Food delivery and the search for profit

Uber and DoorDash are on talks for a merger for about one year.. DoorDash had a private valuation of $12.6bn last year, while Uber has this year a public valuation of around $50 billion.

Ranjan Roy, founder of The Edge Group, yesterday published a post on the newsletter margins about Doordash and Pizza Arbitrage.

The article shows how data science can be inefficient, if not done right. Ranjan says Doordash is scrapping menus from restaurants and somehow Doordash took the price for a plain cheese pizza and applied it to a ‘specialty’ pizza with a bunch of toppings. Result: A pizza that the restaurant charged $24 for was now listed in Doordash as $16. So the restaurant was doing a clean $8 profit per pizza.

The article also shows how Doordash has a good marketing team, as restauranteurs were complaining about their Google listings being “hijacked” by Doordash. Danny Sullivan, working at Google, replied in the article saying that Google has removed any order links from Google business profiles if a business reports there’s no authorized relationship.

But the main point of the article is the lack of profit in the industry of food delivery.