Foodtech and the delivery personnel dilemma

Roshan is a college student, with little to no disposable income and no prior job experience. He signed up with UberEats when he was unable to find an internship during his college break. He felt like he’d struck gold.

The job afforded him the chance to make more money than a lot of entry and mid-level degree-holding job seekers—up to Rs 50,000 ($690) a month.

Roshan even gets to pick his own work hours. As a result, even though his classes have started again, he can still do deliveries during his free time. With this alone, he’s able to net a cool Rs 8,000-10,000 ($110-$138) each month.

But beyond the money, Roshan realizes that things don’t quite add up. “Last night, I did a delivery of a Rs 105 ($1.50) meal, but I made Rs 95 ($1.3) on that delivery. I don’t understand what business Uber is doing for Rs 10 ($0.14)?

Another time, the food price was just Rs 70 ($1), but I was paid Rs 125 ($1.72) for that delivery,” he recounts, still trying to wrap his head around the economics. Is this sustainable, he asked. A pertinent question indeed.

As the various players in the food delivery space look to keep up with growing demand, delivery personnel have become a precious commodity. According to an employee of food delivery startup Swiggy, the company, which has already tripled its fleet size to 60,000 since the start of this year, intends to double its current strength in the next six months.

Hiring individuals and handling them

Similarly, Foodpanda, resurrected since Ola’s buyout late last year, plans to hire 50,000 delivery personnel in the same time period, said a Foodpanda employee. Both spoke on condition of anonymity as they are not allowed to publicly discuss company strategy.

But shoring up their delivery fleets is one thing, maintaining them is another. Attrition is high. Loyalty is low. These jobs are seen as stop-gaps or looked down on altogether.

With little else to keep their delivery fleets loyal, companies have begun throwing cash at them in the hopes of reducing the churn. Roshan is one of around 185,000 delivery personnel—from college students and graduates to dropouts from other jobs—who are reaping the benefits of this. Their earnings have soared to levels scarcely imaginable a year ago.

For now, companies are meeting delivery fleet targets, and delivery personnel is a happy lot. But the gravy train is bound to grind to a halt as these salaries simply aren’t sustainable. So, what then for delivery companies? How do they grow their delivery fleets and still manage to stay sustainable?

History repeats

This isn’t the first instance of a gig economy bubble. We saw a similar situation when online cab aggregators Ola and Uber went head-to-head for supremacy, just two years ago. Both lured drive partners in with promises of high earnings coupled with lucrative incentives. It worked like a charm. Drivers flocked and were kept loyal by the incentive programs offered by each company.

But once the incentives were scaled back, loyalty became a thing of the past. At present, according to an ex-Ola employee The Ken spoke to, only about 15-20% of drivers on Ola are exclusive to the platform. The vast majority, he said, was registered with rival cab aggregators as well. Hyperlocal food delivery platforms now risk going down the same path.

This is an intrinsic trait of the gig economy—it changes the underlying relationship between an employee and employer. Riders on platforms such as Swiggy and UberEats currently choose their own work timings. They can log in and out as they wish. And they alone decide where their loyalties lie.

 

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