Why are delivery apps so expensive?

Big Mac is $8 with tax. Let’s say Uber takes $4. If I texted you right now and said I’d pay you $8 to stop what you’re doing, drive to McDonalds, then drive to a stranger’s home 2 miles away, would you do it? Not a lot of people would, there are nice jobs in America.

Answers here are missing the point. McDonald's is 2.2 miles away from you. But the delivery driver is not at McDonalds. They need to go to McDonald's, wait for your order to be finished, probably pick up other orders, and then go deliver it to you. Then they need to wait for another order. If they're coming in hot its probably no big deal. If they actually need to wait then their driver income goes down per hour. Which means Uber needs to pay them more per order to make this worthwhile to engage with.

If McDonalds had people on site to deliver it would be cheaper. But it still has to be pricey enough that they can afford to pay the delivery guy, per hour, enough to make it worthwhile.

Well you're adding two parties to the transaction. If you go to McDonald's you just have to pay McDonald's. If you use a delivery app you also have to pay the delivery person and the app.

I find them almost weirdly cheap; I would not deliver anything (with some exceptions) for 10x the amount (the delivery people get after paying everything).

Edit; checked here; 1 Big Mac large menu is 11.63 euros including delivery. 7.65 euros for takeaway of the same menu. Distance similar to yours.

Funny question. I always wonder, why are delivery apps so cheap. Here in Prague, i can get 6 USD pizza delivered for free, which seems absolutely insane.

1. You, and many others are willing to pay the price, so that would imply that the price is worth it.

2. How much do you think it should cost, exactly? Do you mean to imply that the cost structure of such services should be much lower?

Same reason why a hot dog that's $1.50 in materials costs $6 from a vendor on the street; you're paying for the convenience of having it right now.

If I were to guess: there is likely some margin to make delivery cheaper. However, the volume won't be there to make up for it.

The volume won't be there to make up for it because all non-free delivery is too expensive for a good many people. Quite likely there is a price point at/below which delivery will start to appeal to larger segment; perhaps at that price, almost everyone will opt for delivery instead of going there. That price is likely below the costs of providing delivery.

It's probably better to just focus on and capture the market segment that forks up for delivery (because it's worth it to them) rather than chasing an elusive volume increase at lower margins.

If they could knock a dollar off delivery but triple the volume by doing that, they probably would; and likely they've already done that sort of price optimization.

Another thing to consider is order size. If you had a big group of people and had 10 of these meals delivered, maybe the economics would be better?

Want to ask the same question but opposite: Why are deliveries so cheap in China? Sometimes it's even cheaper than in the stores. Sometimes when I walk past a store I would go home and order that delivered to get it cheaper. Not at China rn so can't really order one and check the receipt.

With tax, in-person, how much would what you bought have cost?

How much did it literally cost to have it delivered? (Assuming it was not $20 on the dot)

How much extra beyond what you would have paid in person do you belief it should cost and why?

Because the free VC money party is over and Uber was never really a business.

Because you will pay $20 for a Big Mac.

Well, that depends a lot on where you are. Here in Bangkok, Thailand, that would cost $5.86 with standard delivery, or $6.28 with priority delivery. Basically comes down to the fact that labor costs are much lower here (minimum wage is $10 a day); delivery is done via scooter, rather than car (lower fuel costs); population density is high (restaurants are close to customers).

https://wikipedia.org/wiki/Labor_theory_of_value

How else are they going to pay 1000 engineers $300k per year?

Just grab one by oneself then. Taking a walk can increase appetite too.

Convenience was always expensive.

Pizza places are an example of what an efficient (low-cost) implementation might look like. They often bring in too many drivers for the dinner rush and let people go as demand tapers off, they'll cook pizzas in the right order so that a driver taking a double can have both items come off the line at once, and they have loading/serving stations optimized for getting the driver out the door faster. The net result is that drivers are making plenty of money since they're constantly busy, while there are usually enough of them to keep people from getting cold food.

Even in those circumstances, the fully loaded cost of the driver to the customer in some no-name suburbs was around $18/hr, split between on average no more than 3 customers. So on a $5 pizza you'd pay $11.50 for the pizza, tax, and delivery costs.

Contrast that model a bit with delivery apps:

(1) Doubles are rare, so the driver earns less per hour.

(2) There's still a back-and-forth between housing and food, but extra latency was tossed in since you have to wait after your delivery to figure out which place you're going to be grabbing food from. I.e., drivers make less per hour.

(3) Enough restaurants aren't fully optimized for fast deliveries that the drivers easily tack on an extra 5 minutes waiting for their food, resulting again in fewer deliveries per hour and less money.

(4) We can keep going on about why drivers are getting fewer deliveries per hour, but the consequence is that drivers need more compensation per order to be willing to do that over another job. Easily 50% more. Your $6 delivery cost is now $9.

(5) Combine that with the fact that they know the tip ahead of time. There are basically no consequences for skipping an order you don't want to take, so the only people getting hot food are on the high end of the tip scale, which is already higher than the pizza place average. Conservatively, bump this up to $12 per delivery, but when I tried DoorDash I was making $36+/hr for at most 2.2 deliveries per hour. You do the math.

(6) On top of all that, there's a middleman in the transaction with their own fixed costs they need to cover. The pizza place is happy just to sell more pizzas per hour by having a delivery option and charges a fee large enough to roughly offset the cost to them of providing drivers (included in that initial $6 estimate I provided). Uber Eats can't increase their profits _just_ by increasing orders per hour since they didn't have a cut of any of the initial transaction. They have to charge their own fees on top of everything else you're already paying.

I'm actually a little surprised the total bill was only $20. Was it cold?

I hate driving and I am willing to pay to not drive

If price is an issue use the discount codes they send you.

They just need delivery bots. Soon.

VCs gotta get theirs.