Silicon Valley Stops Sprouting New On-Demand Delivery Services

Image courtesy of Mark Turnauckas

Until drones and robots are able to deliver our meals and purchases to our homes, we’re stuck with humans doing the job. Yet there’s no amount of logistics genius or venture capitalist that will make on-demand delivery a robust or profitable business, and investors are turning away from the business.

The problem, experts say, is that there’s nowhere to squeeze savings from when an on-demand delivery business that solely delivers other companies’ products isn’t making money.

“You can’t raise prices on consumers, and you can’t cut labor costs,” venture capitalist Venky Ganesan explained to Reuters. “The core unit economics didn’t make sense.” If you can’t cut expenses or raise prices, you’re stuck, and that’s why companies like the wonderfully named Spoonrocket have failed. Food service is a tough business, and on-demand food service is a tougher one.

Two major players have also entered the market for deliveries and for food: Uber and Amazon both have their own fleets of independent contractor drivers bringing customers food from local restaurants. UberRUSH makes deliveries to consumers from third-party companies.

What the new competitors have in common is that they don’t have to make money from these delivery services, while standalone companies like Postmates and DoorDash do.