[CaptArmchair]

> I'm happy to pay a fair price.

But, that's the thing. Would you? OP's article is a follow up to an original that focusses on and explains price forks and how that affects these delivery services. [1]

[1] https://themargins.substack.com/p/doordash-and-pizza-arbitra...

Why would you - the customer - pay a restaurant 24$ for a pizza while you could get that same pizza for 16$ via DoorDash in a far more convenient fashion? How much do you care about the restaurant's business if the exact same thing is offered to you at 2/3rd's the original price just 2 taps on your smartphone removed from your door?

Companies like DoorDash are currently losing money and they are happy about it. Why is that?

It's a cost/benefit trade off. DoorDash perceives covering the remaining 8$ of that pizza as an expense. What they bank on is being able to buy an established position of dominance as a middle man on the delivery market.

Two things are happening right now. The first is a race to the bottom and drive other delivery services out of the market. That happens by accruing as many restaurants and their customers on their platform. The second is that restaurants get pressured over time to lower their own prices since they compete less with the menu's displayed in their windows on main street, but with the cheap offerings on DoorDash or GrubHub.

If and when the price gap closes over time, incumbent delivery services who remain get to flip their losses into a profit.

The societal cost? Keeping a regular restaurant open becomes prohibitively expensive (which is why ghost kitchens are becoming a thing), low wages for gig and restaurant workers, impact on the quality and diversity of the food on order.

[lmm]

> Why would you - the customer - pay a restaurant 24$ for a pizza while you could get that same pizza for 16$ via DoorDash in a far more convenient fashion?

Maybe some of it's unsustainable, sure. But why should the restaurant care? They're still getting their $24; they should make hay while the sun shines.

> If and when the price gap closes over time, incumbent delivery services who remain get to flip their losses into a profit.

Maybe. This has supposedly been the business model, but has anyone actually managed to execute on it? As soon as they started jacking up the prices it would be very easy for a competitor to enter.

> Keeping a regular restaurant open becomes prohibitively expensive (which is why ghost kitchens are becoming a thing)

As they should - it sounds like they're a more efficient way to do things all round. I'm not worried about regular restaurants disappearing though, because I still like them and am still willing to pay a premium for them.

> low wages for gig and restaurant workers

It's always had a reputation as a minimum-wage (or even below-minimum-wage) job, no?

> impact on the quality and diversity of the food on order.

Sounds like a self-correcting problem - as and when quality and diversity drop, an opportunity rises for anyone who can offer them.

[CaptArmchair]

> Maybe some of it's unsustainable, sure. But why should the restaurant care?

Many restaurants are small independent businesses having business owners taking a lot of financial risk and investing a ton of time to grow that business. They aren't interested in becoming de facto subsidiaries to delivery services. They want to serve their patrons directly while making a living in a sustainable way.

> Maybe. This has supposedly been the business model, but has anyone actually managed to execute on it?

Isn't this how Amazon entered and acquired the book market, by positioning themselves as a book broker at first and then gradually outbidding book stores?

> because I still like them and am still willing to pay a premium for them.

One swallow doesn't make a summer.

> It's always had a reputation as a minimum-wage (or even below-minimum-wage) job, no?

Agreed. Is it to the benefit of society at large if an existing socio-economic circumstances turn more precarious for an increasing group of people?

> Sounds like a self-correcting problem - as and when quality and diversity drop, an opportunity rises for anyone who can offer them.

Isn't that contradictory if the opportunity doesn't exist... because the expenses associated with investing in quality outstrip your competitive advantage with other low-cost competitors?

Sure, you could aim at a high-end niche of customers - e.g. four star restaurants - but those are small and the competition is murderous. That's why there's, comparatively, only a handful of Michelin star restaurants with chefs with a reputation.

Granted, everyone needs to eat. It's a vast market after all. I just do not see how this particular business model applied in the delivery business is a net positive for everyone involved in the long run... except for DoorDash and their ilk.

[lmm]

> Many restaurants are small independent businesses having business owners taking a lot of financial risk and investing a ton of time to grow that business. They aren't interested in becoming de facto subsidiaries to delivery services. They want to serve their patrons directly while making a living in a sustainable way.

Precisely because restaurants are already so risky, one more source of variable demand shouldn't be a problem. It's a rare restaurant that would want to turn down customers today because they might not be there tomorrow. As long as DoorDash are paying what you ask, take their money, just as you would if there were a bunch of people in town for a music festival or whatever.

> Isn't this how Amazon entered and acquired the book market, by positioning themselves as a book broker at first and then gradually outbidding book stores?

I don't think so, unless it was in the very early days? Certainly they were positioned as a mail-order bookstore long before they reached the size that DoorDash is now.

> One swallow doesn't make a summer.

Sure, but I really can't see delivery putting restaurants out of business as a whole, can you? I can see some getting knocked out, I can see price rises, but I can't imagine the category disappearing. Restaurants have always come and gone; there are definitely some that I'll miss that have already shut for good due to the pandemic, but that's always been the way of things.

> Agreed. Is it to the benefit of society at large if an existing socio-economic circumstances turn more precarious for an increasing group of people?

I'm not convinced it will be worse for them, on the whole; DoorDash et al will do the absolute minimum they're required to by law, but they will know and follow the law in a way that existing players in that space often simply don't. It'll be bad for illegal immigrants and healthy young men, but it'll also eliminate some very abusive situations.

> Isn't that contradictory if the opportunity doesn't exist... because the expenses associated with investing in quality outstrip your competitive advantage with other low-cost competitors?

> Sure, you could aim at a high-end niche of customers - e.g. four star restaurants - but those are small and the competition is murderous. That's why there's, comparatively, only a handful of Michelin star restaurants with chefs with a reputation.

I mean, if you're a commodity you're in trouble, but if you're a commodity you've always been in trouble. If your business model is being the cheapest place to get food in town then yeah, your lunch may be about to be eaten - but your lunch was probably eaten by McDonalds decades ago. I actually think the big chains are far more at risk from DoorDash etc. in the long run, because the likes of say Chipotle have already commodified themselves to a large extent.

If you can offer quality that is recognisably a cut above the lowest common denominator then there's plenty of space for that, even at a higher price. Yes, the top end is competitive. But again, it always has been.

> Granted, everyone needs to eat. It's a vast market after all. I just do not see how this particular business model applied in the delivery business is a net positive for everyone involved in the long run... except for DoorDash and their ilk.

The way I see it, DoorDash won't change the high end, but it'll offer a smoother, more consistent, more reliably non-terrible experience at the low end, and that was already a commodified space where big companies had a large presence. Will some restaurants on the margins get squeezed out? Undoubtedly. But I don't think this is a threat to restaurants that actually offer some kind of unique appeal, and more churn as another chain moves into the commodity part of the market is something that's already been happening for years.