so it's only a matter of time before Deliveroo riders are paid minimum wage too.
Basically, you reap what you sow. This is, hopefully, the start of the pushback against gig economy companies that provide little to no actual value in the public marketplace.
Citation needed. Having worked as a deliveroo cyclist during my masters, I can assure you that it's a community composed of desperate people (often undocumented). Rather than happy liberated workers. I wonder what your own experience of working for a below minimum wage gig economy company was like?
Sure, and if I would swap bus for a Ferrari I would have no money. Nobody disputes that it is fair or not, as a customer I care about service price and quality. And those companies deliver both.
Your ferrari analogy is just reduction to absurdity.
This is not about fairness it's about rule of law. You either accept that regulations and taxes exist for a reason and they therefore carry an upfront cost for anyone doing business. Or you accept that everything should be deregulated to avoid non-competitive business from bypassing those that are forking regulatory costs.
Regulate for everyone or regulate for no one but you can't have it both ways.
I see many people complain about the commission they charge to restaurants, but how much restaurants save by not having to serve customers on premises?
After all, if restaurants sign up to work with Deliveroo they must have done their homework and concluded that they were still in the black.
> After all, if restaurants sign up to work with Deliveroo they must have done their homework and concluded that they were still in the black.
Or a VC backed firm with zero profits was created with a sole purpose of securing enough market share that any restaurant that doesn't hand over their 30% is immediately squeezed out of the market.
I'm not saying it's illegal, but it's crappy and the stock market has apparently had its say. At least for now.
I don't know what people want though. If taking 30% and paying £2/hr (I'm suspicious of this) is still unprofitable, who's to blame?
Is it the company, or the customers that won't pay enough?
Is it the company & customers, or the government that doesn't mandate a price floor so that all companies now have to pay riders more and take less commission? And if that were to happen, and all food delivery companies went under, is that a better out come for consumers and riders?
Something has to give—it's not like these companies are making money hand over fist—the customer needs to pony up for the true cost of delivery; they're the problem.
In the UK at least, Deliveroo is almost everywhere, and Uber Eats is more or less only in cities where Uber is a licensed minicab - which is most major metro areas, but not smaller towns and so on.
From that alone, I'd guess Deliveroo is by far the bigger player in this market, but Uber Eats possibly has a wider international market?
I think it's fair to say Just Eat is the major contender to Deliveroo over here. Based on the absolutely tragic UX alone, I doubt many people bother with Uber Eats
I'm so glad it is not just me. There are 2-3 restaurants that are only on UberEats. Every time I open it, I hate it. The Uber ride app was/is the pinnacle of good design; UberEats has extremely poor information architecture that makes using it painful.
They were pushing in-app for customers to invest. I hope no inexperienced investors got burnt by this. It wasn't a really a surprise as others have mentioned.
Well DoorDash has been chopped in half from the top ($256 to $130; or $121 a few days ago), so I'd say the market is expressing its concerns, as it just did with Deliveroo.
A greater than 50% crash in 40 trading sessions, for DoorDash.
Deliveroo takes a very high commission (54% in one case [0]), and that is a commission on the total order value, not the delivery charge! I was not aware that Deliveroo takes so much away from restaurants, had I known I would've used it less and preferred to order more directly from restaurants where possible.
I wouldn't have invested in Deliveroo anyway: the best possible scenario for Deliveroo was the pandemic, once it is over it can only go downhill from there, there isn't more room to grow than that.
[0] https://www.facebook.com/the.olive.grove.cambridge/photos/a....
These fuckers are using the same playbook of the finance sector, middlemen who provide almost 0 value and extract as much money possible from the system with zero regards from the consequences.
> As Neil Campling from Mirabaud Securities told Bloomberg: "ESG is one of the largest pools of capital and ESG funds will avoid such controversial issuances given the concerns on workers rights etc. in the gig/app economy," Campling said.
I worked intensely as a driver in Belgium's Deliveroo two years ago and I'm not surprised that Deliveroo is doing poorly. To sum up, their tech (as interfaced by a delivery worker) was godawful and their relationship with drivers was awful as well.
