Harry here. Today, senior RSG contributor John Ince takes a look at an interesting analysis of the food delivery space, a new partnership between a community college and Uber and another Uber lawsuit.
The Food Delivery Death Star [The California Review on Medium]
Sum and Substance: By all accounts, DoorDash (a company founded in 2013) is a sterling success. With more than 700 employees — not including its contractor-drivers — , $180M+ in funding, and impressive month-over-month growth, Tony Xu is the poster-child for the sort of rapid Zuckerberg-esque ascent that today’s technology makes possible.
The CEO of a sexy consumer-facing company with a sky-high valuation, Xu has even won comparisons to Amazon chief Jeff Bezos. As they say in Silicon Valley, Xu and his team are “crushing it”. They’ve been invited to lecture at Y Combinator. They dole out startup advice on industry podcasts. They’re in the midsts of an aggressive international expansion. And yet, unlike his parent’s Chinese restaurant, DoorDash loses money on almost every meal it serves. In the last five years, investors have poured billions into food delivery startups like DoorDash, hoping that they (or one of their competitors) become large enough to form a lucrative monopoly — like Uber has for taxis, Google for search, and Amazon for e-commerce.
Legacy food ordering websites (like GrubHub.com, Seamless.com and Just-Eat.com) now have their own drivers, while titans like Uber, Amazon, and Google have also entered the fray. Everyone, it seems, wants a piece of the pie delivery fee. And yet… It wasn’t long before the space saw its first casualties: Sprig (funding: $57M) ceased operations in Palo Alto and Chicago, SpoonRocket (funding: $13.5M) shut down entirely, DoorDash (funding: $186.7M) lost a good chunk of its near-billion dollar valuation, Square tried and failed to sell its delivery service, Caviar (which it bought in 2014 for $90M) to GrubHub.com, Munchery’s CEO is on the outs while the company prepares for a massive devaluation, and Postmates was rumoured to have tried to sell its business before raising $141M this week from Peter Thiel’s Founders Fund.
To Postmates’ credit — and to its competitors’ chagrin — it managed to raise a “flat round” which did not lower the $600M valuation it received in 2015. However, Quartz reported that Postmates’ latest deal was laden with investor-protecting “deal sweeteners” that may have inflated the real value of Postmates stock. 2016’s chilly investment climate was a result of “extensive expectation resetting” among food delivery investors. The New York Times said it was “the end of the on-demand dream”. Pando, more memorably, called it the “foodpocalypse”.
So what makes food delivery so hard? Delivery companies face special challenges that other on-demand startups (like Uber) don’t. Transporting people is a simple problem of connecting drivers and customers; food delivery startups have the additional problem of connecting drivers and customers and kitchens.
My Take: This is a long, informative and important discussion about the unique challenges facing food delivery startups. Despite thin margins, huge logistical challenges, and lots of bleeding red ink, investors are still throwing money at companies in this space – just like they were throwing money at WebVan over a decade ago. In fact three of the same investors who invested in Webvan are investing in food delivery startups. What, if anything, have we learned in the intervening decade? What do you think? Is food delivery a viable business in the long term? Or investors just deluding themselves?
Uber and Lyft drivers share the 17 things they wish passengers would stop doing [Business Insider]
Sum and Substance: Driving for a ride-hailing app like Uber or Lyft is a bit of a gamble. Earnings can vary significantly from one hour to the next, and then there’s the question of who exactly is getting into their car. On some occasions, drivers can have genuine conversations with complete strangers. But, then, of course, they also come across their fair share of stinkers.
To find out which passenger behaviors rub drivers the wrong way, we asked them to chime in. Here are 17 annoying things you should probably stop doing right now:
• Leaving one-star reviews for no reason
• “One thing that might surprise people about the job is that even a four-star rating is bad. The whole system is set up so anything less than five stars is terrible for the driver.” —Lyft and Uber driver
• Making your driver wait “Don’t ask for a ride unless you’re ready to walk outside the second you order the ride.” —Lyft and Uber driver
My Take: Let’s face it – being a driver can be a very frustrating experience, and this article captures most of the things that annoy drivers. With Business Insider is publishing an article like this, maybe, just maybe, some people will read it and recognize that drivers deserve some respect in the world. Did they leave anything off the list?
Out Of Options, This School Got Uber To Pick Up Its Students [NPR]
Sum and Substance: When Patricia Gentile was settling in as the new president of North Shore Community College in Massachusetts — about twenty miles north of Boston — she remembers looking out her window and seeing something strange. “All of these cars rolling up, and tons of folks getting in and out,” Gentile says, thinking about that January day a couple years ago. “So I asked my assistant, ‘What’s going on down there?'” Turns out that’s where students were picked up and dropped off, but Gentile wondered why there were just so many cars. “And that’s how I found out that this campus was not accommodated by public transportation.” The closest option? A bus stop at a mall about four miles away. Once you arrive there, though, getting the rest of the way is up to you. The campus is in a pretty isolated area, so “not walkable or bikeable” according to Gentile.
