Food Delivery Wars: 3 Takeaways From The UberEats, Postmates, Grubhub, DoorDash Ecosystem—How It…

Private companies in the last 5+ years have had every incentive to forgo profitability for a different metric: growth.

First, that the opportunity Postmates saw was Grubhub’s to lose, but Postmates ran at that opportunity too aggressively while Grubhub ran at it too slowly. And second, as DoorDash battles two public company competitors in GrubHub and Uber Eats, staying private is a weapon I suspect they won’t be eager to give up.

Postmates and DoorDash were the first to realize that if they could provide the broader group of restaurants that did not do delivery with the ability to do deliveries, they could dramatically increase the number of restaurants that could exist in the marketplace, thereby leapfrogging Grubhub’s selection (and liquidity).

In other words, dominance in a market, not aggregate GMV across many markets, is the goal of any marketplace and ultimately what determines equity value.

This is because marketplaces are not a race to growing GMV, they are a race to creating the most value for both the supply and demand side (liquidity). When you start in a small, focused market, it’s a lot easier to build liquidity and get to a meaningful percentage of that market, becoming the best place for both the supply and demand to go.

Postmates and DoorDash pursued this growth-at-all cost mindset so aggressively that they listed restaurants and stores that weren’t even signed up for either service. Doing so let both scale supply faster than a sales team would have been able to, but it obliterated the unit economics early on. Because neither were integrated on the backend of the ... See more

This vulnerability is not unique to food delivery. The same pattern of leapfrogging an incumbent by dramatically expanding the potential supply-base happened in home-sharing and travel.

Grubhub’s original model was a marketplace for consumers to order food from independent restaurants that already had their own delivery fleets. Though this was a game-changer for consumers, it constrained supply to only listing restaurants that could perform their own deliveries. This was a mistake.