At first, the COVID-19 pandemic seemed like a perfect fit for food delivery apps. Restaurants in states with lockdown orders now depend completely on delivery and takeout, while public health authorities are telling consumers to stay indoors. The big four consumer-facing delivery apps—Grubhub, Uber Eats, Postmates, and DoorDash—offer a convenient solution for both parties, accelerating the move to the tech-centric, gig-economy-powered Delivery World of tomorrow.
It hasn’t quite worked out that way.
Instead, some consumers are walking away from delivery apps, restaurants are struggling to make delivery sustainable, and there’s potentially a bigger problem even a captive consumer base hasn’t solved.
“Their current models don’t really work,” said Dan Fleischmann, a vice president at Kitchen Fund, a venture capital firm that invests in food startups. “It just doesn’t really work for anyone. It doesn’t work for the restaurant. It doesn’t work for the third-party delivery provider.”
Even Before the Pandemic, Things Weren’t Looking Great In August 2019, analysts from the investment firm Cowen estimated that Uber Eats was losing $3.36 on every order and would continue to lose money on every order for the next five years. Uber CEO Dara Khosrowshahi acknowledged that Uber Eats is not yet profitable in an email to employees in March after its parent company laid off more than 3,700 employees. “While Eats growth is accelerating, the business today doesn’t come close to covering our expenses,” he wrote. When asked about the profitability of Uber Eats, Uber spokesperson Sarah Abboud referred The Markup to the company’s 2020 first quarter earnings report.