I probably wasn't the only person who had to wait two hours for an Uber Eats order yesterday. Supply isn't keeping up with demand when it comes to drivers for Uber Technologies (NYSE:UBER), DoorDash (NYSE:DASH), and Lyft (NASDAQ:LYFT), and it's a problem that could upend the ridesharing and third-party restaurant delivery markets if it's not corrected.
Demand outstripping supply is often seen as a good problem to have. If I want to order a Tesla (NASDAQ:TSLA) Model 3, the website tells me I have to wait eight to 12 weeks from today. If I want to work up a sweat on a new Peloton (NASDAQ:PTON) stationary bike, I'm going to have to hold off for as long as three weeks. This is an inconvenience that comes with aspirational brands, and it probably adds to their prestige.
It's a different story if I'm hungry. It's a very different story if I'm waiting on the sidewalk for a ride. Making matters worse, many ride-sharing and takeout-delivering apps are resorting to the same infuriating tactics that airlines have used for years by not being transparent about how long delays are going to be. If the industry doesn't remedy the problem, it may not be long before supply starts to outstrip demand.
Law and ordering
The major players know that there's a problem. On the restaurant delivery front, it's not a coincidence that DoorDash and Uber Eats have shifted the emphasis of their promotional offers lately from deals on delivery to discounts on orders placed for pickup. Earlier this month Uber Eats ran a targeted offer for 50% off a pickup order.
Wait times are also starting to creep higher on the ride-hailing front. In a move to smoke out new drivers and incentivize existing ones, Uber announced a $250 million driver stimulus plan. Lyft is offering a bonus as high as $800 to win back some former drivers.
DoorDash, Lyft, and Uber are hungry for drivers. Yesterday I was just hungry. As someone who has seen delays get longer in recent weeks, I know well enough to order early. I placed an order from a popular hibachi restaurant on Monday afternoon, and the listed wait time was 60 to 70 minutes.
The moment I confirmed the order, I was hit with a 4:20 p.m. expected delivery time, roughly an hour after the order was placed. The meter almost immediately jumped to 4:50 p.m., the latest arrival time.
As the clock ticked well into the second hour -- with no driver assigned -- Uber Eats bumped the delivery another half hour. The app warned that it was having a problem matching a delivery person, a humbling but honest confession. We're now talking about two hours from when the order was placed for the order to arrive.
By the time a driver was located and picked up my meal he had a couple of stops to make on the way to me. It arrived a little more than two hours after it was ordered.
"Delays don't happen often," the app explains when it blows through promised delivery windows. The problem is that I -- and probably other customers -- are seeing that delayed delivery warning happen often.
We're at a critical juncture. Uber announced record gross bookings in March. Its flagship personal mobility service is almost back to pre-pandemic volume now that more folks are heading out, but we've been spoiled by home delivery of restaurant takeout orders. This should be the best of both worlds for Uber investors, but the model doesn't work if customer satisfaction starts to suffer.
There are many possible explanations for why Uber, Lyft, and DoorDash drivers are in short supply these days. Some were burned when business slowed down -- particularly for Lyft and Uber in terms of ridesharing -- during the pandemic. Wearing a mask all day in your own car isn't fun. Others are counting their stimulus checks. With economies opening up, there are also more job opportunities.
Whatever the root of the problem is, there's a lot at stake here. These disruptive models will be disrupted themselves from the inside out if they don't keep up with the resurgence in demand. In a few years this won't matter if they're competing against automakers and tech giants with fleets of robo-taxis where the only constraint to supply will be technology. However, right now it's not just folks waiting for their delayed restaurant orders who could be going hungry.