I don't know what the app/driver split is, but in developing countries, the total fees are typically $1-2 for food delivery on Grab, Food Panda, Gojek, etc.
If those apps can make enough from that, then there's no reason they need anywhere close to what they're charging in the US and similar countries. The app costs (ignoring what's paid to drivers) shouldn't differ much between markets.
> I don't know what the app/driver split is, but in developing countries, the total fees are typically $1-2 for food delivery on Grab, Food Panda, Gojek, etc.
But how much are the drivers making? If labor is dirt cheap there it's not surprising at all that they can offer delivery for $1-$2. I find it strange how you went from "developing countries, the total fees are typically $1-2 for food delivery" to "there's no reason they need anywhere close to what they're charging in the US and similar countries" without at least doing a cursory analysis of the labor costs.
Because even if we assume the labor costs are zero in the developing countries, that means the platform is only earning a couple dollars per order.
But the original article suggests that Door Dash is making over $10 an order (after labor costs), which is 5x over the best case scenario for the developing countries' apps.
> Because even if we assume the labor costs are zero in the developing countries, that means the platform is only earning a couple dollars per order.
1. That's gross profit, and doesn't cover stuff like marketing spend, which presumably is also more expensive in developed countries. If you look at the linked financial report, just under "Gross Margin" (and is cropped out) is "sales and marketing", which is nearly half of the gross margin.
2. The $10/order profit figure in the report includes restaurant fees as well. If you exclude that, their revenue (ie. all fees charged), and their profit (ie. revenue minus whatever they paid to the driver) drops by two-thirds.
Taking the two factors into account the doordash premium (for lack of a better term) over the Asian delivery companies decreases significantly. If you factor other expenses (eg. customer support/admin) and/or factors (eg. whether the Asian delivery companies are currently trying to gain marketshare as opposed to trying to take profits) probably decreases the discrepancy even further.
Is there some sort of barrier preventing those Asian competitors from entering Western markets? If it's as simple as you make it out to be, they should be swooping in and eating the incumbents' lunch with their lower overall costs.
They don't have the venture capital to burn at start... It all begins with dumping. First prices and intro offers are unsustainable... You can not start competing when other side started by burning massive piles of money.
Right, but investors were happy to fund those intro offers with the hope that they'll be rewarded in the end with market share. In fact they were funding multiple competing companies (eg. uber eats, doordash, grubhub). If the Asian competitors are fundamentally cheaper than their Western counterparts, then it'd be a non-brainer investors to invest in them instead, because over the long term they'll have a cost advantage.
The problem is that almost every kind of company entering markets to compete would have to spend an ungodly amount of money for advertising (you have to let people know you exist and drivers that you are offering a job) and the setup cost are high too.
It is simply expensive to ENTER the market and you will have to have high prices for at least the first period but with them there is no incentive to use you.
And if you give an artificially low price for your service (let say on the long term you can pay the initial fees maintaining lower prices)then the whole thing is still super risky.
It can be done, there are just more safe endeavors.
First mover network effects. Also, not knowing the market. It’s hard for a company without at least a cursory local presence to get local restaurants to sign up for things. There is a significant burden on the restaurant to get onboarded for a delivery company, so there has to be a good reason to do so.
But, there is definitely a margin to be had here… if you could have a lower cost delivery service that managed the white label backend like DoorDash, I’m sure you’d see companies flock to it for their in-app delivery. (Think McDonalds delivery ordered in the McD app)
Out here in the developing world of South Africa, it's more like $1-2 as delivery cost, another $1-2 as the "platform fee", on top of the inflated platform menu prices (which they take a cut of) , and increasingly they insist that we tip drivers a percentage of the meal.
Is this kind of like US pharmaceuticals where the prices are very high in the US because they can be and that “subsidizes” the development of these apps so the fees can be cheaper in other regions.
US apps like this were cheaper for awhile too while they were still lighting investor money on fire in order to gain customers quickly. I think DoorDash is out of this mode now, and there may be less investor growth money being poured in in the US at this point since it’s no longer early days and the market there has matured.
If those apps can make enough from that, then there's no reason they need anywhere close to what they're charging in the US and similar countries. The app costs (ignoring what's paid to drivers) shouldn't differ much between markets.