GrubHub's "promiscuous" problem

Wednesday, October 30, 2019 by Robinhood Snacks | Disclosures

A scene yesterday from the grocery delivery wars

Dow Jones
27,071 (-0.07%)
S&P 500
3,037 (-0.83%)
Nasdaq
8,277 (-0.59%)
Bitcoin
$9,414 (+1.72%)
10-Yr US Treasury
1.834%

Hey Snackers,

Theme party. We're dressed as "delivery" — every Snacks story below is wearing a delivery outfit, too.

Markets dipped Tuesday before today's aggressive serving of earnings reports: Apple, Starbucks, Facebook.

Got this Snacks from a buddy? — Subscribe here to get it in your inbox daily

Faster
1. Amazon triggers nuclear option: Free grocery delivery for Prime members

Groceries. Delivered free. Within 2 hours... That insanely convenient offering is now real for Amazon Prime members in America's top 20 cities (it's coming to 2K cities total, but not necessarily within 2 hours). Pulling that off is so logistically hard that only existing Amazon Fresh customers get it right now — 1st-timers will hit a waitlist so Amazon can assess how many grocery-dashing humans it needs to hire (spoiler alert: lots).

Will this finally make grocery delivery a thing?... Most Americans still grocery shop the ol'-fashioned way — by grabbing a shopping cart and blocking the aisle while squish-testing avocado firmness. Amazon's new offering eliminates 2 of the 3 big barriers to grocery delivery:

  • The cost barrier: Grocery delivery today features fees (Amazon's used to be $15/month on top of Prime). Plus tips.
  • The planning barrier: You typically need to know your fridge's shelf status at least 6 hours in advance. That's cut to 2 hours with Amazon's new offering.
  • The freshness barrier: Some of us undoubtedly still want to harvest our own produce and not risk someone grabbing the wrong almond milk.
THE TAKEAWAY

Don't try to beat Amazon on price. You'll lose... Last week we mentioned that Amazon's profits suffered because it insisted on beating Walmart and Target's 1-day shipping. Now its profits could suffer more (in the short-term) as it takes on those two in groceries plus Instacart and Good Eggs. Amazon's long-term plan: Get everyone to join Prime by offering the lowest prices/best deals, no matter what the cost.

Delivered

Your chicken parm is a million minutes away... GrubHub shares plummeted 43% to their lowest level in 2.5 years. The restaurant food delivery pioneer is sandwiched between 2 numbers from last quarter:

  • Revenues rose a healthy 30%.
  • But profits plummeted 96%. 96%. Let that sink in and sit in your stomach — Here's why:

“Promiscuous” customers... That's what the CEO just called us disloyal, price-focused GrubHub users. When we crave some pad thai, we open DoorDash...then Caviar...Uber Eats...Postmates. Comparison shopping forces delivery apps to slash prices to snag our late-night dinner $$$. Those "$2 off" coupon codes are crushing GrubHub's profits.

THE TAKEAWAY

GrubHub should focus on brand — not price... Delivery is a commodity — it doesn't matter where it get it from, it's the same (just like socks). But people do irrational things for a brand (like splurging $200 on a Patagonia pullover, because, Patagonia). If GrubHub can build loyalty for its brand with banh mi festivals or a stance on social food issues, customers may ignore lower-priced rivals and become monogamous.

Order

Could I get a 478-pack of F-35s?... The procurement person for the US government just placed the biggest order ever for military-grade fighter jets. Lockheed Martin won the deal. The Defense Department's pumped about the savings: Each $71M jet is 12.7% less than the last order — but Wall Street expected the result, barely budging Lockheed's stock on the news.

This thing is Air Force Fancy... The stealth F-35 is nearly invisible to the enemy and hits Mach 1.6 speed (a smooth 1,227 MPH). The Department of Defense calls it the “world’s most advanced, lethal, interoperable aircraft ever developed.” Most of the manufacturing happens in Texas, but they’re only flown by the US and 12 allies. Now Lockheed's gotta deliver them.

