The Great Pizza Arbitrage Scheme Of 2020 Is Spotlighting The Strangeness Of Food Delivery Services
from the supply-and-gourmand dept
Food delivery services always felt a bit wonky to me. I'm usually not terribly old fashioned about most things, but I generally understood that some restaurants delivered and some did not and that that was mostly fine. Along came food delivery services to bring us food from places that didn't deliver and that was mostly fine, too. But lately it's starting to become clear that somewhere in the ecosystem of venture capitalist funding and food delivery services, something is broken. We'll explore the larger issues in a separate post, but one great example of how janky this is getting is how one pizzeria owner managed to make a nice profit by buying his own pizzas from DoorDash. Confused? Well, buckle up.
Yesterday, Ranjan Roy, a content strategist and writer, wrote about the latter in his newsletter The Margins; one of his friends who owns a few pizza restaurants suddenly got an influx of customers complaining about delivery when the restaurants didn’t offer delivery. “He realized that a delivery option had mysteriously appeared on their company’s Google Listing. The delivery option was created by Doordash,” Roy wrote.
Apparently, this is one way that DoorDash does customer acquisition — by bullying restaurants. But what’s funnier about Roy’s friend’s problem (and it was a real problem because of Yelp reviews and angry customers) is that DoorDash priced the pizzas incorrectly. “A pizza that he charged $24 for was listed as $16 by Doordash,” emphasis Roy’s. And then: “My third thought: Cue the Wall Street trader in me…..ARBITRAGE!!!!”
And so began the dumbest transaction plan in the modern history of business. The pizzeria owner placed some DoorDash orders, expecting that eventually DoorDash would catch on. It didn't. To date, even with journalists now asking the company direct questions, DoorDash hasn't commented as of the time of this writing. At $8 per pizza in pure profit, the owner went ahead and ordered an indeterminate, but more than 10, number of pizzas. It got fun enough as an experiment that eventually the owner just ordered pizza dough through DoorDash, alleviating the need to even turn on the ovens, at $75 in pure profit.
Are these huge numbers? No, except that when this sort of thing happens to the restaurant rather than the delivery service, the former operating under much smaller margins with real hard costs, it's a problem. Those problems mostly being what happens when DoorDash delivers crappy service that the customer thinks is from the restaurant as well as customers getting used to these very low prices when the owners of the business actually charge more for the product.
The answer isn’t clear because we’re very far from the old ways. By the magic of venture capital, some businesses don’t have to make money to survive. And that’s upended things for everyone. “Third-party delivery platforms, as they’ve been built, just seem like the wrong model, but instead of testing, failing, and evolving, they’ve been subsidized into market dominance,” as Roy puts it. “The more I learn about food delivery platforms, as they exist today, I wonder if we’ve managed to watch an entire industry evolve artificially and incorrectly.”
As Bloomberg put it last Halloween: “GrubHub Inc. just announced disappointing quarterly results and said that food delivery is only a means to an end, unlikely to ever be profitable on its own. The risk heading into 2020 is that the inevitable reckoning for the food-delivery businesses will spread to the broader restaurant industry.” And at the end of the first quarter of 2020, that looks more prescient than ever. According to its first quarter report, GrubHub, the only profitable restaurant delivery business, lost $33.4 million over the last 3 months. (In fairness: COVID-19.)
Yeah, but in other fairness, companies that cannot make a profit aren't supposed to survive in capitalist societies. That's sort of a cultural lodestone in our economy. And while venture capital can certainly prop up emerging businesses that otherwise would never launch into real profitability, it's worth considering whether the food delivery business has run out of runway.
On the question of why these food delivery service companies seem to almost universally lose money, more to come.
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Filed Under: arbitrage, food delivery, pizza
Companies: doordash
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Company government own
My country have company like this. When need more money, only need ask government give more money, more debt but never have profit.
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Trademark issue?
I've worked with lawyers long enough to see an even more profitable approach: sue DoorDash for violating your trademarks and fraud. They very clearly use the name of your restaurant to sell pizzas from a different source, which damages your good name. Ask for preliminary and permanent injunctions... A good lawyer should be able to make you tens of dollars in lost revenues for each pizza DoorDash sold in your name. Don't wait too long, when more restaurants follow thia approach DoorDash will be bankrupt and out of business in no time.
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Re: Trademark issue?
