What’s with all these food-delivery startups inviting users to try their stuff for free? Plated, Instacart, Blue Apron, Sprig… This isn’t shareware, man.
People in the office have been passing around Munchery referral codes, so I gave it a whirl. My first order was free! And the person who gave me the referral got $20!
But my order was messed up. Now, the mess-up wasn’t bad, certainly not on the level of I FOUND A SEVERED APPENDAGE IN MY FOOD bad. But I politely informed customer service, and they immediately apologized and gave me another $30 credit.
That is very nice of them, but I wonder — Do customer acquisition costs even matter anymore, or is that just a balance sheet smudge?
Delivery startups are increasingly adopting the heroin-pusher model, where the first hit is free. The rationale is that their food service is SO GOOD that once you try it, you’ll be hooked and eager to pay full price.
That works with heroin because when you want heroin, THERE IS NO SUBSTITUTE. But when you want food delivery, there’s, like, all these guys:
Food delivery is a commodity. Sure, Munchery claims to offer locally-sourced artisanal (have you ever noticed that artisanal ends in “anal”?) meals, but if they go away, one of the other fifty bespoke delivery services could easily fill that void.
If you’re an early-stage company and your growth metrics don’t look like a hockey stick, you should kill yourself. That’s more or less what I’ve learned from talking to investors out here. And when delivery startups report their key metrics to investors, what are they using as a proxy for growth? Users. Not profits, because if you’re profitable that means you’re not spending enough on GROWING.
I personally appreciate the venture-backed free food subsidy, but growth-at-all-costs rarely leads to customer loyalty. Didn’t Groupon already demonstrate this by screwing over small businesses all around the world?