We're all being too "promiscuous"?

TUE, OCT 29, 2019

YOUR AFTERNOON NEWS UPDATE AND MARKET ACTION FROM CNBC

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EDITOR'S NOTE

So much for the first-mover advantage.

Shares of GrubHub--which owns Seamless, and is one of the first and largest restaurant delivery companies--are down 43% (!!!) today after a terrible earnings report.

Keep in mind these shares traded at an all-time high of just under $150 just last September. And now they're barely over $33. Oppenheimer's Jason Helfstein was one of five analysts to quickly downgrade the stock (which he had a buy rating on!), in his case slashing his price target to $34 from $91.

Among GRUB's litany of sins: they missed revenue estimates, reported a 15% drop in orders compared with the previous year, and gave fourth-quarter revenue guidance way below expectations.

The problem: they can't hack it in the increasingly competitive delivery space. Take DoorDash, which was worth less than $1.5 billion early last year. By May, the still-private company was worth almost $13 billion--more than Domino's at the time!--as it has rapidly gained market share, especially in the suburbs. There's also Uber Eats, Postmates, and more.

The best line comes from the company itself: "We believe online diners are becoming more promiscuous," GrubHub's CEO and President said in a letter to shareholders.

More "promiscuous"! But here's the deal: we are exactly the problem for GrubHub. When we lived in New York City, we ordered plenty of delivery from Seamless. When we moved to the 'burbs a couple years ago, we realized DoorDash, not GRUB's Seamless, is where it's at. So now we order from DoorDash more than I'd like to acknowledge--and we haven't ordered from Seamless once in the past two years.

Every now and then, we'll turn to Uber Eats instead (like when DoorDash was glitchy this past weekend). But for the most part, it's not that we're flirting with too many delivery options--we simply have a new default one, and it's not GRUB.

I should add that I've actually come to hate ordering delivery. It's way too expensive, takes too long, and just isn't that good. Of course, it's great to have the option, and we still have to use it a lot, but if this is the industry with too competitive pricing, any more "rational" price hikes will only hasten my avoidance of using it altogether.

And we're already tapering off; the last summer we lived in the city I think we ordered salads for dinner pretty much every night. These days, we're more in the 2-3 times a week camp. And the sooner I can get that down to zero, the better!

GRUB may have lost its first-mover advantage (and let that be a warning to other such start-ups), but I'm curious whether the larger economics of food delivery are sustainable in the long run. Travis Kalanick might be on to something with his CloudKitchens. The winning delivery model, I think, is yet to be settled.

See you at 1 p.m!

Kelly

Kelly Evans
@KellyCNBC

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