I agree. While there are ways you can use another company's trademark, you have to be clear that you aren't them. Putting the delivery option on their Google listing implies that the delivery comes from the pizza place itself. The fact that the pizza place was getting complaints about the delivery would likely show that customers were legitimately confused about who was providing the service. It also shows tarnishment, as complaints indicate that the service provided was lower than what customers would expect.
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Re: Re: Trademark issue?
And if the pizzas truly are coming from a source other than the business, the lawsuit will be open and shut.
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Re: Trademark issue?
If I but Coty perfume, put it in a new bottle, and sell it for a profit, stating truthfully that the bottles contain Coty perfume, trademark law does not entitle Coty to prevent me from doing so. The 1924 Supreme Court decision to this effect, Prestonettes v. Coty, is the foundational precedent for the doctrine of fair use in trademark law.
If Door Dash is advertising that you can, for the price of $24, buy an Aj NY Pizza from Door Dash and have it delivered to your door for $24, I don't see trademark as a barrier. We see companies trying to use trademark law all the time to quash secondary resellers or non-authorized dealers, and although they sometimes succeed, they should not.
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Re: Re: Trademark issue?
Trademark is about customer confusion. Customers know that Macy's didn't manufacture the items they sell, so advertising those items including brand names is no problem. If customers of the pizza shop know that they have nothing to do with DoorDash delivering their pizzas, then trademark should not be an issue. The fact that customers are complaining to the pizza place about the deliveries indicates that there is not only potential but actual customer confusion caused by the association DoorDash has created with the pizza place. I don't know that it would be found infringing by a court, but it's not obvious to me it would be dismissed either.
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OMG Clever!
That's not just arbitrage... that's crazy-stupid-arbitrage™.
A $16 pizza doordash will give him $24 for ... well let's do some math.
Typical food cost = 20-30%. Pizza isn't "fine dining" and he currently probably doesn't pay a bunch of servers to bus, serve, clean, and handle an empty COVID dining room. Why not go with 25% then because it's definitely over his cost.
So that "$16 pizza" cost him $4 to make (prep, bake, pan, box, etc.) and he sold it to DoorDash for $24. Last time I checked 24/4 means 600% profit.
This guy should just put dried pieces of paper in a box for his own pseudo-fake orders and ship them to himself. He could shave off $3.99 per box ;)
Ehud
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Re: OMG Clever!
nope, the whole " Great Pizza Arbitrage Scheme " narrative here is very sketchy and draws faulty conclusions.
Suspect key facts are missing, if this 3rd-hand story is even true to begin with.
Why the extraneous slams against the food-delivery business generally and the capitalist system ? The author has an agenda.
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Re: Re: OMG Clever!
You'll note that Techdirt (which I generally like very much) is in love with Airbnb but very much anti- Uber and food delivery.
It's kind of a fascinating, given that, in practice, Uber is just an unlicensed taxi, just as Airbnb is just an unlicensed hotel (or, in the case of my neighborhood, an unlicensed renter of party houses that are a nightmare for the neighborhood and the police).
There's an agenda, but I can't imagine what it is.
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Re: Re: Re: OMG Clever!
Licensing rules vary. AirBNB is legal. Uber is legal.
Party houses? Next you'll bring up child molestation or copyright infringement. Stop with this.
There's nothing unlawful about anything here. If there was, BIG HINT there'd be a lawsuit. D'oh.
E
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Re: Re: Re: OMG Clever!
The New York Times published a hotel lobby memo a few years ago. It described how the hotel lobby was planning to create fake stories about AirBnB party houses and drunks and loud music. The plan was to scare elderly people into going to the local neighborhood board to complain about AirBnBs and get the boards to regulate them out of existence. The stories are almost all fake or exaggerated. The funny thing about mass media is liars like the hotel lobby can get caught red handed and still have idiots repeating the lies over and over forever.
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Re: Re: Re: Re: OMG Clever!
"The funny thing about mass media is liars like the hotel lobby can get caught red handed and still have idiots repeating the lies over and over forever."
MSM is corporate owned and operated, as is the hotel industry. Why would they broadcast the truth when they can cover it all up with silence?
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Re: Re: Re: Re: Re: OMG Clever!
"MSM is corporate owned and operated, as is the hotel industry"
It's my experience that anyone who uses "MSM" seriously is being fed bullshit by corporate news outlets like Fox or con artists like Alex Jones. Then, I laugh at their cognitive dissonance, and weep at the fact that someone who believes that fiction has the same vote as sane people.