You would get paid per order. But, they practically didn't compensate distance (an order that would require take 10x longer to deliver would have a 2x pay). So you would have to refuse long orders. Then they would sort of shadow ban you for refusing orders, where you wouldn't get any explicit indication of that being the case, but you'd get worse orders and less frequently than others (drivers had a concensus that we were being shadow banned). After a long time of that, instead of fixing the situation, Deliveroo stopped showing the drop-off point, so you had to accept or refuse without knowing the length of the trip. Every thing they did was more infuriating than the last. What we would do then is play along, but if we'd get an outrageous order (way too long, way too cheap), we'd have to contact live support to get it cancelled, which was very cumbersome.
Anyway, I could recount stories like that for a long time. Uber Eats did some driver-oriented promotions around that time and we switched over in flocks. There was an actual Uber Eats manager we could interface with once a week in a local office. It made a big big difference. Interesting thing that he said once was that Deliveroo's Belgium branch had something like an order of magnitude more staff than Uber Eats'. Uber Eats was something like one person running the north of the country, someone running the south, someone managing both and then a handful of people in the Brussels main office. While, Deliveroo's office was something closer to 30-50 people (can't recall the precise number). And Uber Eats was doing a better job. When I think about it, it feels like Deliveroo was constantly putting out fires.
In the UK - most of the local takeout places seem to be on Just-Eat. They sponsor one of the most popular TV shows (X-Factor) and they only take 13% commission. Not sure why I never see them discussed when this kind of thing comes up.
Deliveroo seems to be more for the higher end of things. Not sure why or how it turned out that way.
Lots of anti-Deliveroo and anti-gig economy sentiment.
I love Deliveroo, I love the gig economy.
I've had a sprained ankle for six weeks. Without these companies my life would have been much harder.
Economic studies mostly seem to find that employees value the flexibility of the gig economy. (Feel free to tell me if I'm wrong - I'm just giving a broad-brush opinion.) It's unclear to me whether all the handwringing is coming from actual participants.
In the UK we have had very low unemployment rates for the past decade. That's good. I'm glad that people can get a first job in this way. It's true that they classify drivers as self-employed. Maybe that is because employees would have a large and expensive panoply of rules applied - some of which may benefit them, while others seem more to benefit the only-too-thriving HR industry.
I have zero desire to go back to the old days. I don't want the price of London cabs to go back to "unaffordable", to have to hunt for a dodgy minicab, or pay triple for a London taxi, which is a Mafiosic monopoly. I like being able to get food delivered. The pandemic would have sucked without it. Millions of consumers seem to agree.
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[ 4.4 ms ] story [ 183 ms ] threadi.e. If I was an investor looking to buy, I'd be a bit worried if the dev team would all be made instant millionaires on the day I bought in, with no incentive aside from salary to carry on working. You might find you'd just bought shares in an empty office.
[0] https://news.ycombinator.com/item?id=26578082
valuable company that provides extraordinary services. immense value for customers.
Perhaps, but that has so far been entirely sponsored by early investors. Deliveroo has never made a profit and it remains to be seen if it ever will. In a competitive marketplace where your competitors are well funded, it is very difficult to raise prices. That makes it kind of the opposite of a valuable company. The services it provides are also not extraordinary at all, home delivery has been a thing for decades.
In UK at least, they're seen as the 'premium' food delivery option (mainly restaurants, rather than takeaways) - and that's good. What's not so good, is that brand aside, I'm not sure what makes them unique. Speaking to their riders (and Uber drivers) their workforce isn't particularly loyal and have a few different phones for the few different gig-companies they work for. Somebody comes along and offers them more money (say a company that doesn't have to provide a return to investors) and their riders will vanish from the streets overnight - and everybody will seamlessly switch.
Deliveroo will be the Yahoo of food delivery.
Indeed.
So premium that I now always check other services (particularly Just-eat) to see if the restaurant is on them, as the price differential has been as much as 25%. Over £10 on orders in the £40-50 range!
- The pandemic has meant more traditional chain restaurants embracing delivery (me personally in UK that has been Nandos, Wagamama being available to me via Deliveroo).
- There space for more premium restaurants to reach individuals at home, from what I have seen they prefer to own the whole chain (own website, driver network). Interesting if this expands and they decide to partner with provider. I would think Deliveroo would win here over JustEat (just my view).
- The whole driver situation is in a state of flux. There is a good paper here* that describes what's going on in gig worker fuelled platform companies as 'pre-automation'. Essentially they are keeping employees at arms length and 'taskifying' all activities with a long term view of automating away the human component with technology (Drones, Autonomous Cars...). This is where the margins start to look more attractive for companies like Deliveroo but the capital investment upfront along with political / legal issues means this will be painful.
