What is the future of food delivery?

Answer by Adam D'Angelo:

In the long term, only professional full-time cooks should be cooking and most people will likely get all their meals via delivery.

Over the next few years, two trends dominate:

  1. Delivery networks like OrderAhead (disclosure: I'm an investor) and DoorDash get built out. If you're in a relatively dense area, it becomes easy to get food delivered from almost anywhere you want for the marginal cost of the delivery.
  2. Made-for-delivery restaurants like Sprig grow in scale, increase in quality, and decrease in price.

These are convenient services, but they still don't work for most households, because restaurant food and delivery costs are expensive. And it's worse for people outside of cities, because restaurants are farther away.

Delivery costs are roughly 3/4 the driver and 1/4 car and fuel. When self-driving cars come out in 5-10 years the cost will be cut to 1/4.

You also don't need an entire car to deliver a meal. Once you don't need to hold the driver, the vehicle can be something more like a motorized skateboard with a heater built in, which saves further on the car+fuel costs. It also means you can hold more of these vehicles on the existing road infrastructure.

The net effect of this is that the cost of delivery goes almost all the way to zero. With this cost so low, there is suddenly much more demand for delivery.

How high will the demand go as delivery cost approaches zero? It will be easier to move food from restaurants to people's houses than it is to move the people to the restaurants, so there is almost no limit. This means most restaurants begin to optimize entirely for delivery. With the increased scale and better machinery / robots / chefs to do cooking at restaurants, meals from these restaurants become cheaper and much higher quality than what most people can create at home. This should be enough to get to the state where most meals are cooked centrally and delivered.

I expect the structure of this industry to consist of a small number of delivery networks in each location (because of the economies of scale) and a large number of restaurants (because of the preference for variety and diseconomies of scale). The largest restaurants will run their own delivery but my guess is that most deliveries will be done by the networks.

An interesting question is who controls the interface in which people browse restaurants and get recommendations about what to order. This entity is like the Netflix of food, and there could be a near-monopoly within each geography.

In the past there was an idea that there would be a robot in every kitchen that cooked meals. I think this is an unlikely outcome because the robot would be expensive and it would sit idle the vast majority of the time, and it won't be able to provide much better service than the delivery networks.

What is the future of food delivery?

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s