Delivery Apps & the Gig Economy

You might have seen the video of a Brooklyn delivery worker wading through waist-high waters to deliver a plastic bag’s worth of food during Hurricane Ida. New York City spends more on delivery apps than any other city, at $773.70 per capita. Through storms, pandemic shutdowns, and Silicon Valley funding rounds, around 80K delivery workers in NYC have seen innumerable changes in their work lives as these apps have grown. Last week, NYC was the first city in the nation to impose new rules on delivery apps and restaurants to protect delivery workers.

     

Past
Remember the pizza guy? Previously, delivery people were employed by a restaurant, making an hourly wage plus whatever cash tips they received on delivery. Delivery apps changed that paradigm. Some of the things lost among the changes include an hourly salary and a regular schedule, insulated delivery bags, and, not to be understated, the use of bathrooms while on shift. Gig workers are now their own companies of one, on the line for startup costs like insulated packs and, in the age of optimization, e-bikes, the now ubiquitous delivery vehicle.

Present
Some of what is changing now, at least by the New York City city council who voted to enact several pieces of legislation to protect gig workers, includes: at least once weekly payments, transparency around customer tips, free insulated bags, and use of restaurant bathrooms. These changes are due to the organizing efforts of Los Deliveristas Unidos and other grassroots organizations to address the average hourly wage, including tips, of $12.21 (under the $15 minimum wage and well under the estimated $33 wage delivery apps suggest their workers make).

The question of whose responsibility it is to ensure a livable wage is still up for discussion. The WSJ recently reported on the breakdown of an average Doordash takeout order: the customer pays $35.55 (including taxes, tips, and fees), the restaurant makes $19.97, the delivery person takes $8.91 (delivery fee & tip), and Doordash takes $4.85. Subtract from that $4.85 refunds, promotions, advertising & other costs, and Doordash is left with $.90, or 2.5%, of the total order. Profit remains elusive as the companies try different methods to keep restaurants, workers, city officials, and consumers happy while also creating a path toward profitability for investors.

Grubhub (which, BTW, comes up in my research as the greatest ally to its gig workers) doesn’t see slashing operating costs through greater efficiency as the way forward. The company is making moves to become a better advertiser for restaurants. NYSE:GRUB was acquired by European delivery giant, Just Eat Takeaway, in June for $7.3BN

Future
Meanwhile, many apps are just entering the market, promising even speedier deliveries of on-demand items like booze, vape pods, and snacks. Gorillas just raised $950MM from fellow German delivery company Delivery Hero along with Tencent and Coatue Management, helping it reach a $3BN valuation just 15 months after its founding. The company already faces similar challenges from its delivery workers in its Berlin hometown. In previous reports, we reported on the growing startup landscape here & here and went in-depth on companies goPuff and Instacart.

Time will tell if the impact of these regulations will have much of an effect on the total price paid by consumers. The Uber & Lyft price hikes of early summer had to do with a worker shortage and resulted in backlash from many consumers who ended up hailing cabs instead. Will people go back to grocery stores and their neighborhood takeout spots? Will business models shift to advertising for restaurants, and delivery workers become employees again?

Gig Innovation
In the meantime, startups are seeking to improve the financial reality for gig workers, primarily through fintech. Gridwise keeps track of mileage, earnings, & deductions for tax time. Lean Financial is building a suite of financial products specifically for gig workers; it just raised a $4.5MM seed round from Inspired Capital.

Food for thought: How will your behavior possibly change if your takeout bill creeps a little higher?