"Some delivery companies are valued higher than restaurants for which they deliver. For example, DoorDash was valued at $4B after receiving its last round in August the same as Wendy’s whose burgers it delivers.” https://www.wsj.com/articles/investors-are-craving-food-delivery-companies-1540375578 … Will delivery have greater pricing power?
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If the delivery co’s are able to dictate restaurants like a supply chain this way, signs point to yes.https://www.bloomberg.com/news/articles/2018-10-24/uber-s-secret-empire-of-virtual-restaurants …
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Ya, personally I open doordash and see what’s there, that logic makes sense
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Can any single platform get enough share to create pricing power? Network effects are weak since restaurants can work with many platforms. So key q is how a platform can differentiate if not on supply. ps AV's are serious confound to all analysis here.
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When you drive 10-30% of orders, you have substantial pricing power.
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Industries in which a firm has 10% control of the demand side vary greatly in outcomes. Do nine firms control the rest or 100s? Are there sale side economies too? What about brand, intellectual property and regulation? Restaurant franchisors barely have 10% share all together.
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Just seems like comparing apples and oranges - DoorDash doesn't *only* deliver for Wendy's.
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They'e an apples and oranges comparison in every value chain. The question is how much bigger an orange is a restaurant apple which is the worst case? "What will delivery margins eventually be?" not "will they be bigger?" They will be bigger but the question is: How much bigger?
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With Uber eats opening ghost restaurants, vertical integration is on the horizon. They are also winning the data game.
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Yes owning demand is the most important thing for a marketplace. Own demand and you can have greater pricing power with customers. Problem for food delivery companies is that they don’t own demand. They compete on delivery time and fees. Grocery delivery is a different story.
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Is the customer relationship ownable? Switching costs between Uber, Postmates, Caviar, GrubHub, etc. all seem quite low for the customer...
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