A pizzeria owner made money buying his own $24 pizzas from DoorDash for $16

[SugarDaddy1]

Yesterday, Ranjan Roy, a content strategist and writer, wrote about the latter in his newsletter The Margins; one of his friends who owns a few pizza restaurants suddenly got an influx of customers complaining about delivery when the restaurants didn’t offer delivery. “He realized that a delivery option had mysteriously appeared on their company’s Google Listing. The delivery option was created by Doordash,” Roy wrote.

Apparently, this is one way that DoorDash does customer acquisition — by bullying restaurants. But what’s funnier about Roy’s friend’s problem (and it was a real problem because of Yelp reviews and angry customers) is that DoorDash priced the pizzas incorrectly. “A pizza that he charged $24 for was listed as $16 by Doordash,” emphasis Roy’s. And then: “My third thought: Cue the Wall Street trader in me…..ARBITRAGE!!!!”

And so the story unfolds. “If someone could pay Doordash $16 a pizza, and Doordash would pay his restaurant $24 a pizza, then he should clearly just order pizzas himself via Doordash, all day long. You’d net a clean $8 profit per pizza [insert nerdy economics joke about there is such a thing as a free lunch],” wrote Roy. They order 10 pizzas this way, and it worked! The money was free, a seamless transfer from SoftBank’s deep venture capital-lined pockets to Roy’s friend’s business bank account. Eventually, in another series of what Roy hilariously calls “trades,” they just ordered pizza dough through DoorDash for $75 in pure profit.

Later in the piece, Roy points out that DoorDash lost $450 million generating $900 million in revenue last year, which is wild. The delivery business was working just fine before DoorDash and co. swept in with piles of money to burn. Today, as Roy writes astutely, the model is broken. “You have insanely large pools of capital creating an incredibly inefficient money-losing business model,” he writes. “It’s used to subsidize an untenable customer expectation. You leverage a broken workforce to minimize your genuine labor expenses. The companies unload their capital cannons on customer acquisition, while this week’s Uber-Grubhub news reminds us, the only viable endgame is a promise of monopoly concentration and increased prices. But is that even viable?”

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[Tryharder62]

So the question is......does he even have to make the pizza's if he is delivering them to himself? Hmmmmm.

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