DeansMusings

In an earlier article, I had written about the problem with delivery apps. https://rpdeans.blogspot.com/2023/08/the-problem-with-delivery-app-business.html My contention was that the market size was limited (less than what was projected by VCs) and growth would be limited. Margins from restaurants would reduce as competition offered them lower fees, or a subscription model. Delivery costs would rise, given that gig workers were inadequately compensated. This created a conundrum of falling growth, reducing margins and higher costs. Blinkit was a way to continue growth and kick the can down the road as far as profitability was concerned. So too, I believe is the company founder’s announcement that he wants to get into the airline space (running it like a bus service) and more recently, consider manufacturing jet engines. What I wrote in 2023, appears to hold good today, despite a lot of effort by Zomato (eternal) to be  profitable. I was called a sceptic when Zomato (Eternal) posted ...

  The problem with delivery apps in India When first studying economics and later business, I learnt that building a profitable business depends on: Supply and demand (if demand goes up relative to supply, price increases) & Solving a problem better than competition. The example of Uber and Ola in India illustrate what I mean by supply and demand. Ride hailing apps worked well in markets like the US where they got car owners (e.g. retired people or college students) to work part time as Uber drivers. This added to the number of cabs available. When supply went up, relative to demand, prices fell. The reduced prices attracted new customers, who wanted a better alternative to public transport or their own vehicle, but at a lower cost than conventional cabs. The lower price was acceptable to the supplier (Uber driver) as it was extra income for him, thru utilizing his idle asset (car) and time. In India, the average car owner would not want to drive a stranger for money an...