"Why would they broadcast the truth when they can cover it all up with silence?"
He says in response to an "MSM" outlet stating what he wanted to hear, so he believed them instead of the target...
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Re: Re: Re: Re: Re: Re: OMG Clever!
...your "experience" is obviously narrow and thus generally non-applicable to the widely used acronym "MSM"
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Re: Re: Re: Re: Re: Re: Re: OMG Clever!
Define "MSM". Then explain who defined it for you, Then, I'll demonstrate how hilariously you're wrong.
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Re: Re: Re: Re: Re: Re: Re: Re: OMG Clever!
In the other anon's defence, it's difficult to judge the relative truths of any medium that has to put out the phrase "President Donald Trump" on a regular basis.
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Re: Re: Re: Re: Re: OMG Clever!
"Corporate owned"
Yeah, and fox news and OANN are all-volunteer charities that meet in the library basement, virtuous in their poverty. It's so heroic.
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Re: Re: Re: Re: Re: Re: OMG Clever!
One of the funniest things to watch is Fox News zombies simultaneously claiming that mainstream news is evil while also claiming that Fox has the biggest ratings... They are just that brainwashed.
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Re: Re: OMG Clever!
Did you even bother to read the linked article? Here, let me help you, and the original piece. You mention faulty conclusions without mentioning what those faulty conclusions are. You suggest key facts are missing without detailing what those missing facts might be. You suggest the author has an agenda without giving any evidence as to what that agenda might be, or that it even exists.
What DoorDash did is underhanded and not in the interest of the restaurants it does it to. It does it for its own benefit, and leaves a trail of incompetence that leads back to the restaurants and not DoorDash. That is scummy.
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Re: Re: OMG Clever!
---- a critical fact omitted in the MR story here is from the original Ranjan Roy newsletter account:
"Note 1: We found out afterward that was all the result of a “demand test” by Doordash. They have a test period where they scrape the restaurant’s website and don’t charge any fees to anyone, so they can ideally go to the restaurant with positive order data to then get the restaurant signed onto the platform. "
** ... so this was all a quite deliberate DoorDash marketing effort to ultimately recruit this local Kansas pizza restaurant chain into the regular DoorDash operation.
this greatly changes the original "story" of a crazy wacked-out DoorDash management delivering pizza at a big $$ loss.
Instead, these temporary losses were simply deliberate marketing-costs to expand DoorDash business.
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Re: Re: Re: OMG Clever!
So, you seem to think this makes the 'fact' better and not worse?
So it's okay for DoorDash to undermine (undercut) the resteraunt in a 'test' to try and get business???
Look, we can sell your food for less than you are (due to venture capital) and we can ruin your reputation at the same time...
WIN WIN right? I mean once DoorDash runs the reputation into the ground, the owner will have no choice to sign up for their service? amirite? OMG They are SuperSalespeople...
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Re: Re: Re: Re: OMG Clever!
...there's no real harm done to the pizza restaurant, BUT a big benefit to their normal pizza consumers via those big price discounts from DoorDash.
DoorDash has a lot of money from Chinese & Arab venture capital investors -- and thus can easily pay for oddball marketing experiments, at a loss.
If wealthy Chinese & Arab investors want to subsidize the pizza purchases of average folks in Kansas -- that's a good thing for us.
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Re: Re: Re: Re: Re: OMG Clever!
There is reputational harm to the pizza place, since customers mad about poor delivery may decide not to visit the resturant and leave bad reviews that discourage others from visiting.
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Re: Re: Re: Re: Re: Re: OMG Clever!
geeez -- the restaurant got a couple of trivial complaints about late or lukewarm pizza -- there's no serious 'reputational harm' because the restaurant is NOT in the delivery business.
Nobody complained about the basic quality of the pizza.
Their customer base is still the same in-house and take-out crowd who like the food/service and no doubt tell others.
The DoorDash customers who complained to the restaurant were quickly educated as to the restaurant's absence of control, and responsibility for delivery problems.
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Re: Re: Re: Re: Re: Re: Re: OMG Clever!
"the restaurant got a couple of trivial complaints about late or lukewarm pizza"
Did they? I don't see the nature of the complaints in the article. How do you know they weren't about the orders being wrong, staff being abusive or trying to steal unauthorised tips?
