Looks like those low-cost services are about to get a reality check
An article in The New York Times, entitled “Farewell, millennial lifestyle subsidy”, details how many companies offering anything from home delivery to transportation to vacation rentals, have been systematically subsidized over the years by their shareholders in search of rapid growth, a situation from which many have benefited, but that is coming to an end.
There are any number of companies out there that have long been offering services at prices that don’t add up as they seek either to build a brand presence in highly competitive markets, or to build habits within a certain customer base. The result has been remarkable growth in the use of many of these services: a whole generation has grown up moving around cities in high-end Uber vehicles, flying to destinations around the world, having stuff delivered to their homes on a daily or even hourly basis or enjoying state-of-the-art furnished vacation accommodations, and all for very low prices.
When prices are lower than the costs involved in making something, then the model is either being subsidized by its shareholders, squeezing some element of its value chain, such as delivery drivers, drivers, warehousemen or other workers, or is subject to a combination of both. The result is that these prices are not sustainable in the medium or long term, and…
