For years, my question about companies like Uber was … how? How did it make sense to take a 20-minute trip across San Francisco for the price of a sandwich? How was it possible for an app to connect me with a courier and a local restaurant and get a burger delivered for what seemed like peanuts?
The answer in many cases was that it did not make sense. Uber has been in business since 2009 and so far this year it spent so much to stay afloat that it effectively set on fire 14 cents of its cash for each dollar of revenue. That is not what healthy businesses tend to do, and this was an improvement for Uber. The food-delivery companies in the United States are mostly unprofitable, too.
As my colleague Kevin Roose wrote in June, young app-based companies built for consumer convenience no longer have the luxury to spend cash in stupid ways. Most of these companies are now trying to buy out competitors, raise prices, or squeeze couriers or restaurants for better terms. Or they are hoping that the companies’ economics stink less as they deliver more types of goods and bigger orders. Sure, these tactics might work in some places and some of the time. Or they might not.
More recently, delivery companies that make even less sense have sprouted everywhere. In 2015 Uber rides seemed impossibly cheap, yet now companies like Gopuff, Dija, Getir and Jokr — my spell check protested at these names — promise to deliver a pint of ice cream and condoms in 10 minutes or less.
These companies operate something like little 7-Elevens, except they absorb the cost of both buying products and sending a guy on a scooter to your home. This might make sense if people were paying for the privilege of skipping the store, but the fees or markup on products are relatively minimal. How?
Article source: https://www.nytimes.com/2021/09/22/technology/delivery-apps-true-cost.html