Other high-margin businesses (technology, media, pharma) require a staggering up-front capital investment and are fraught with risk.
Uber and WeWork reflect the high watermark of an infatuation with growth at the expense of margin.
The firm used their runway to find margin with AWS and Amazon Media Group.
Inspired by the Seattle giant, and presented with a market that offered billions to "disruptors," firms saw a shortcut: paint a compelling vision and offer $10 worth of service for $5 — negative margins.
This trope funding offered negative margin firms more runway to spin up other concepts (WeGrow, WeLive, Uber Eats, Uber Freight).
Uber management is doing the right thing and acquiring firms with overvalued stock in a desperate attempt to find lift, like Cornershop.
This will be a tacit acknowledgement that Uber is a big, low-margin consumer brand, not a growth tech firm.
Latent in these pieces (there are dozens of them published on the web) lies a superficial storyline that’s appealing to the bright but not detail-oriented: that there are high software margins (or ‘cloud’ margins if you will) to come from a world in which kitchen space is suddenly shareable, and that’s going to lead to a complete disruption of restaurants as we know them.
In fact, this supposed rise of the cloud kitchen gets at the real crux of the matter: the true ‘expense’ of restaurants isn’t rent or labor, but in fact is really marketing: how do you acquire and retain customers in one of the most competitive industries around?
Instead, it’s the meal delivery companies themselves that will take advantage of this infrastructure, an admission that actually says something provocative about their business models: that they are essentially inter-changeable, and the only way to get margin leverage in the industry is to market and sell their own private-label brands.