Uber, Postmates Agree on $2.65B All-Stock Deal
Food delivery is a terrible business. M&A won’t make it better.I worked at LivingSocial in 2012/2013. We used to joke that “we lose money on every transaction but make it up in scale.”Takeout and Delivery was one of the last bets the company made. Basically food delivery. The customer service load is huge, the services aren’t really differentiated, and you have to both pay the driver enough for it to be worth it and keep prices low for the consumer to think it’s worth it.Attracting customers on either side of the market means spending money to undercut your competition. As soon as you stop giving free delivery promotions or introductory no-fee periods for restaurants, they can instantly churn with little to no pain. Not to mention reaching small restaurants is incredibly time consuming. They’re not all just hanging out online. They’re running a business. They take a lot of expensive (human) outreach.Margins are terrible, if they’re ever positive. It’s just a bad business.And yet people keep trying. None of these companies have made a net dollar. But it’s a simple enough pitch and a common enough use-case that investors think, “yeah, that makes sense!”But it doesn’t.
It just doesn’t.