Minimize Use of Standard Internet Food Delivery

Epistemic Status: Public service announcement. Confident and not sponsored.

[EDIT Added 2/11: The comments (at DWATV) provide a lot of reasonable challenges and a lot of additional reasoning behind my statements, and start to get at the larger things in play.]

Today, I went to one of my favorite local restaurants to find it was closed.

This is not an uncommon occurrence. About a month prior, I lost perhaps my favorite place in the world to go for a nice meal, BLT Prime. Today, I learned I’d lost my favorite Indian place, Old Monk. The list goes on. This has become frequent enough that I’m going to work on a list of places I’m afraid will close, so I can encourage others to help them keep the lights on.

[EDIT: And I wasn’t fast enough, because the very next morning of 2/11, I went to get croissiants at my favorite local bakery, and found it was permanently closed with no warning. Of all the places I’d hate to lose it was at least top three.]

The best way to help keep everyone’s lights on is simple. If you like the restaurant and want those working there to earn a living, and the place to continue to exist, do not order via online services like SeamlessWeb, GrubHub, Delivery.com or Caviar, if there is another way to contact the restaurant. Period.

This is because they take mindbogglingly huge fees out of every order. We’re talking on the order of 20%. I am not one to begrudge a middle man or market creator their reasonable fee. This is not a reasonable fee.

But because customers don’t know, and the store is forced to eat the entire cost or lose the order since customers have been trained by small conveniences and bribes to use the apps and websites, the fees continue to be collected, and the cycle continues. The few places that pass the cost along look super greedy and lose business.

If you would cost your local place $5 to save the cost of a fifteen second phone call, make no mistake. You are defecting. You are playing zero-sum games with those who should be your allies. You are bad, and you should feel bad.

This is way, way, way worse than not tipping where tipping is expected. Not tipping is shirking on the price and pocketing the money. Here you don’t even get the money.

If you are super rich and your time is that valuable, you can tip them 50% (or 500%) and make up for it. In that case, go for it. For the rest of us, seek out the restaurant’s website or if necessary, at least once you know they’re legit, pick up the damn phone. Talking to a human is a small price to pay to support what you get value from.

That’s why the promotions they bombard me with are so rich. How can they give me such deep discounts on almost every order I make? Now I know. They aren’t even always losing money on those orders. The bastards.

In New York City, the pizza places are fighting back using an app called Slice. Slice is essentially the same as the other apps, except it is run by and for pizza places. Thus it only offers local pizza and not other cuisines, but it allows pizza places to avoid the giant fees. As a bonus, they exclude horrible chains from your delivery options. They once sent me a hilarious promotion accusing (very, very guilty) chain pizza stores of ‘crimes against pizza.’

If you can, use Slice. I hope there’s more of these for other types of places in the future. Or better yet, I hope they already exist, in which case tell me in the comments and I’ll update the post.

There are larger principles in play. They are important. But first, be concrete. Start here.

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33 Responses to Minimize Use of Standard Internet Food Delivery

  1. Anonymous-backtick says:

    What if the restaurant’s own webpage is “powered by EatStreet”?

  2. mquander says:

    I care about doing ethical things, so I want to evaluate whether this is a true problem I should be concerned about. As a programmer, I have a lot of sympathy for DoorDash and GrubHub noticing that the restaurant industry has spent 20 years blowing off the work of making delivery software, doing the work for them, charging a fee, and producing a result that people like to use. (I also think that it’s unethical for them to write and operate proprietary software to do this job instead of handing the software to the restaurants, but whatever, it’s better than no software at all.)

    In any case, the market is supposed to work in this case and price in the convenience appropriately and so on. Why do you think the market mechanism is broken? If the restaurant is delivering me food for some price, why are they setting that price below what they need to survive? What do you think is the “end game” if people keep using the restaurant delivery services?

    The demand for eating dinner isn’t going to go anywhere, so it strikes me that restaurants are going to keep existing to serve that demand, whether they have to raise prices on DoorDash users or do whatever else.

    Anecdotally, in the South Bay, delivery services have been de rigueur for years, and there are not yet a noticeable amount less places for me to eat delicious food.