* Pre-Automation:Insourcing and Automating the Gig Economy https://sociologica.unibo.it/article/view/11657/12290
In the case of solar panels, we *all" owe a debt of gratitude to China for commoditising a market that we all needed. It's industrial policy, yes. But even more because the product is strategic in other ways too.
In the case of Deliveroo and the like, it's another example of capital markets still haven't figured out how to price the capital / tech-growth new calculus that started with Amazon.
Deliveroo may turn out to be a harbinger, or markets may revert to dumb credibility in eventual tech-growth.
You seem to be assuming it will be good to buy sometime...
1. Deliveroo ought to be mad profitable, because (other than customer acquisition costs) they've offloaded all variable costs to drivers and restaurants. Taking one more order means the restaurant needs more ingredients and the driver needs more fuel. But Deliveroo just need one more row in a database. How can they possibly lose money?
2. The company has a moat, in the form of drivers/restaurants/brand recognition/customers/app installs. They could raise their prices and become profitable immediately if they wanted to, they're just investing all the money in growing the business.
3. Even if they're inherently unprofitable now, if they can buy enough market share eventually economies of scale, like drivers making more deliveries per route, will make them profitable.
4. If investors continue to subsidise their growth, one day so much order volume will go through them that they can shake down restaurants for an even larger cut of each order.
5. Even if the company never becomes profitable in its current form, the future is robot kitchens/drone deliveries/driverless cars, and their moat will let them dominate that market.
6. Even if the company never becomes profitable in its current form, in the future nobody will cook or even have a kitchen. Their moat will let them dominate that market.
Of course, it's possible none of the stories above are true:
1. If they have a moat, how is it Just Eat, Deliveroo, Uber Eats, DoorDash and half a dozen smaller competitors are all in the same market?
2. If they'll be profitable through economies of scale, why hasn't the last 12 months done that? Delivery has been absolutely dominating the prepared food landscape. In-person dining is closed. Lots of people are looking for work - while people who've been lucky enough to work from home have saved loads of cash they would have been spending in the hospitality industry. If this unprecedented advantage hasn't been enough for them to make a profit, will anything be?
3. Is it really likely that a company smart enough to develop self-driving cars or workable delivery drones will be unable to launch a competing app? Even though they'll be able to offer much lower prices? Oh, some delivery companies might claim they're developing drones themselves, but everyone knows 99% of drone delivery PR have no tech behind them, and a manual pilot hiding behind the camera.
Personally, I won't be rushing out to invest.
* Deliveroo has basically no assets
* What is the barrier to entry for other companies? Neither riders, restaurants, or customers have any reason to stay with them.
* Deliveroo heavily depends on "self employed" couriers which quite likely courts will find are workers (edited, was: "employees") which the company needs to compensate accordingly
Already happened in NL, Deliveroo is appealing.
https://news.bloombergtax.com/daily-tax-report-international...
You have to provide evidence of owning a long list of equipment as part of the application process.
But as a business it's tough because consumers are not willing to pay much for delivery, which is a very low productivity activity (a delivery 'rider' cannot do many deliveries per hour in most cases).
At any rate, if they really released at pricing levels determined by transparent and efficient markets we wouldn't see these pops, would we?
This issue has been raised in France but it turns out most couriers are "micro-entrepreneurs" and appear to be quite content with both the social benefits and the flexibility (as reported by Deliveroo and as independently assessed by the Sénat in 2020).
Anecdata, I had a couple of chats with some couriers and it seems to correlate with the Sénat finding. TBH I expected it to be otherwise.
https://fr.wikipedia.org/wiki/Deliveroo#Rémunération_et_stat...
Yikes this seems terrible for the drivers. There would be a race to the bottom surely with the most desperate drivers who perhaps just need to make a mortgage payment today undercutting everyone else.
An individual driver may have a loan-shark threatening to break their fingers for a repayment that day.
I think individuals are going to be much more volatile and so create a worse race to the bottom.
Maybe let drivers set a price above a floor? Could be like their own surge pricing.
If I look for Ubers and one is offering rides for 50p I'd take it, because the result should be the same as anyone else offering something more expensive and I have no relationship with my Uber driver.
