Food-delivery companies did record-breaking business during the pandemic, as millions of homebound Americans embraced the idea of ordering dinner via smartphone apps. Their valuations skyrocketed. They acquired reams of data that helped increase their efficiency. There was just one problem: Even at the height of their success, they weren’t making any money.
Now, as the pandemic wanes, companies like DoorDash Inc., Uber Technologies Inc. and Grubhub Inc. are trying to address what could be a life-or-death question: How can they make the math work?
“You really need to optimize things to the cent,” said Pierre-Dimitri Gore-Coty, the global chief of Uber’s delivery business, which includes Uber Eats.
Delivering food is an expensive logistical undertaking. Apps earn money by charging restaurants a percentage of the order, as well as by charging consumers a service fee. They then dip into those earnings to pay drivers, their biggest expense.
After accounting for advertising costs and refunds to customers, among other operational expenses, DoorDash on average is left with 2.5% of a customer’s overall bill, according to a Deutsche Bank analysis. That means DoorDash ended up with 90 cents on the average order during the height of the pandemic, worth around $36.