    • TheZvi says:

      You think that, essentially, some marketing expert who hired a coder should take all, perhaps more than all, of the entire surplus? Forever? Over the people who actually, you know, do all the work? Because they’ve now got a captive marketplace via deception, so they get all the rents?

      The restaurant has fixed costs and makes money on each sale. If its customers will only work through the service, it is screwed either way. It can cave, or it can not cave. Or it can go out of business and ruin someone’s livelihood. You can’t pass on the costs because others aren’t doing it, so it’ll just make you look expensive and nuke demand. And again, it’s based on a huge fundamental deception.

      It’s not about the software. Software is easy. You could write this software. It’s about the customer access and customer perception. They are not told what the service is charging, which warps their perceptions and willingness to pay. They are trained to look in this one place for delivery, and it then extracts huge fees.

      The end game is an equilibrium with higher overall prices, higher cost of living, lower demand, lower surplus, and continuous extraction of resources by unethical corporations. The system bleeds, standards of living go down. People are fundamentally poorer, as they are taxed by this outside force. With more banks and convenience stores, and more chain restaurants, replacing quality local business, since they’re all bidding for space/rent.

      As for why the market is ‘broken’ it is because it is a matching/network problem and because the customers are de facto being lied to about what is being extracted. Whenever you have a matching problem, whoever controls the platform can extract huge profits whether or not they’re anything other than a coordination point (e.g. see Facebook, but please, don’t see Facebook.)

      I do appreciate the asking for us to solve for the equilibrium. I really do, it’s a good and important question. But there’s also a simpler perspective, which is that you’re letting someone else, who is providing something valuable, get robbed. Don’t do that.

      • me says:

        I think you’re sell short what the these services are providing.

        They enforce consistency on restaurants that you just do not get by calling up and ordering over the phone. The intermediation they provide is valuable (at least to me). If you order on one of these service, you can be will usually know when the restaurant is and is not taking orders, what you are able to order, where they are willing to deliver to you, what they will charge, etc. They aren’t enforced perfectly, but these sites do increase the incentives for restaurants to get these right a lot.

        I’ll be honest that I have a strong dislike of talking on the phone in general. But talking to a restaurant on the phone is particularly unpleasant. The consistency I described above goes out the window because (a) the restaurant never bothered to make precise decision on the above, so random ad hoc decisions get made or (b) the employee you talk to on the phone does not know the actual policies and makes up random things and (c) those employees are probably overworked and stressed and such people are just less pleasant to talk on the phone to.

        I’m also suspicious that this has had a substantial change on the rate at which restaurants go out of business. The restaurant industry has been brutal for a long time. Lots of restaurants going out of business all the time is not a new thing.

      • mquander says:

        Regarding the deception:

        It’s surprising to me how offensive you find the “deception” — the idea that consumers don’t know that DoorDash & co. are taking a cut above the delivery fees listed. I personally hadn’t thought about this in terms of deception before. As a consumer, I’m used to thinking that if I buy a product for a listed price, and I get the product for the price, nobody is deceiving me. I don’t expect to be able to accurately guess the details of the supply chain that caused the product to get to me for the price. DoorDash never did anything to make me believe that the prices on the online menu were the exact prices that the restaurant would charge a sit-in diner, or that 100% of those prices were going to go directly to the restaurant. (I contrast this with the perennial problems with “tipping” on services like Uber and DoorDash — I certainly understand tipping to be a way to directly compensate service workers, and breaking that contract is deceptive.)

        As a crux, if I learned that people really did all think that restaurants would be taking home the whole subtotal of your order and really did get outraged when they discovered otherwise (like they get outraged about tips), I would change my mind about whether DoorDash is doing something ethical.

        Regarding how much of a service providing the software is:

        > It’s not about the software. Software is easy. You could write this software. It’s about the customer access and customer perception. They are not told what the service is charging, which warps their perceptions and willingness to pay. They are trained to look in this one place for delivery, and it then extracts huge fees…

        > Consider the possibility that the reason they [the restaurants] don’t set it up [their own online ordering software] is because everyone just uses the services and doesn’t know they’re robbing us blind, so the setup isn’t worthwhile.