If a gardener stats to offer gardening services for 50p an hour I wouldn't go with that, because I have a relationship with my existing gardener and I'm suspicious how quality someone can be for 50p an hour.
See the practical difference?
[0] https://www.gov.uk/employment-status/worker
[1] https://www.gov.uk/employment-status/employee
That's because this is always presented in a certain (negative) way in the media so that people have come to believe that all Deliveroo riders or Uber drivers are unhappy.
Of course the reality is a bit different, not least in a country like France that has high structural unemployment (and a very closed taxi industry). The 'gig economy' has no doubt allowed people to get work, and in a rather empowering way.
The real winners in this scam are the founders, VCs and Amazon (Who will eventually acquire them) and some of the employees (Not riders). As expected the general public who got in late always lose even when the big investors warned them they would sell very early. Some did and some backed out altogether.
I don't know how one could fall for this ad in the UK [0] and actually become a very late 'retail investor' in Deliveroo's IPO day in which not only the share allocation isn't guaranteed, you are now locked in to waiting until the general public can trade it.
If a retail investor who bought into this pump and dump sells on the day of trading, it is at a loss. Ignore the initial hype entirely, wait for it to die down and probably buy it low.
[0] https://imgur.com/a/ylLwtE8
EDIT: also, WeWork was somehow a tech company. Until it wasn't...
What makes Deliveroo any worse of a business than Grubhub, Door Dash or Just Eat or Uber Eats or...
(There do seem to be exceptions to the above for some restaurants)
Some of the current debate touches on the commission that gets charged which I guess is similar for the two, however much seems to be about treatment of the delivery drivers which would be more of a difference if Just East don't (usually/always?) employ/pay them directly.
But that is of course a minority of customers, especially amid a pandemic. (But then again, with restaurants closed, for the ones who travel ...)
I assume they either cut kitchen staff and only have a very basic (boring) offering to cut costs or add some fantasy label to make use of their kitchen and offer delivery themselves as new revenue stream. Then the deliveroo rider could ride on the elevator instead of their bike ;)
2. You might have a very different definition of asset than everyone else's. Please explain.
3. The barrier to entry? Absolutely massive initial capital requirement.
4. Yes, just like every other sharing econ companies, unless you are operating exclusively out of California.
The org bloat is quite staggering for what is effectively a taxi app.
[1] https://nymag.com/intelligencer/2019/04/ubers-plan-to-lose-m... [2] http://highscalability.com/blog/2016/10/12/lessons-learned-f....
We may have reached peak food delivery, but we are nowhere close to peak food and peak delivery.
Disclaimer: I'm a Deliveroo shareholder.
- Matching delivery people to restaurants to deliveries (and giving them a route that serves 2, 3 people)
- Their app experience is really polished (both on the buyer and delivery people side). Delivery times are usually predicted accurately and it shows when your delivery person is near you.
- Network effects (obviously)
Of course nothing of that is too hard to replicate, but it takes time
How hard is it to change to a new app? Three minutes maybe? That’s not hard is it, come on.
If that's all it took, then no, it's not hard.
However, they all require you to login, provide email/phone details, prove who you are etc.
Also, that their Ts and Cs say that they'll share data with their partners, which you can go lookup on a massive list somewhere...
That's umpteen more companies that I know nothing about with a copy of my details.
It all adds up.
https://en.wikipedia.org/wiki/Mind_share
It probably says something that Amazon failed at entering back in 2018 [0]. Then, they u-turned and invested in Deliveroo [1].
[0]: https://www.theverge.com/2018/11/26/18112620/amazon-restaura...
[1]: https://www.bbc.co.uk/news/business-48306172
Basically, you reap what you sow. This is, hopefully, the start of the pushback against gig economy companies that provide little to no actual value in the public marketplace.
the value they provide is great to both workers and investors. immense to clients.
I feel like government needs to solve this. Maybe UBI?
Example, if Airbnb had the same fire regulations as hotels or paid the same tourism tax to city councils the price difference would likely dissapear.
If Uber had to garantee vehicle maintenance, mandatory driving breaks, insurance etc. The ride price difference would likely get eaten away.
This is not about fairness it's about rule of law. You either accept that regulations and taxes exist for a reason and they therefore carry an upfront cost for anyone doing business. Or you accept that everything should be deregulated to avoid non-competitive business from bypassing those that are forking regulatory costs.
