I increasingly ask myself how can these commoditized business models could retain some profits over the long term. They are all playing in an extremely competitive environment with the same modularized supplier (restaurants).
Some could compare these business models with Amazon, but Amazon is a huge exception and it has a by far bigger network advantage over the other competitors like Walmart, and Amazon doesn’t have any head-to-head competitor with the same propositions. You don’t buy a power bank on Walmart.
Why am I thinking this:
1) DoorDash, Uber Eats & Co. have the same product assortments, making these platforms purely interchangeable. Usually, the restaurants don’t sell only on one platform but they are in all of them, and the skills/barrier of entry required to sell in a new platform are basically zero because they work the same, have the same fees, and don’t have to do anything more.
2) They can only attract a meaningful profit only if they develop some form of advantage. Take Netflix, the only sustainable advantage they could have is to develop their own series/movies. Do you think is the same with the ghost kitchen? I believe that foods are purely interchangeable (except you have a differentiated brand like Whole Foods), not quite the same as a movie though.
3) They can compete with a better service, but it can be easily copied (and nobody has a substantially bigger advantage in network or scale), and there is also a limit on the convenience. Do you think customers care if one delivers the food 3-5 minutes before the other? Is it an enough competitive advantage for the long term?
The same thing applies to grocery deliveries like Instacart. BTW I’m huge bullish on Amazon Fresh/Whole Foods since 1) it controls the majority of the assortments with private labels 2) It controls the distribution 3) It doesn’t need to spend $Bs in ads, hence lowering down the prices.
What are your thoughts on this? Do you believe they could ever be profitable? If yes, how? Looking to discuss with you.