THE TAKEAWAY

Lockheed Martin is in the business of war — and politics... Its core customers are governments treating themselves to battle machines. On the one hand, it's pretty much the only producer of its products... but there's pretty much just one buyer. So negotiations on price are tricky. And Lockheed investors may want an international relations degree to handle things like Turkey — geopolitical drama there may force Lockheed to find a new supplier for the nearly 1,000 Turkish-made parts in the F-35 program.

What else we’re Snackin’
  • Lineup: AT&T announces details for its HBO Max (it'll be $14.99 and include some South Park)
  • Well-balanced: Kellogg's shares rose 3% after a quarter fueled by snacks (pretty meta)
  • Snuffed: Murray Energy (America's biggest private coal company) files for bankruptcy
  • Vaped: Juul will cut up to 15% of its 4,000 employees as part of its "necessary reset"
  • Awkward: Boeing's CEO testified in front of Congress on the 737 Max plane's failures
  • Combine: Fiat Chrysler stock jumps 8% on word it's in talks to merge with Peugeot
Snacks Daily Podcast

The Bay Area is running low on black turtlenecks (maybe) because too many people are prepping Theranos founder Elizabeth Holmes costumes for Halloween.

Wednesday

Disclosure: Authors of this Snacks own shares of Amazon

ID: 997711

Subscribe to Robinhood Snacks

Our Editorial Principles
Robinhood Financial LLC and Robinhood Crypto, LLC are wholly-owned subsidiaries of Robinhood Markets, Inc. Equities and options are offered to self-directed customers by Robinhood Financial. Robinhood Financial is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at www.sipc.org. Cryptocurrency trading is offered through an account with Robinhood Crypto. Robinhood Crypto is not a member of FINRA or SIPC. Cryptocurrencies are not stocks and your cryptocurrency investments are not protected by either FDIC or SIPC insurance.

Getting “early access” to options or Web is defined as signing up with a valid email address for a spot in Robinhood Financial’s respective waitlist queues for Web or for options. Getting “early access” to Robinhood Crypto is defined as signing up with a valid email address for a spot in Robinhood Crypto’s waitlist queue. Early access to the waitlist for Web, options, or Robinhood Crypto should in no way be construed as confirmation that a brokerage account with Robinhood Financial has been opened or will even be approved for opening. Priority may be given to Robinhood Gold subscribers and existing customers of Robinhood Financial.

Free trading of stocks and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities via mobile devices or Web. Relevant SEC & FINRA fees may apply. Please see the Fee Schedule.

Robinhood Financial is currently registered in the following jurisdictions. This is not an offer, solicitation of an offer, or advice to buy or sell securities, or open a brokerage account in any jurisdiction where Robinhood Financial is not registered. Additional information about your broker can be found by clicking here.

Margin trading involves interest charges and risks, including the potential to lose more than deposited or the need to deposit additional collateral in a falling market. Before using margin, customers must determine whether this type of trading strategy is right for them given their specific investment objectives, experience, risk tolerance, and financial situation. For more information please see Robinhood Financial’s Margin Disclosure Statement, Margin Agreement and FINRA Investor Information. These disclosures contain information on Robinhood Financial’s lending policies, interest charges, and the risks associated with margin accounts.

Investors should consider the investment objectives and unique risk profile of Exchange Traded Funds (ETFs) carefully before investing. ETFs are subject to risks similar to those of other diversified portfolios. Leveraged and Inverse ETFs may not be suitable for all investors and may increase exposure to volatility through the use of leverage, short sales of securities, derivatives and other complex investment strategies.

Although ETFs are designed to provide investment results that generally correspond to the performance of their respective underlying indices, they may not be able to exactly replicate the performance of the indices because of expenses and other factors. A prospectus contains this and other information about the ETF and should be read carefully before investing. Customers should obtain prospectuses from issuers and/or their third party agents who distribute and make prospectuses available for review. ETFs are required to distribute portfolio gains to shareholders at year end. These gains may be generated by portfolio rebalancing or the need to meet diversification requirements. ETF trading will also generate tax consequences. Additional regulatory guidance on Exchange Traded Products can be found by clicking here.