"the restaurant is NOT in the delivery business"
Exactly. Which is why it's a problem that they were getting complaints about the delivery. The article does state that they were having angry customers relating to the deliveries, which suggests the customers didn't know about that fact.
"The DoorDash customers who complained to the restaurant were quickly educated as to the restaurant's absence of control"
AFTER complaining to them and presumably telling friends and family about the bad service before the issue was resolved.
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Re: Re: Re: Re: Re: OMG Clever!
"If wealthy Chinese & Arab investors want to subsidize the pizza purchases of average folks in Kansas -- that's a good thing for us."
...unless the bad reputation due to poor services leads people to use the out of state chains rather than local businesses who didn't know about the deliveries.
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Re: Re: OMG Clever!
I must have missed that part, can you quote it?
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One Posibility
Lets assume that the pizza delivery service is much like any other cash service such as a laundromat. (not the physicals but money side)
Why would anyone operate a laundromat at a big loss? What if it were a money laundry machine. That is profits from some illegal business were converted incoming cash flow from a ligament business.
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Re: One Posibility
Step 1: Offer service at a loss. Step 2: Competitors go out of business because they can't match your prices. Step 3: Now that you have a monopoly, jack up the prices.
I don't think this will work all that well, in the case of a laundromat or a delivery service. There's not really anything preventing competitors from entering later.
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Re: Re: One Posibility
Or, for that matter, customers deciding they don't like the higher prices and reverting to going out to resturants.
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Re: Re: Re: One Posibility
Except that going out to restaurants is killing home-cooking!!
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Re: Re: One Posibility
You are referring to an honest crook-it business. Think crook-it crook-it.
First you sell 100 mill in drugs, or what have you for cash. Now what do you do with the money? Let it sit in barrels in the warehouse or invest it and make more money? If you decided to invest it or spend it without declaring it as income on some tax form a little organization called the IRS is going to start asking questions. So, you wash it by running it through an all cash business, say a close laundromat where the input to the washers and dryers is cash. By this means you convert illegal income into legal income. Because one of the first business to experience this were laundromats and because of their purpose in cleaning close the process of converting illegal gained money into legally gained money became known as laundering money.
Is this what is happening? A giant money washing machine.
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Money laundering
I tend to doubt it -- but only because GRUB owns DoorDash, and they are a public company.
If it weren't for that though... yes.
Here in Tucson, Arizona we have a "local chain" of Mexican drive-through restaurants. They're all in individual buildings - no strip malls - and are open 24 hours a day, and sell tacos, burritos, etc. for measly amounts. All are on primary arteries ... and there is no possible way 24 hours of selling $3 burritos will fund even the city tax load (let alone a mortgage or whatever).
We suspect they are money launderers for or by the drug cartel(s).
The original term "money laundering" came from the Italian mob in the US owning laundromats and running cash through the business to show a "source of income". I don't see DoorDash being a part of that.
E
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Re: Money laundering
Public you say and that makes them legal.
Are there not laws against monopoly and stock fraud and all sort of other bad things that companies do?
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Re: Re: Money laundering
No, he's saying that they are public and therefore subject to greater scrutiny, so less likely to be a laundering op.
There are laws against a lot of things companies do. Good luck getting them enforced.
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Re: Re: One Posibility
"Step 1: Offer service at a loss. Step 2: Competitors go out of business because they can't match your prices. Step 3: Now that you have a monopoly, jack up the prices."
It's actually more common a business model than you'd think - if you have the capital to eat big initial losses your intended competition (with, probably, no planned budget to eat persistent losses) stands no chance.
Essentially that's how japanese electronics companies (TV/Radio manufacturers, mainly) ran the, at the time, dominant US TV OEM's right out of the market. Then repeated the stunt with cars (aided, mind you, by the 70's energy crisis causing the demand for fuel economy rather than gas-guzzling street cruisers).
...With the twist that rather than jacking the prices they invested even more in lowering the cost until they started making a profit, handing them the market for a far longer period of time.
It's a trick as old as dirt. Hell, there's evidence that ancient roman and greek gladiator and slave traders were complaining about being undercut by lavishly funded competitors pulling the same stunt.
It works for laundromat and delivery services just as well. And if you're smart you do like the japanese did in the 70's and make sure you take that period of loss leaders to reinvent your supply chain or optimize your business until you've got the recipe where your costs are lower than any likely new competitor without requiring the price hike. At that point you've got a lock on the market which forces any competitor to either also have a lot of venture capital to burn or the same recipe for offering equivalent service at similarly low cost.
