Is on-demand delivery fundamentally a profitable, scalable business model?

Miki Kuusi · Nov 28, 2022

The delivery-as-a-service model is unworkable — you cannot simultaneously have great retention, good unit economics, and a viable business for both merchant and courier

83 North looked at close to 100 companies doing what Wolt does and concluded the model does not work

45:27 Delivery as a service cannot simultaneously achieve retention unit economics and viability for both sides

Jeff Jordan · Jan 16, 2023

Fast/instant commerce was Kozmo redone with nothing genuinely new on top, so it was not worth backing

Without an existing base of business at Instacart's scale, doing fast delivery with both service integrity and workable economics is extremely hard

27:52 Fast delivery without pre existing scale repeats kozmos failure

Bastian Lehmann · Apr 8, 2024

On-demand delivery is a tremendous business if you can scale it — every market Postmates had at scale was profitable, and the same was true at DoorDash

By around the Series B or C there was enough evidence in the numbers to clearly articulate the path to profitability; the perception that it is a bad model is a misconception

12:58 On demand delivery is profitable at scale despite perceptions of poor margins

Dave Clark · Jul 17, 2023

Launching ultra-fast delivery matters mainly as a signal of speed and innovation to customers, not as a profitable service in itself

Very fast shipping is only a small subset of what actually gets delivered, but once competitors marketed fifteen-minute delivery, it reframed two-day as slow and, lacking that offer, Amazon looked like it was no longer on the cutting edge

12:21 Ultra fast delivery serves as marketing signal not a profitable service itself

Dave Clark · Jul 17, 2023

The closest last-mile delivery gets to a working business model is subscriptions plus advertising, layered on heavy fees

Product COGS and margin cannot absorb delivery cost, so the companies that do operate rely on lots of ads, fees, delivery charges and tips — a $30 Chick-fil-A order by the time it's all added

13:07 Last mile delivery economics work only via subscriptions plus advertising layered on fees

Dave Clark · Jul 17, 2023

The delivery companies that survive will be those with tremendous scale and price-inelastic customers who value their time over money; those without scale will disappear

Only inelastic, time-valuing customers will absorb the fees and subscription costs required to make the economics work

14:02 Delivery companies survive only with scale and price inelastic time valuing customers