        I don’t believe that. I think that if it were common for restaurants to have a nice online ordering form which offered prices that removed, say, 50% of the DoorDash tax and were thereby a couple bucks cheaper, price-conscious consumers would be extremely fast to form the habit of always checking whether they could order direct from the restaurant. Consumers are great at remembering simple strategies to save a few bucks, like which gas stations they want to go to, or when periodic discounts are active.

        I think a much better explanation is that between managing a delivery driver pool and hooking it up to a nice web interface with a menu and a map, DoorDash has done work that restaurants have to date found hard or unnecessary to do. Although it seems stupid, I think there just remains a ton of room for good software to make things easier in a variety of industries and there is a bunch of money lying around to take by making it.

        By the way, if the fees that DoorDash and co. are extracting are so out of proportion to the cost of developing and operating their service, why do you think competition isn’t driving down their margins? It seems like there is plenty of it in this space.

      • TheZvi says:

        Again, it feels like you think that DoorDash is doing things here that are productive and adding lots of value. Postmates enables delivery where none previously exists, which makes it unique – you literally can’t call the restaurant in many cases because they don’t deliver, or you can but it’s too far away.

        In terms of managing a pool of delivery people, if that was what was going on… if we often saw delivery guys taking things from multiple restaurants at once, and wait times were down substantially, and so on… then there’d be a reasonable argument for a much larger cut (although there would now still be huge hold-up issues). If that’s what’s going on, I’m somewhat wrong. But I don’t think they’re doing that. Slow places are still very slow, places bad at delivery are still atrocious at delivery even if they’re good in-store.

        Agree that deception here is a bold claim. I’m making it. No question that everyone thinks they take *some* cut. Got to keep the lights on, you know. But I figured, you know, 2%, given competition (there’s also very clearly collusion going on if it’s 20%+, and perhaps that’s a better angle; in a real market this oligopoly would fall apart, and hopefully long term that will happen). My jaw was on the floor when I saw it was >20%. I had no idea businesses were wishing the things didn’t exist.

        The alternate answer to why not competition, is that all the services took hugely expensive capital in order to bribe both sides to come to their marketplace, in the hopes of getting a monopoly and charging monopoly prices, so none of them are willing to ‘burn the commons’ to offer non-temporary non-monopoly pricing levels, since there are only a few of them, in a form of implicit collusion that might be explicit but does not have to be.

        Competition is what Slice is doing, but they’re fighting this giant marketing effort and being willing to go to war by doing the thing you’re not allowed to do, which is talk about the huge fees to the customer, since as discussed you can’t pass them along. If getting customers is about huge marketing spend, habit and lock-in, and you can choose to be in or out for each market, and you have high fixed costs, and everyone has pricing power, why should anyone lower their price?

    • TheZvi says:

      It is causing price increases across the board in New York, and I’ve definitely been losing places faster lately. No question it’s always been brutal, though.

      I do agree that the service is quite nice, and is worth something. But you seem to… think the service is a lot more than it is?

      They don’t enforce consistency. There are lots of awful, awful places full of awful reviews. They don’t kick them out or anything. Others that have good ‘reviews’ deliver late and/or inedible food when you try them. Or have reviews that are obviously all lies. Delivery times are not accurate.

      Yes, they create an index you can search, and a form you can fill out and provide basic information. That’s all they do. As far as I can tell.

  3. wfenza says:

    I think this only applies if the restaurant has some other way of ordering online. If it’s not worth it to them to set up online ordering, I’m certainly not going to feel bad for using a third-party service.

    • TheZvi says:

      Consider the possibility that the reason they don’t set it up is because everyone just uses the services and doesn’t know they’re robbing us blind, so the setup isn’t worthwhile.

      Doesn’t solve the problem of picking up the phone, granted. And obviously, if calling them doesn’t work (for whatever reason), then you’re stuck.

    • mquander says:

      Just to put some data points on the table, I just looked up 10 of my favorite South Bay restaurants and checked out their online ordering functionality.