It's basic capitalism 101. If your company didn't put money away to outlast any Tom, Dick and Harry with a few million to burn in a soft market takeover then that's entirely on you. The rules are the same for everyone and no one owes you not to come up with a better model to nick your place in the market.
Ironically the US tends to get played by the asian countries because american companies are so focused on the short-term profits they tend to lose the ball game.
Then a number of myopic businessmen have their lobby go whine to their congressmen about "unfair" business practices like small children upset that they insisted on playing the monopoly game with someone who was actually good at playing it like it was meant to be played.
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Re: Re: Re: One Posibility
If they can be profitable at those lower prices, I wouldn't call that a trick, just a more efficient business.
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It's what Silicon Valley seems to be for these days, come up with an idea which is 'Do X without paying employee benefits, using a computer or phone somehow, ignore all laws governing the service you provide, run it at a massive loss until it becomes ubiquitous and rivals who need to run at a profit collapse as they can't compete with something intentionally run at a catastrophic loss, then profit by default.' Operating without the consent of their partners is a new one, but the logical next step to operating in cities without permission. No doubt the end goal is to gain the ability to redirect custom to preferred partner restaurants, then bring it all in house and just run their own factory operations with a skeletal staff on nightmare contracts until it can be automated entirely.
Capitalism, y'all! It's working fine!
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Re:
The only problem is that customer will move on after the monopoly consolidates and do a price surging.
Even, uber, the oldest one of this kind, could not get a monopoly after several years and still operates in red every quarter.
If lyft declare bankruptcy tomorrow, uber will only get closer to declare it also, because if it increase its price to break even, people will use it much less.
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Re: Re:
Thats not necessarily true. Uber could jack up their rates a fair bit and still not cost as much as a traditional taxi. Uber is also an order of magnitude more convenient thanks to their app, in paying for the ride, tipping, knowing when your driver will arrive, even choosing the class of vehicle you want to ride in. I think Uber could cost more than a taxi and still be popular.
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1998 DotCom bust redux
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Re: 1998 DotCom bust redux
"I doubt they have any patents or anything else actually valuable."
What they have appears to be better by far than a piece of paper which frees you from doing much else than sit on your ass and collect rent from those who DO work.
It's basically capitalism 101 to adapt to market conditions, pressuring competitors by using any fiscal lever which allows an eventually positive roi.
"...Uber underprices by a large amount, and breaks Taxi laws."
If either was true Uber couldn't operate because they wouldn't just lose money, they'd be shut down and investigated. Instead they are doing like any well-planned company ought to in any basic market economy. It's pure capitalism.
It's somehow funny that so very many self-styled "republicans" and "conservatives" whine and bitch incessantly every time a company actually practices hard-core capitalism.
"The only really useful and profitable version was shut down by the FAA - where private pilots could advertise they were flying somewhere and had room for passengers."
Yeah, air transport is a different ball game. Courtesy of the panic attacks after 9/11, under GWB republicans went apeshit trying to make sure air travel couldn't ever carry a bad man. Which, in ironical hindsight, probably had Trump wishing he was a TSA agent. Given their new frisking rules he'd be able to grab women by the p___y by the planeload at the security checkpoint.
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"Taxi laws"
What are "Taxi laws", where are they codified, and how does Uber "break" them.
Note: break a law is not a technical term. You probably mean "act in an unlawful manner". That's typically done by people, not a corporation... but hey, your words.
Ehud
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Re: "Taxi laws"
In NYC you need a taxi medallion to legally operate a taxi. Apparently they are ridiculously expensive; at one point they were being sold for over a million dollars each. Uber doesn't bother with the medallions.
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Re: Re: "Taxi laws"
The million dollar NYC taxi medallion shows that operating a taxi is a profitable business.
The problem with the system is that the medallion sucks all of the profit to the medallion holder. It's an capitalistic disaster -- a share of a government enforced monopoly, with rent-seeking operators funding the retirement of the original medallion holder.
Grading on a curve, Uber and Lyft look like angels compared to the taxi medallion system. There was plenty of room for everyone to make a fair profit, except those that had 'invested' by over-paying for the government-granted right to sell into an artificial scarcity.
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Re: Re: Re: "Taxi laws"
"Grading on a curve, Uber and Lyft look like angels compared to the taxi medallion system."
