The Middleman
Companies like Uber and Doordash have gained popularity in recent years. One of the biggest reasons for this is how available their service is. The companies achieve this by not only having people as customers, but also having many people as drivers, and acting as a middleman between the two. This differs from the conventional model of hiring employees, training them, and utilizing their services, in that nearly anybody can work as a driver (whether driving passengers or delivering food) and take a portion of the revenue.
The company only has to pay drivers for exactly how much they drive, which greatly decreases the amount of overhead that goes to the "employees." The companies also doesn't need to own the vehicles, just needs drivers to sign up to make money on each service.
On the other side, customers are often willing to pay (for example with Uber) what a taxi service would charge, but with the much decreased overhead of not having employees, and not having to own the vehicles. The profit, seeing it from these perspectives, seems to have immensely high potential.
However, since drivers are only paid for the exact work that they do, and not the time in between or when they aren't actively on a job, it obviously can be difficult for them to make a livable wage. When there is a higher demand for the company's service, the price goes up, initially causing the payment to drivers to increase. However, this attracts more drivers which increases the supply of the service and inevitably brings down the price, making it even more difficult for drivers to make enough money to sustain themselves.
All of this said, many people that work for these companies use it as a side job to make a little extra money, despite the shortcomings of working for them.
https://qz.com/1129367/driving-for-uber-will-never-be-a-great-job-thanks-to-these-simple-economics/
https://jungleworks.com/doordash-business-model-how-doordash-works-earns-revenue/
The company only has to pay drivers for exactly how much they drive, which greatly decreases the amount of overhead that goes to the "employees." The companies also doesn't need to own the vehicles, just needs drivers to sign up to make money on each service.
On the other side, customers are often willing to pay (for example with Uber) what a taxi service would charge, but with the much decreased overhead of not having employees, and not having to own the vehicles. The profit, seeing it from these perspectives, seems to have immensely high potential.
However, since drivers are only paid for the exact work that they do, and not the time in between or when they aren't actively on a job, it obviously can be difficult for them to make a livable wage. When there is a higher demand for the company's service, the price goes up, initially causing the payment to drivers to increase. However, this attracts more drivers which increases the supply of the service and inevitably brings down the price, making it even more difficult for drivers to make enough money to sustain themselves.All of this said, many people that work for these companies use it as a side job to make a little extra money, despite the shortcomings of working for them.
https://qz.com/1129367/driving-for-uber-will-never-be-a-great-job-thanks-to-these-simple-economics/
https://jungleworks.com/doordash-business-model-how-doordash-works-earns-revenue/
Great post! It's also interesting to think about a company such as DoorDash and its influence on the food industry and their marketing style. As seen in the Weight of the Nation, one of the big draws to fast food is their 24 hour service that allows the consumer to eat at any hour of the day or night. However, with a company such as Doordash, a consumer is able to eat at any time from any place. While there are time constraints with Doordash and the restaurant the food is being picked up from, the consumer is able to essentially get whatever they want without the inconvenience of even having to get up as well as get food from a variety of places.
ReplyDeleteAwesome post! I also find it fascinating that middleman services like Uber and Doordash have created a brand new category of jobs: the middlemen. As we get lazier, more jobs get created to do our most basic tasks for us, and I find this to be really awesome since it is good for our economy and employment rates.
ReplyDeleteI think it is also very interesting that these new services are being created. I think one of the downsides, though, is that (in the case of Doordash) the company acts as a middleman between the driver and consumer, and the whole unit acts as a middleman between the consumer and restaurant. This two-layer middleman results in much higher costs, but also means that the company who has control over everything will try to minimize how much it has to pay the drivers. Usually, it would be closer to a direct transaction between consumer and restaurant or consumer and taxi driver, but with these middlemen it lowers the "status" of the actual workers and essentially costs them power over their service that they would otherwise have.
DeleteInteresting post! The part where you mention how the price initially goes up with higher demand before supply increases as well reminds me of how inflation works, in almost an identical manner. As the Fed lowers interest rates, more people are able to borrow money and the market flourishes, but soon prices increase to balance the system. It's also a very relevant topic, as many of these companies like Uber and Doordash have only recently become very popular.
ReplyDeleteVery insightful observation! These short-term price changes may also cause many people to use a different service, or find another solution. For example, if Uber is having a spike in their usage and raises their price, consumers might not want to pay $50 for a 15 minutes trip. Since it's generally a very short-term change, it's feasible to simply wait it out. However, in the case of inflation as you mentioned, it can cause devastating effects to some people and can span many years. This was seen in Europe after WWI, and took outside help to recover from it.
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