Options transactions may involve a high degree of risk. Please review the options disclosure document entitled the Characteristics and Risks of Standardized Options available through https://about.robinhood.com/legal or https://www.theocc.com to learn more about the risks associated with options trading.

The cash management program is expected to be offered by Robinhood Financial LLC. The cash management program, when operational, will be an added program to Robinhood brokerage accounts and will not be a separate account or a bank account. Robinhood Financial will provide additional information on the cash management program once it is operational to help customers, including those with “early access,” to determine if they want to add the program to their brokerage account.

Robinhood Snacks newsletters and podcasts reflect the opinions of only the authors who are associated persons of Robinhood Financial LLC and do not reflect the views of Robinhood Markets, Inc. or any of its subsidiaries or affiliates. They are meant for informational purposes only, are not intended to serve as a recommendation to buy or sell any security in a self-directed Robinhood account or any other account, and are not an offer or sale of a security. They are also not research reports and are not intended to serve as the basis for any investment decision. Any third-party information provided therein does not reflect the views of Robinhood Markets, Inc., Robinhood Financial LLC, or any of their subsidiaries or affiliates. All investments involve risk and the past performance of a security or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit or protect against loss. There is always the potential of losing money when you invest in securities or other financial products. Investors should consider their investment objectives and risks carefully before investing. The price of a given security may increase or decrease based on market conditions and customers may lose money, including their original investment. Robinhood Financial LLC, member FINRA/SIPC.

Testimonials may not be representative of the experience of other customers and are not guarantees of future performance or success. Robinhood Financial LLC, member FINRA/SIPC.

Third party information provided for product features, communications, and communications emanating from social media communities, market prices, data and other information available through Robinhood Markets, Inc., Robinhood Financial LLC or Robinhood Crypto, LLC are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any financial instrument or cryptocurrency or as an official confirmation of any transaction. The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Any information about Robinhood Crypto on any Robinhood website (including www.robinhood.com and blog.robinhood.com), the Robinhood platform, e-mails, or any other communications, are meant for informational purposes only and are not intended as an offer, solicitation, or advertisement for Robinhood Crypto or any goods or services offered by Robinhood Crypto. The Robinhood website provides its users links to social media sites and email. The linked social media and email messages are pre-populated. However, these messages can be deleted or edited by users, who are under no obligation to send any pre-populated messages. Any comments or statements made herein do not reflect the views of Robinhood Markets Inc., Robinhood Financial LLC, Robinhood Crypto, LLC, or any of their subsidiaries or affiliates.

Investors should be aware that system response, execution price, speed, liquidity, market data, and account access times are affected by many factors, including market volatility, size and type of order, market conditions, system performance, and other factors.

All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk it does not assure a profit, or protect against loss, in a down market. There is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing.

Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not currently backed nor supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. Trading in cryptocurrencies comes with significant risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. Cryptocurrency trading requires knowledge of cryptocurrency markets. In attempting to profit through cryptocurrency trading, you must compete with traders worldwide. You should have appropriate knowledge and experience before engaging in substantial cryptocurrency trading. Cryptocurrency trading may not generally be appropriate, particularly with funds drawn from retirement savings, student loans, mortgages, emergency funds, or funds set aside for other purposes. Cryptocurrency trading can lead to large and immediate financial losses. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular cryptocurrency suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying cryptocurrency system. Several federal agencies have also published advisory documents surrounding the risks of virtual currency. For more information see, the CFPB’s Consumer Advisory, the CFTC’s Customer Advisory, the SEC’s Investor Alert, and FINRA’s Investor Alert.

Robinhood Crypto, LLC has a seller of payment instruments license in Georgia, with reference number 61417.

Robinhood Crypto, LLC has a money transmitter license in New Jersey, with reference number 1803456-C22.

Please note that an Alaska money transmission license does not cover the transmission of virtual currency.

Check the background of Robinhood Financial LLC and Robinhood Securities, LLC on FINRA’s BrokerCheck.

Robinhood Terms & Conditions    Disclosure Library    Contact Us    FAQ

© 2019 Robinhood. All rights reserved.