The month before the pandemic hit, I met with a banker who didn’t want to talk. As we sat in a San Francisco hotel bar, he expressed either indifference or ignorance about every topic I brought up, even though I’d promised to keep his name out of any story I’d write.
Then I brought up delivery.
He took out his phone and opened the Postmates app, then Uber Eats, then DoorDash. Could I tell them apart? he asked. As a banker, he didn’t like the delivery industry. Customers were disloyal and bounced between services based on the fees they charged. The only way out for the delivery companies was by growth — meaning, buying a competitor — and those deals were having trouble getting off the ground.
More than a year later, delivery is bigger than ever, but it’s unclear that it’s better than ever. Uber’s $2.7 billion purchase of Postmates last July has been a mixed bag. Uber’s latest earnings on Wednesday showed that delivery revenue was good when people were hunkered down at home during the pandemic, but it’s a capital intensive business that eats up profits as ride-hailing—Uber’s other money-losing unit—starts to pick up.
Meanwhile, DoorDash’s shares have disappointed, having fallen below their IPO price even as the S&P 500 has risen 20%.
But those are just numbers, and the reality is that the delivery industry’s problems run far deeper than that. For one, New York City’s legislature passed legislation last week that extends caps on delivery fees, imposed during a pandemic-induced state of emergency, into next year, and will soon take up making it permanent.
While some companies have whinnied about the caps, the law bends the maximum commission down to 20%. Before, delivery companies had been making as much as 30% on orders — a much fatter margin than what your typical pizza parlor gets for making actual food.
But it goes beyond that. The new laws also force third-party delivery companies to share their data with the restaurants they deliver for. They rein in how they charge for phone orders. And — crucially — they stop delivery companies from adding new restaurants to their platforms without their permission. That was the cornerstone of growth strategies for apps like Postmates and Seamless.
While San Francisco was the first to impose some limits on price, New York’s law would be the first with teeth. Yes, the companies will probably challenge the law in court, and perhaps they’ll win some concessions. I’ve been told that the City’s pandemic-era caps served as a model for Los Angeles, parts of New Jersey, and other large metro areas, so it’s reasonable to think that this could spread.
I’ve written extensively about the delivery industry during the last two years: how Seamless/Grubhub’s phone ordering system overcharged restaurants, how business owners struggled to get off apps they didn’t want to be on, and even how undocumented immigrants in Queens used privately-funded relief money to buy e-bikes and start delivering food.
The third-party delivery industry has skated by for more than a decade without much regulation. It’s small, about $25 billion, and many of its workers are immigrants and young people. These are people who are disenfranchised or not politically motivated, or both. And anyway, in most states, they’re barred from unionizing.
But look around. Where I live, in Brooklyn, the streets are so full of delivery drivers that they’re influencing future infrastructure decisions. The drivers are fighting for more protections — sick of taking on risks that are getting them killed. Pedestrians — including a friend of mine, Doree Lewak — are being maimed in collisions. In Doree’s case, she was hit by a Postmates driver on an ebike. Uber, which subsequently bought Postmates, has tried to sidestep responsibility for her debilitating injuries.
These issues aren’t unique to delivery, and are likely to play a major future role in how the tech industry is regulated. Delivery, it seems, doesn’t just end at your door.
Correction (8/9/21) – An earlier version of this article incorrectly stated that New York City’s legislature passed a law making caps on delivery fees permanent. In fact, they were extended until February, and lawmakers plan to discuss making them permanent later this year.
Kevin T. Dugan
@kevintdugan
NEWSWORTHY
Amazon delays office return. Corporate employees for Amazon will be able to work remotely until at least January, the company said, as the COVID cases remain at elevated levels due to the Delta variant. Previously, Amazon employees were expected to return in September, though that was on a flexible basis. The retailer joins Facebook, Twitter, and Google in pushing back its plans to go back to their offices.
Biden's EV plan. In nine years, the number of cars and light trucks that have gasoline-reliant combustion engines will fall to 50%, according to a new plan to be announced by the Biden administration, as well as executives from Ford, General Motors, and Chrysler's parent company. That means half of all cars sold by 2030 will be electric, hybrid, or hydrogen fuel cell. Right now, EV's make up about 3% of the market.
Facebook's Cuomo link. On Tuesday, the New York Attorney General released a bombshell report on Gov. Andrew Cuomo's alleged sexual misconduct. It included accusations that Dani Lever, currently a Facebook spokeswoman, smeared a woman who spoke out against the three-term politician, according to the New York Post. The story prompted Rep. Elise Stefanik to call on Facebook to fire Lever.
Foxconn's chip buy. Foxconn, the Chinese company that assembles the iPhone, is buying Taiwan semiconductor plant from Macronix for $91 million. The deal gives the company, which abandoned a Trump-era deal to manufacture in Wisconsin, a bigger footprint for building chips for electric vehicles.
Fed crypto skepticism. Federal Reserve Governor Christopher Waller said he was "highly skeptical" about the central bank adopting a cryptocurrency.
Google firings. The search giant fired 31 people in 2020 over improperly accessing the personal data of Google's users and employees, according to documents obtained by Vice. That number is up from 2018 and 2019, according to the report.
Robinhood slides. The stonk app company lost about 15% of its value on Thursday morning in early trading, after ripping up 50% the day before. Now Robinhood, which enabled the Gamestopification of Wall Street, has been Gamestopified. Meta!
FOOD FOR THOUGHT
Warehouse waste. Getting something delivered makes more waste than picking it up yourself. Tiny items sometimes get shipped in giant cardboard boxes filled with protective bubble bags. Order enough items from Amazon and all of a sudden, your home is overrun with packaging.
But there's another side to waste: returns. The Verge has a story about how Amazon is cracking down on how, and how often, returns are destroyed rather than donated or re-sold. According to one French investigation, the company trashed 3 million pounds of items in 2018 in that country alone.
From the article:
The moves come in the wake of several separate investigations into Amazon warehouses that found that many returned and unsold items were labeled for destruction. Businesses that use Amazon to sell their products pay to hold their stock in Amazon warehouses. When those goods don’t sell, or if returned items pile up, they might decide to chuck the products to save money.
Amazon’s new “Grade and Resell” initiative will now give third-party sellers in the UK the option to sell stuff that’s been returned as “used.” Sellers can choose to funnel returned items to the new program, where Amazon will give the “used” item a rating: “Like New,” “Very Good,” “Good,” or “Acceptable.” The third-party seller can then set pricing based on the rating and sell it as they would a new item. The program is supposed to be available in the US later this year, Amazon says. It’s also expected to go live in Germany, France, Italy, and Spain by early next year.
IN CASE YOU MISSED IT
China’s Delta outbreak tests Beijing’s faith in its homegrown COVID vaccines by Grady McGregor
Full FDA approval of Pfizer’s COVID vaccine is coming soon. What that means by Sy Mukherjee
The best first jobs teach workers these skills by Tiffanie Boyd
Shaking off the Delta strain, European carriers grow cautiously bullish on air travel by Christiaan Hetzner
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BEFORE YOU GO
Human search engines. Before there was Google, there were librarians. This short profile of the New York City Public Library's archivists and librarians by Chris Bonanos (full disclosure: Bonanos edits my work for New York Magazine) is a reminder of how the world seen through Google's lens is not the whole picture. “One thing that historians learned this year is that digitization can never replace the archives,” says Julia Golia.