… Searching for options, Gentile first turned to the Massachusetts Bay Transportation Authority, requesting that a nearby bus route be extended to the campus. But the agency needed proof of ridership — numbers Gentile didn’t have yet. “We did some studies and, at one point, somebody recommended that we talk to Uber to see what could be done,” Gentile says. And so that’s what they did. Under a pilot program, students can request discounted rides from three select nearby public transit locations, including another mall, this one about five miles away from campus. … The school will pay the first $10 of each ride. That leaves about $3 for Matos to pay out of pocket each way. To cover students’ costs, North Shore set aside about $40,000 in this year’s budget, an amount Gentile calls a “pretty good bargain.”
My Take: This is the kind of partnership that really makes sense. Everybody wins here. The students get cheap and efficient transportation. Uber gets $40,000 and some good publicity. And the school gets a good solution for a nettlesome problem. Kudos to all involved for figuring this out.
Elon Musk: ‘It’s Not Tesla vs. Uber. It’s The People vs. Uber.’ [Huffington Post]
Sum and Substance: Yes, “the people” who can afford $100,000 electric cars will finally rise up. Elon Musk denied on Wednesday that Tesla Motors’ planned ride-hailing network would put his company in direct competition with Uber or Lyft. Rather, he said, the tentatively named Tesla Network would allow the luxury cars’ owners to take on the ride-hailing giants themselves.
“It’s not Tesla vs. Uber,” the billionaire businessman said during an earnings call with analysts. “It’s the people vs. Uber.” Uber and Lyft both take roughly a 25 percent commission on each fare, although their share could be as high as 43 percent, according to data from The Rideshare Guy, a site devoted to ride-hailing services. Tesla, which has offered few details about its planned network, may end up taking a much smaller cut, Musk said. “The majority of the economics would go to the owner of the car,” he said.
Last week, Tesla announced plans to outfit every one of its vehicles with hardware that would allow the car to operate autonomously. First, though, the company said it needs to collect enough data to perfect its software models, and it needs to obtain regulators’ approval to enable the function. Musk vowed to send a self-driving car from Los Angeles to New York City by the end of next year. Once all the new Tesla vehicles can drive themselves, Musk proposed connecting them through a network that would allow the cars to function as a fleet of robotic taxis, summoned through an app like those of Uber or Lyft. The idea is that the vehicles would earn money for their owners during the time they would otherwise be sitting idle. But the self-driving Teslas won’t be compatible with any fleet of autonomous vehicles run by Uber or Lyft.
My Take: This is a curious story to be appearing in the Huffington Post, especially when Arianna Huffington sits on the board of Uber. It’s a thin story based on an offhand comment by Elon Musk. Okay, so Tesla is planning on “outfitting its cars to operate autonomously” and Tesla is thinking about a network of some kind to help poor, struggling Tesla owners make a little extra cash to make ends meet.
Uber gets slapped with lawsuit over missing food delivery tips [Engadget]
Sum and Substance: A courier in New York who used to deliver food for Uber has filed a lawsuit against the company over unpaid tips, according to Buzzfeed News. In the lawsuit, he said that tips from customers never made it to him and other delivery personnel for UberRush and UberEats. Both services deliver food to your doorstep from nearby restaurants, but they still have their differences. Rush mainly operates through GrubHub’s delivery service whose rates typically include online gratuity, none of which (the plaintiff said) made it to couriers’ pockets.
Eats, on the other hand, doesn’t allow in-app tips at all as one of its purposes is to eliminate delivery tipping. It charges a $3 “booking fee,” but the plaintiff argues that according to the law, a company must “adequately notify the customer” that this fee they’re charging is not a gratuity in easily understood language written in “no smaller than 12-point font.” Its checkout page does have a disclaimer that says “Tips are not included in the cost of your order. Tips are neither expected nor required.” The plaintiff believes that’s not enough, so the booking fees should go to the couriers.
As for where the missing online gratuities and booking fees go, well, they typically seem to get lost somewhere along the way. Uber told BuzzFeed that it’s the restaurants’ responsibility to make sure tips reach delivery personnel and that it even redesigned the Uber-GrubHub dashboard to make the task easier. However, couriers say they get ignored when they take it up with the restaurants.
Online delivery services typically go through so many channels that losing tips somewhere down the chain isn’t that uncommon. When four Prime Now drivers in LA sued Amazon, their complaint included not getting the tips customers would pay via credit card. This also isn’t Uber’s first rodeo with tip-related lawsuits: in September this year, it agreed to pay riders $384,000 for pocketing around half of the 20 percent tip its app automatically charges passengers.
My Take: This is now beginning to sound all too familiar. Through some questionable tactics, Uber manages to pocket tips that were supposed to go to one of their workers (independent or not). The only way the issue gets addressed is through a lawsuit. If this just happened once, one might dismiss it as an inefficiency or an exception, but when it happens over and over, you have to wonder about Uber and what kind of games they’re playing.
Readers, what do you think of this week’s round up?
-John @ RSG
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