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. I was recently at a Restaurant Tech meetup in New York. One of the panelists was a restaurant owner. Others were startups in the food space. 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. I worked in food delivery for a few years before I was a software engineer. - 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? Here are 3 problems I see. 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. Regarding point #3, I would be weary of putting my food in the hands of an unaccountable person. If the person works for the restaurant then they have some level of responsibility for the end user experience. If they are working temp for some service then they are less inclined to care about how the end user receives the food. They might even be resentful of the customer receiving the food. I've seen and heard of people doing some really horrible things to other people's food and I assume the worst. 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. It's too expensive for most people to replace a regular trip to the market. Also I think people actually like food shopping. Push a button to get service, Sometimes things cost more than people are willing to pay for them. 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. Public transit is in massive use in many cities around the world where people are happy to pay for it. And it has huge economic benefits beyond the immediate costs of operating it. > Public transit is in massive use in many cities around the world where people are happy to pay for it 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.
Answering 'YES' to atleast two questions above means its going to struggle. 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 ?