      – One didn’t seem to have a website.
      – Five had websites but didn’t seem to offer any kind of online ordering.
      – One offered online ordering for pickup but I was out of its delivery radius (which evidently is less than five miles wide.)
      – One offered online ordering for pickup and suggested I use a third-party service if I want delivery.
      – One offered online ordering for pickup and delivery only for >$100 orders.
      – One linked directly to Caviar.

      So that’s a total of 0% of restaurants which will offer me an alternative online delivery service for my use case. It’s not clear whether most of those would deliver by phone, either. I assume this is pretty different in NYC.

    • TheZvi says:

      Good data, thanks!

      I definitely found delivery in the Bay to be anemic compared to NYC. Options even on SeamlessWeb were slim, what delivery they had was super slow. The culture didn’t think this was a thing.

      In New York, they’ll definitely all pick up the phone. At least so far I’ve never been told no, unless they simply don’t deliver period (at which point Postmates is your only option, and I think they do charge you their entire cut except for their select group, since the restaurant isn’t choosing to participate, so using them for that is much better).

      I’d be curious if you asked them about delivery and how they view it, the next time you happen to drop by. Or you can always get a phone number from Google maps, and try calling and see what they say.

      The place that won’t deliver >5 miles? That’s pretty normal. You don’t want delivery that far out, it’ll be slow and cold. You want to cap at 1-2 miles, unless traffic is not a thing.

      My guess is that what you’re seeing there is largely the thing where even in a really tough business, the people who are in it are mostly running a script they founded the place with and hoping it works, and not really maximizing or thinking. People don’t do things. So once someone actually creates a place, that person needs to have the skills to create a great product and isn’t thinking too hard about money (if they did it would ruin the food) and they don’t realize even in the Bay to use this technology to get more customers even though it would totally work, because it’s a slightly non-standard action.

      But it’s also a thing where the market isn’t coming together. People who would want delivery don’t expect to be able to get it with reasonable quality and speed (and price), so they don’t try, or they try a few times, fail and stop asking. Places don’t get that many requests, so they don’t pay the fixed costs of making delivery possible, and the market breaks.

      In the market-broken world it becomes possible that delivery is actually expensive to provide, but people hate paying for it (e.g. Amazon notes that people hate shipping more than almost anything so they try very hard not to charge for it explicitly). So what happens is, now Seamless is either trying (in the generous version) to create a viable market that will create returns to scale and Make Delivery Great Again so it can afford those costs, or (in the realistic version) offers places the chance to take business from other places, by listing on Seamless and taking only a tiny marginal profit (after a promotional period) given all their costs. Again, the customer would rather pay $30 in-store than $40 at the place, but they get offered $30 vs. $33, so they are moved to where their surplus is being captured.

      Which goes back to the hold-up issue, which was the key central general point that I want to make more explicit later.

      • Midwest says:

        From my observations in a medium-size midwestern city, delivery availability used to be uncommon, except for pizza places, and has been greatly increased due to these apps.

  4. deluks917 says:

    Talking on the phone really sucks. The simplest solution here is regulation that limits how much grubhub and such can charge. I am relatively skeptical of capitalism (for a rationalist in NYC anyway) but the severity of this situation stil surprises me.

    The field seemed to have a reasonable amount of competition and competition should reduce prices. However I looked at the numbers and found this: ‘Edison Trends research shows GrubHub led the industry across the USA with 34% market share, followed by Uber Eats with 28% and DoorDash with 18%.’ This was surprising to me because I did not see semless. However it appears seamless and grubhub merged! So Grubhub/Seamless is ‘fake competition’. Maybe three companies having 80% of the market share is not enough in a field with strong network effects.

    Perhaps anti-trust law should be enforced here?

    • Quixote says:

      Yeah. Your solution makes a lot of sense. The market structure is clearly a natural monopoly. On the cost side its high fixed cost near zero variable cost. On the consumer side, you want every place to be listed on the same website. If people have to check multiple sites each time they order that’s an utterly tremendous dead weight loss of lost time. People won’t (and shouldn’t) stand for that. They will only check one place and that is the place with the most options. In a natural monopoly, the optimal solution is generally some form of heavy regulation, a little price control, and some special taxes on monopoly profits so the monopoly’s incentive to squeeze for extra juice is reduced.

