The trending topic in many of the courier groups on Facebook is the sudden deactivation notifications from DoorDash. In the past few weeks, couriers have been uploading screenshots of emails from DoorDash notifying them that they’ve been deactivated for low completion rates of deliveries. Postmates has been doing something similar but not as widespread as DoorDash’s purge.
DoorDash and Postmates are cracking down on couriers who don’t meet performance benchmarks. This has upset a lot of couriers. Many completed large numbers of deliveries for these platforms over the years and feel betrayed. Some didn’t see this coming even though they knew there are expectations in terms of performance and reliability. So what gives?
I think it has to do with the financial stability of these food delivery companies.
There are several major names in the food delivery space right now. Amazon Flex, UberEats, Caviar, GrubHub, Postmates, and DoorDash to name a few. So why are these two purging couriers while other platforms seem to be moving along as if it’s business as usual?
Let’s look at the profile of the major brands and their finances.
Brands at added food delivery: Amazon and Uber
Amazon’s food delivery has financial stability. Amazon recently added food delivery to their business. This arm of their business is just a small part of CEO Jeff Bezos’ giant empire.
Uber, the market leader in ride share provides support for UberEats. The rideshare giant added UberEats to their business model. Despite recent public relation woes (#deleteuber and Susan Fowler) and challenges to Uber’s self-driving car vision, UberEats has financial backing. Even if it’s losing $100 million dollars annually.
Brands that acquired food delivery: GrubHub and Caviar
Founded in 2004, GrubHub didn’t start out in food delivery. They started out with the mission of being an alternative to paper menus. In 2013, GrubHub merged with Seamless and enter the food delivery space.
Caviar is not an independent company. Square, Inc acquired Caviar a few years ago. Caviar’s brand is about mutually beneficial relationships between software and local business partners. This aligns with Square’s mission to create products and services that help businesses innovate. So Square acquired Caviar. Caviar is in a secure place.
These four major brands do not have an urgent need to raise another round of funding. They are not profitable but they’re not in a place where they must raise money or perish. It’s a different story with DoorDash and Postmates.
Brands that are funded by venture capitalists: DoorDash and Postmates
Amazon has multiple revenue streams. Uber has rideshare. Square generate revenue through their payment platform. GrubHub has a listing business.
Postmates and DoorDash belong to another category. These are venture capital backed tech startups that need to prove their model in order to continue raising money to keep the lights on. They are not owned by another company nor do they have established revenue streams outside of food delivery.
As a result, Postmates and DoorDash must do what most tech startups in their category must do, exhibit a hockey stick growth curve. By and large, this is how Silicon Valley companies get more investor funding.
Postmates, for example, has demonstrated this hyper growth with the number of deliveries they complete per month.
But in the last two years, investors have cooled on the on-demand food delivery space. Some brands have died as a result.
In recent memory, DoorDash raised a down round and Postmates raised, according to their own CEO, a ‘super difficult’, round.
The biggest cost of operations for these brands is hiring, training, and paying couriers.
So when there are too many couriers, it creates competitions for delivery jobs between them. As a result, drivers don’t make good money and start doing multiple platforms at once. This makes couriers unreliable.
Let’s say DoorDash’s internal data shows that they need an average of 50 active couriers for a particular shift. If they get 50 couriers on their shifts but half of them are stacking jobs with another platform, their fleet is unreliable and cannot fulfill all the DoorDash orders. Customers will be unhappy.
So what do you need to do? Examine reliability statistics of couriers and get rid of the ones who aren’t reliable.
That’s what has been happening in recent weeks.