The issue seems to be that the monopoly position granted by the medallion means that drivers don't have to worry about real competition and thus don't mind giving the customer a lesser service. price is an issue but it's not the only one. I can't speak to the systems in NYC and SF as I've only taken a single cab ride in each city. The examples that come to mind are Vegas, where drivers don't mind openly ripping off customers by going via the freeway from the airport if they think they can get away with it, and London, where black cab drivers are notoriously picky about crossing the river at certain times. They have a reputation for giving poor service for as much money as possible, so they created the demand for a competitor.
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Racist much
Black cab drivers have no such rep in NYC.
Peace out.
E
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Re: Racist much
Apparently you are too focused on racism.
Black Cabs in London are a specific type of taxi. Not quite the same as Yellow Cab, but equally not-about-race.
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Re: Re: Racist much
Yeah, that was weird lol
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Re: Re: Re: Racist much
I can't stop laughing. I feel so wrong, but i cannot stop.
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Re: Racist much
https://en.wikipedia.org/wiki/Hackney_carriage
Stop being racist, yourself...
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Re: Re: Re: Re: "Taxi laws"
That's interesting, considering the sheer amount of training and testing involved. I had imagined that sort of behavior was heavily mitigated against with the whole black cab thing.
I guess it shouldn't surprise me, with humans involved, and given the fact i have zero firsthand experience to judge by.
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Re: Re: Re: Re: Re: "Taxi laws"
I've never lived in London myself, and in fairness I'm not sure if it still happens today, but "sorry guv, I don't go south of the river" has always been a fairly common trope when black cabs are referred to in UK comedy, at least. The reason often given IRL is that south London was less likely to give them a return fare, so some would rather reject the fare outright rather than have to return to the north to get their next one. Which is little comfort if you live in the south and have a hard time getting home.
My point was simply that real competition in this area might have led to a better fare system that allowed for peoples' needs, rather than them being regularly left without lifts and clamouring for an alternative, and it's a non-price reason why ride sharing is ironically encouraged by the old systems.
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Re: Re: Re: "Taxi laws"
The medallion shows that operating a taxi is a profitable business BECAUSE THE GOVERNMENT WILL mess up anyone who does not have one.
Darn near any business can be highly profitable if you're able to exclude competitors.
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Re: "Taxi laws"
Even if you're correct, this is not a law school or even a legal blog (that is, it covers legal issues but is not written by or for lawyers).
Are you saying corporations cannot act in an unlawful manner, or making a claim about the relative frequency of such acts by natural persons compared to corporations? Either way I would be curious to see a source for such a claim.
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Wow! I want to arbitrage!
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Re:
That guy created the best restaurant in tripadvisor from thin air.
If you do something like that, maybe doordash will want to make business with you.
https://www.vice.com/en_uk/article/434gqw/i-made-my-shed-the-top-rated-restaurant-on-tripadviso r
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Re: Re:
Ha, i forgot about that. Utterly fantastic.
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Down and dirty via naivety
First off, thanks to Bent Franklin for posting this in the Chat Window. Two services are mentioned in the article above, and the thing that distinguishes the difference between the two is that one is doing something without the permission of the business owner, and the other is doing things by contract. Neither appears to be doing things with the restaurants well being in mind.
DoorDash is inserting itself without the permission of the business owner, and it appears that Yelp is abetting that effort, in the simplest terms by not insuring that complaints are directed at the appropriate wrongdoer. The error created by DoorDash, and their failure to operate in a manner that evinces quality causes the end customer to be angry at the restaurant, rather than the delivery company that has no aboveboard relationship to the restaurant. DoorDash fails to relate the menu and prices correctly, and then fails to perform the delivery correctly, and then dishonestly allows the restaurant to take the hit for poor performance.
The other company Timothy mentions is GrubHub (and I suppose it will be further discussed in the future article he mentioned). Apparently they obtain a contract with the restaurants they 'represent', but after reading the article discussing what they do it appears that they do nothing more than some advertising on their own pages and make a referral by redirecting a phone number they generate to the restaurant and charging a fee for that referral. Those fees are often more than the total cost of the order, or more than the profit on the order. Other problems occur in that when looking for a restaurants phone number, but the GrubHub number appears higher in the search list than the restaurants actual phone number.
The thing that struck me was how naive the restaurant owners were in signing those contracts. Possibly thinking that having their restaurant listed on one of GrubHubs sites was a great marketing opportunity, they failed to consider the actual cost of those referrals with regard to their gross margins.