  5. Anonymous says:

    Strange complaint. The only realistic claim that anything might be going wrong here is about network effects leading to monopoly price-setting power, but there’s plenty of competition so I doubt that’s the issue.

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  7. Nathan W says:

    They provide more than just a form to fill out, they also provide confidence that if anything goes wrong with the order I’ll always be able to get a refund, so there’s a trust benefit.

    Where I’m struggling with your PSA is that all of this is optional. Why would any restaurant voluntarily price themselves out of existence? They can always just, not do delivery through the app? Are you suggesting that restaurants are using the app and then not crunching the numbers to make sure they’re not taking a loss on each order?

    • TheZvi says:

      They price themselves out because the alternative is even worse. They have high fixed costs – labor, rent, etc. They make large profits off each customer. Taking the delivery option means they make a tiny amount, or even that they lose a little especially on small orders but might gain a customer long term that eventually they can profit from. They’re stuck.

      As for the refund? I could price that out and would find in practice it’s worth very little, compared to your alternatives otherwise. At most it could be an argument for it being worthwhile when trying new places, but to make that make sense at this price point you’d have to be willing to demand a refund simply if the food was bad/late. That’s not the norm as I understand it, but I can see arguments for it (e.g. you’re increasing the power of quality as selection, so it’s ok that this makes the general world much more hostile?)

      • Nathan W says:

        I suppose that makes sense, to me on some level it seems/ed like a restaurant should be able to crunch the numbers and not do things that will end up driving them to bankruptcy – surely going out of business is worse than the alternative – but I’m not in the restaurant industry and doubtless the real picture is a lot more complicated.

        I agree about the refund, I was mostly responding to an earlier comment where you said that all they do is provide a form. There’s a benefit there in having a trusted intermediary in the same way that having Amazon/ebay as an intermediary to online shopping provides a willingness to shop online that mightn’t otherwise exist. A customer has a trust relationship with the platform and it de-risks the transaction because they know they can always get a refund from the platform no-questions-asked. In practice, I agree that this alone doesn’t necessarily make up for the huge cut that the intermediary takes from restaurants, and that actually asking for a refund happens rarely (the most common scenario in my experience is neither of the ones you mentioned but rather a partial refund when the restaurant forgets one or more items in an order).

      • TheZvi says:

        I will update the post, but note that I literally just went out to buy breakfast at my favorite local bakery and learned it was permanently closed. I am pretty furious.

      • TheZvi says:

        There are large up-front, fixed, sunk costs to starting any business. If your choices are operate at a loss or in a way that doesn’t seem long-term sustainable to try and turn things around while doing what you love, or give up now, most will quite rightly tough it out.

      • Nathan W says:

        Very true, and very good point re: ‘doing things that aren’t sustainable in order to try and turn it around while doing what you love’

  8. Weronika says:

    I don’t know that I would classify this as deception, but all right, yes, I didn’t know how much of a cut grubhub took. Nonetheless, I consider online ordering to be incredibly valuable, because as an observed fact if I have to make phone calls then I will spend half my weekends without food, and that would be bad. However, given that, I should be willing to pay for it. So, current plan:
    1) Check if the restaurant has its own online ordering website, and if so, use that. (I don’t expect this to yield a lot of results, honestly, but I could be wrong.) (Note that in this scenario I’m still privileging grubhub-partnered restaurants by using grubhub as a search engine. Is there a sensible alternative? Why is getting convenient food so hard??)
    2) Either tip an extra 20% on grubhub (by the way, source on the number? If you don’t have one to hand, I can do my own research) or use DoorDash which actually charges me the fees.
    3) Try to become aware of other newer online-ordering websites that take less of a cut, and switch to those when possible.
    Does that sound reasonable? I don’t want good restaurants to go under, but seriously, grubhub is providing a valuable service for me.

