In Texas, an expression I've often heard is that someone is "all hat and no cattle". It means that someone is full of grandiloquent talk, but lacks the accomplishments or assets to lend substance to their words.
I've long felt that services such as Grubhub, Doordash and their ilk are pretty much "all hat and no cattle" in business terms. They don't add even one cent of value to the goods they deliver. Their entire business model is based on providing convenience for a price, but that's an entirely dispensable benefit. If I'm short of cash, there's nothing stopping me cooking for myself, or even driving to a restaurant and eating there for no additional charge. They aren't an essential service.
Now Wolf Street points out that they aren't economically sustainable businesses, either.
There’s no secret to success in tech. But like hitting a 98 mph fastball, it’s easy to describe, nearly impossible to do: Create a great product that can scale. Even better if you can build a patent moat around it. If, after five hard years of R&D, you create killer software at a cost of $100 million, then the first product you ship for $1,000 comes at a loss of $99.99 million. But by the time you’ve sold your millionth unit at almost no additional cost, you’ve grossed a billion. That’s scale.
Here’s the rub: You can scale intellectual property, you can’t scale labor. Your millionth pizza costs as much to deliver as your first.
Yet the meal-delivery guys claim they will scale when they create a critical mass. They will have the density they need to become profitable (none are yet) if they can somehow bag a huge market share. The density argument goes like this: if we can deliver enough meals in a given trade area, we can be like the post office in terms of efficiency (yes, the post office, I’m not being ironic). Nice idea, but it doesn’t wash.
. . .
Meal delivery is a discrete business. No one else in your zip code is ordering spaghetti Bolognese from Trattoria Pastaria at 6:30 on a Tuesday evening. Whether the Uber Eats guy drives to the restaurant or you do, it’s the same (except the food is hotter if you do it yourself). There is no way to string that discrete delivery into an efficient, cost-effective route. To that point, old-school pizza joints average about 2 deliveries an hour and their drivers start at the restaurant. Can a free-floating DoorDasher do more than two an hour?
In short, Mount Everest is scalable, meal-delivery companies are not.
. . .
Let’s get specific. DoorDash, Postmates and Uber Eats all deliver for McDonald’s. According to that most reliable of all sources, the internet, they charge about $5 to deliver your burger and fries. And it takes about 30 minutes from the time you order to delivery. This means that, like pizza, the driver can do about two trips an hour. This is a truly great service for the consumer too stoned to get his own milkshake at midnight.
But there is no way, no way, in the world this can be profitable for the meal-delivery companies (or the restaurants if they do it themselves). Ten bucks an hour won’t even pay for the driver’s gas and minimum wage, let alone his incidental car costs. What’s left for DoorDash on ten bucks an hour? Nothing.
There's more at the link.
That's the problem with so many allegedly "hi-tech" businesses in an Internet world. All they're doing is piggybacking on someone else's hard work, charging a fee (sometimes a hefty fee) for delivering what someone else has made or done. They aren't indispensable services in their own right. As soon as money gets tight, or competitors enter the market, their business model collapses around their ears, because people won't pay excessive added costs if there's no added value.
I have a number of friends who've turned to driving for Uber, Lyft and such companies to make ends meet. Those who've been doing it a while report that they made good money up to a couple of years ago; but now the companies are paying them a lot less, or not passing on tips, or stiffing them in other ways. The central company is trying to retain value at the expense of its contractors. Guess how long that can go on before the contractors realize they're being stiffed, and start stiffing the company back in any way they can? I know of more than a few Uber drivers who've made private arrangements with regular clients, being paid in cash at a discounted rate for a scheduled ride, and not sharing it with the company at all. It works for them, and it works for the customer.
Ah, yes. Modern economics . . .