Two different scams targeting the same industry. Restaurants are historically one of the most difficult to make a go of, partly because while they retail their product, unlike other retailers, they also manufacture their product. Grasping the nuances needed to not only control those two significantly different processes, but to create a concept that consolidates all the intricacies that make one operation not only different but better than the guy down the street is not an easy skill set to come by. Then to be beguiled by outside entities with only their own best interest in mind is likely to be the straw that breaks the bank.
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"...food delivery is only a means to an end"
As in, wrapped around a telephone pole kind of end?
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Thirty minutes or it's roadkill!
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I am more interested in why VC are still funding these unprofitable business models unless they have some other game going.
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Its like Amazon basically. They're trying to get in on the ground floor.
How long has Amazon been bleeding money while it expands? And its had to bleed that money because it needed to grow fast enough to successfully become a singleton (or as close as you can get). Amazon was founded in 1994. Until 2017 Amazon basically made shit in profit and what they did make was plowed back into the company to fund expansion (along with further rounds of investment funding). But now the money is starting to roll in. Their first 14 years they made as much as they did in a single quarter in 2018.
This stuff isn't short-horizon stuff, these guys are playing games that won't see payoffs for a decade or more. But if they pay off will pay off massively.
If one of these guys takes off it could be like Uber/Lyft, like AirBnB, etc, in terms of market share.
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I had actually thought about Amazon in that regard. I just am not seeing the endgame being super-viable, or these outfits going for the long haul, but what do i know?
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That shows a fundamental misunderstanding of Amazon's lack of profits. They were reinvested in the company instead of grand scale dumping. Even if Amazon went bankrupt at any arbitrary year in that expansion phase the company value grew in realized gains unlike dumping schemes.
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Sell their stock at an IPO and leave the people who bought it holding the bag.
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I would short the crap out of any such IPO.
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Somebody's been watching 'Silicon Valley' - but they didn't understand it.
https://youtu.be/Txl90NEl92U?t=26
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Venture Capital invests in a company the idea is the company may lose money but it may gain market share. Other Companys go out of business since they need to make a profit every year
If you have have x per cent market share in theory
Some big Company will buy the company and the venture capital investors cash out
See softbank it invests in a lot of company's that don't make much of a profit
The tech boom is now over. even tech company's are laying off workers
Some company's like Google zoom and Amazon
are doing well in the crisis
Maybe most Vc, s have no long range plan, they just hope one in 10 company's they invest in will be
the next tesla or zoom
Does classic capitalism exist anymore in a world
where everyone uses apps to get services from
gig workers who work for company's that don't
make a profit but exist to get market share
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Classic capitalism ended way before anything like apps were a twinkle in their grandfather's eye, if you want to go down that road.
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"Classic capitalism ended way before anything like apps were a twinkle in their grandfather's eye..."
Nope. The example in the OP is indeed classic capitalism.
What is ironic is usually that the ones crying loudest about why this sort of market grab is wrong is usually those who defend capitalism to the death, all the way...until they actually see someone using the rules laid down, at which point they tend to instantly swing due left and try to redefine capitalism.
The real issue is that too many companies don't keep pressuring their costs and lay aside money to fend off price undercuts. That means those companies will lose to those who do.
Small companies in the US - and the upcoming market newbies - have to play that game.
The real issue with companies not abiding by capitalist rules is with those companies "too big to fail" who have either managed to cement their place at the top by regulatory capture of all the supervisory bodies, or by holding enough of the economy hostage that the government has to let them flex and bend the rules past normal breaking point. Shadow banking. AIG. GM. Etc.
Ironically if Google had ensured it's stock value was linked to 401(k) funds - like AIG - not a single congressman would dare peep at them.
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I wonder if he ever sold the same pizza to DoorDash more than once.
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I wonder if he ever made a complaint and return.
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"companies that cannot make a profit aren't supposed to survive in capitalist societies. That's sort of a cultural lodestone in our economy."
Like WeWork, Softbank, and Uber.
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love..
Waiting for the comedown
Walk these streets with me
I'm doing decently
Just glad that I can breathe, yeah
cookie clicker
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forget arbitrage--are they impersonating your restaurant?
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funniest ever
i was thinking how people are coming to conclusion without doing their own homework.
thanks to this great article which i found while i was researching on-
https://nect.co/
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