    And I really don’t understand why nobody else is providing the same service for less of a cut (except apparently Slice, which sounds great, if I lived in NY and wanted pizza), and I don’t think it should be entirely on the customers when restaurants are mostly just… not doing anything to solve this problem that clearly exists. Have online ordering! It doesn’t even have to take credit cards, I don’t mind paying cash on delivery nearly as much as I mind phones! If they keep not doing that, sure, it sucks when someone else starts doing it and charges way too much, but what did they expect? It sounds to me like the major thing that grubhub provided was noticing that people wanted this at all, and I’m glad SOMEONE noticed, because I like being able to get food. Sure, now it may not be very valuable for the restaurants to put up their own online ordering, because grubhub is already a thing, but there was a pretty long period when grubhub didn’t exist and restaurants were still not doing it.

    Also note that in my case I really am not taking money away from restaurants by using grubhub – if grubhub didn’t exist, I would not be ordering from said restaurants at all, ~80% of the time. I’d just be cooking my own food or subsisting on snacks or not eating. The existence of grubhub means I eat online-order food most days of the week – and sure, maybe my aversion to phones isn’t rational and I should’ve been doing the same in the absence of grubhub, but the observable fact is that it wouldn’t happen. I wonder how many customers are like me.

    • TheZvi says:

      All that seems fair, if you verify that DoorDash actually fully charges us. Notice I said ‘minimize’ not ‘eliminate’.

      I found out the number from a Slice ad originally, then got verification from people to make sure they weren’t lying, so I can’t site it directly.

    • Weronika says:

      Oh, and I just remembered – the other useful service they’re providing is letting me easily search “which restaurants are delivering to my address at all”, and even things like “which restaurants deliver to my address and are currently open and serve chile rellenos”. Is there another easy way to currently accomplish at least the first part? I remember trying several years ago and not finding anything.

      Again, no argument that the service they’re providing shouldn’t cost 20% in a sensible market, but they are in fact providing enough services that “pretend grubhub doesn’t exist and order the old-fashioned way” just isn’t a very good option.

      • TheZvi says:

        No, that’s true. Again, minimize not eliminate! It is a reasonable compromise to e.g. try places once using Seamless, since they’re providing a useful discovery system, then stop using it if they prove good.

  9. Jeltz says:

    I am confused. If restaurants are losing money on these services, then why are they using them? Why not just not use them?

    • TheZvi says:

      They are not losing money *on the margin* on each sale versus doing nothing, but these sales are barely profitable and taking the place of what used to be very marginally profitable deliveries, and the store has fixed costs.

  10. benquo says:

    This has a lot to do with why I’ve switched to tipping waiters in cash.

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  13. shemtealeaf says:

    Like some other posters have mentioned, I think you are seriously downplaying the service that GrubHub provides. Just off the top of my head:

    1. They provide a guarantee that the restaurant is currently open, accepting delivery orders, and will deliver to me. It’s very frustrating to come up with an order and have it turn out that I’m a mile outside the delivery radius.

    2. They provide a nicely organized list of restaurants in one place. When I want to order takeout, I can clearly see what options are available without having to maintain and update my own list of restaurants and hours.

    3. They clearly display the different options associated with each menu item. Rather than having 10 seconds to make an unclear choice while on the phone with an impatient employee, I get to consider all my options beforehand. This is particularly important when you are placing an order for multiple people who might have to weigh in on any choices.

    4. They provide an interface that is easily usable on a mobile device. I’m not interested in trying to decipher a PDF of a scanned menu on my phone.

    5. They allow you to present your order in a written form that is very difficult to get wrong. Verbal communication, especially with the non-native speakers who run a lot of my preferred restaurants, is just not that reliable.

    6. They save my credit card information, so I can easily place an order in a situation where I don’t necessarily want to read my credit card details out loud.

    Honestly, I think I value the service provided by GrubHub more than I value any of the individual restaurants I order from. I would happily accept some percentage of my favored restaurants going under in exchange for GrubHub continuing to exist. My favorite pizza place is not on GrubHub, and I find that I very rarely order delivery from them. Having food that tastes 10% better is worth less to me than the convenience that an online delivery site offers.

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