Regulate for everyone or regulate for no one but you can't have it both ways.
The ones who leach off the vulnerable and pay less than minimum wage after realistic considerations need kicking out of society.
I see many people complain about the commission they charge to restaurants, but how much restaurants save by not having to serve customers on premises?
After all, if restaurants sign up to work with Deliveroo they must have done their homework and concluded that they were still in the black.
Or a VC backed firm with zero profits was created with a sole purpose of securing enough market share that any restaurant that doesn't hand over their 30% is immediately squeezed out of the market.
I'm not saying it's illegal, but it's crappy and the stock market has apparently had its say. At least for now.
Is it the company, or the customers that won't pay enough?
Is it the company & customers, or the government that doesn't mandate a price floor so that all companies now have to pay riders more and take less commission? And if that were to happen, and all food delivery companies went under, is that a better out come for consumers and riders?
Something has to give—it's not like these companies are making money hand over fist—the customer needs to pony up for the true cost of delivery; they're the problem.
From that alone, I'd guess Deliveroo is by far the bigger player in this market, but Uber Eats possibly has a wider international market?
Lol I've been waiting forever for any food delivery or ride sharing company whatsoever to start operating in my Cheshire town!
A greater than 50% crash in 40 trading sessions, for DoorDash.
I wouldn't have invested in Deliveroo anyway: the best possible scenario for Deliveroo was the pandemic, once it is over it can only go downhill from there, there isn't more room to grow than that. [0] https://www.facebook.com/the.olive.grove.cambridge/photos/a....
"Additional fees" seem to correspond to "Marketer offer discount", which I don't know exactly what it is and whether the restaurant had a choice.
You would get paid per order. But, they practically didn't compensate distance (an order that would require take 10x longer to deliver would have a 2x pay). So you would have to refuse long orders. Then they would sort of shadow ban you for refusing orders, where you wouldn't get any explicit indication of that being the case, but you'd get worse orders and less frequently than others (drivers had a concensus that we were being shadow banned). After a long time of that, instead of fixing the situation, Deliveroo stopped showing the drop-off point, so you had to accept or refuse without knowing the length of the trip. Every thing they did was more infuriating than the last. What we would do then is play along, but if we'd get an outrageous order (way too long, way too cheap), we'd have to contact live support to get it cancelled, which was very cumbersome.
Anyway, I could recount stories like that for a long time. Uber Eats did some driver-oriented promotions around that time and we switched over in flocks. There was an actual Uber Eats manager we could interface with once a week in a local office. It made a big big difference. Interesting thing that he said once was that Deliveroo's Belgium branch had something like an order of magnitude more staff than Uber Eats'. Uber Eats was something like one person running the north of the country, someone running the south, someone managing both and then a handful of people in the Brussels main office. While, Deliveroo's office was something closer to 30-50 people (can't recall the precise number). And Uber Eats was doing a better job. When I think about it, it feels like Deliveroo was constantly putting out fires.
Deliveroo seems to be more for the higher end of things. Not sure why or how it turned out that way.
I love Deliveroo, I love the gig economy.
I've had a sprained ankle for six weeks. Without these companies my life would have been much harder.
Economic studies mostly seem to find that employees value the flexibility of the gig economy. (Feel free to tell me if I'm wrong - I'm just giving a broad-brush opinion.) It's unclear to me whether all the handwringing is coming from actual participants.
In the UK we have had very low unemployment rates for the past decade. That's good. I'm glad that people can get a first job in this way. It's true that they classify drivers as self-employed. Maybe that is because employees would have a large and expensive panoply of rules applied - some of which may benefit them, while others seem more to benefit the only-too-thriving HR industry.
I have zero desire to go back to the old days. I don't want the price of London cabs to go back to "unaffordable", to have to hunt for a dodgy minicab, or pay triple for a London taxi, which is a Mafiosic monopoly. I like being able to get food delivered. The pandemic would have sucked without it. Millions of consumers seem to agree.
You'd be out of a job, with no money. Not even sick pay.
You can have all of the things you mention, and the companies that employ people can still employ them fairly.
In reality though, anyone in a corporate position is paid well and some investors are likely to do very well from an IPO.
Deliveroo can pay its riders more, but makes an active decision not to.