How Food Delivery Killed Competition (And Took Your Budget With It) | Diving In
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The fact that I can open up my phone, just push a couple of buttons, and 30 minutes later have restaurant-quality food show up on my doorstep, it's pretty incredible. Seriously, the magic of our times. But it's also gotten painfully expensive. That $28 burrito isn't just a meme. It's a reality. And so I want to ask, does it really have to be this way? I mean, Amazon can get almost anything in my house cheaply. And quickly. But that burrito, it's priced as if they're sending it here in a Rolls Royce. So today I want to ask, why is food delivery so damn expensive? I mean, sure, it looks like a competitive market. There's lots of businesses competing and they're all selling pretty much the same product.
Wouldn't economics tell us that competition drives prices down? But this market, it's not delivering the one thing that I really want, which is low prices. So here's the big idea. The whole point of competition, it's that you should be able to easily compare prices and find the best deal. But when it comes to food delivery, that's weirdly hard to do. First of all, the prices on the app, they're usually a whole lot higher than the price at the restaurant. And they don't even tell you what the markup is. That's a hidden fee right there. On top of the hidden markup, they add in other fees which come in different shapes and different sizes and they vary across platform. And honestly, those fees seem to vary by the time of day, the order size, whether I have a subscription and whatever strange mood the algorithm woke up in that morning.
And perhaps the worst bit, these fees, you can't even see what they are until you get to the very last screen. By that point, you're dreaming of burritos or pizza or sushi. This is a story about what happens when you have plenty of competitors, but not much competition because price comparison is painful. This is going to be a story in five chapters. First, we'll follow the money and we'll see what it takes to compare. one ordinary family dinner, my family's dinner, across three of the biggest food delivery apps. Second, we'll explore why these hassles matter and how these small frictions can add up to very big inefficiencies.
Why has food delivery become outrageously expensive?
Third, I want to make the case that this is not an accident of bad design. It's an intentional strategy used by Uber Eats and DoorDash and Grubhub. to boost their bottom line at the expense of your back pocket. Fourth, I always like to talk about solutions. And so I want us to figure out what we can do about all of this, how regulators might be able to finally fix this once they eventually get around to figuring out the scam. Fifth is the dessert course. You might think, and most of the time we're going to talk as if this is a video about food delivery, but really it's a metaphor for a much larger story about capitalism, markets, and how economies can go right and wrong. Okay, let's begin. Competition, it's the magical force that leads markets to deliver better outcomes for consumers.
One shop charges five bucks for a Coke and a candy bar and another charges seven. You end up going with the cheaper one.
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