How do these firms even compete with each other?
I understand that different taxi apps in an attempt to attract drivers simply pay more than others apps but how do they even secure the funding to launch an app like that in the first place? Same thing for food delivery apps
Imagine you were an investor, and someone told you, “I’m going to compete directly with Uber Eats, our competitive advantage is that we pay out delivery guys more”. Why would anyone fund that? That’s not a strong competitive advantage.
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The plan with basically every single one of these apps is “Fund us so that we can undercut the top dog by paying more/charging less, to put them out of business, so we will then have the monopoly and can charge/pay whatever we want, at which point we turn a profit that goes back to the shareholders.” Early on in the venture capital game this was a fairly consistent strategy for making money. These days, people are just trying to replicate that success, but mostly failing, so a lot of VC has dried up for these kinds of projects. Still, the promise of possible future massive returns has some still willing to invest.
The basic thing here is that “no one has cornered/dominated the market yet” although we are approaching that.
So when a new idea comes up (like “taxi service right from your phone App!” Or “order food/items and have them purchased by a shopper/delivery guy!” For example) then investors all jump on them and give them seed capital to try and grow and take over.
This is why you see tons of competition in early/new market segments… until someone or just a few big players take over the market and dominate and the others fail or get bought out and folded into the larger group.
We see this happen time and time again. The USA had like 20+ car manufacturers in the first several decades of cars existing and that market development and growth. Every small company competes hard and some outperform the others, grows larger, and eventually smaller companies have to merge with eachother to compete with the larger… or they get bought directly by the larger and get folded in.
This is why the USA used to have 20+ different car firms, and now they basically have 3. GM, Ford, Stellantis (formerly Chrysler group) and that big three holds many older brands under their control.
Where is Nash? Where is Eagle? Where is Studabaker? They all lost the car game and Ford and GM won…. That’s just one example. You see this with big box retail, with fast food, with airlines, with aircraft, with telecom, and so much more.
Uber/Lyft have both sort of won the app taxi game, and the other startups are failing away. Ubereats, doordash, grubhub, etc are still fighting with other apps but eventually someone will win that market more fully.
It’s a relatively low barrier to entry compared to some other businesses.
If I tried to start my own Airbnb tomorrow, it would take a LOT to get people to trust me putting strangers in their homes.
If I tried to start my own Uber, I’d need a massive army of drivers before it had much value to users because the whole idea is that a ride is quick to get going a lot of places.
But delivery is largely between two places relatively close together. I don’t need that many delivery drivers to serve an area. Delivery people can easily hop on to work for multiple delivery apps to maximize their income and you can take advantage of people who self trained using other apps.
And the other thing is that the established options kind of suck. They’re expensive with weirdly hidden fees and a risk of unreliable weirdo delivery people. So a lot of people who use them are looking for alternatives.
The other end of the transaction- the places stuff is coming from are well established, so users can open a brand new app with lots of logos of companies they more or less know and trust doing their part of fulfilment.
Also, companies that already are somewhat related keep trying to take advantage of what they already do to make a delivery service. Grocery stores have their own because they already have the groceries. Uber has their own because they already have a ton of people driving around.
Software has a low barrier to entry. You dint need factories, you dont need warehouses, you dont need supply chains and logistics. All you need are some software teams, marketing, customer service. A few million in seed funds is enough to launch a minimum viable product in a limited region. “Millions” sounds like a lot, but its not much in the world of venture capital
Offer drivers a better rate, offer customers a cheaper ride, take less profit than the competition (or operate at a loss temporarily) to gain market share. Once you have a strong presence you can grow the team and expand into more regions
Easier said than done of course, but compared to starting a car company (for example), child play
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