‘A full-time career in the gig economy? Think twice.’
The highly competitive food delivery service industry is a ticking time-bomb.
THE gig economy is capitalism at its most brutal. Everybody wants to create the next “unicorn” – disrupting conventional businesses on a global scale like Airbnb and Netflix.
However, potential champions often end up like WeWork, whose botched initial public offering (IPO) in August saw its putative valuation plummet 75% from US$40bil to US$10bil and its longhaired, pot-smoking founder, Adam Neumann leave in disgrace. According to recent media reports, the perennially money-losing concern could now be facing a cash-crunch.
Foodpanda, part of the publicly-listed German group Delivery Hero is encountering challenges in Malaysia – a market its local Managing Director, Sayantan Das said it dominated with a 92% market share as recently as June 2018.
Basically the food delivery service is now attempting to alter payment terms with it’s all-important motorbike riders. This has prompted strikes as well as government scrutiny from Tun Dr Mahathir Mohamad’s Pakatan Harapan administration which has an avowed “shared prosperity” focus.
The controversy underlines the extreme choppiness of the gig economy.
Team Ceritalah attended an emotional dialogue between Foodpanda riders and Malaysian Youth and Sports Minister, Syed Saddiq.
Muhammad Hajid, a skinny but chatty, nineteen-year-old student was one of those present at the minister’s residence. He became a part-time rider back in December 2018. He was hoping to cover his course fees and help his single mother.
Initially, all went well. He claimed that last month – while on his semester break – he earned RM3000. It was hard work. Hajid clocked up 28 shifts in one month, (that’s essentially 315 hours) making some 311 deliveries.
“I was planning to do this full time because it paid so well,” Hajid confessed.
With the latest revision, Hajid is less sure about his future. Why? Foodpanda has scrapped fixed hourly rates and substituted them with a higher payment per delivery rate. This, however, introduces a greater degree of uncertainty. Hajid also believes that his income will drop.
According to Hajid, new riders now have to pay for their own Foodpanda delivery bags. When he joined the bag was free. The extra RM160 may not sound a lot (this is deducted from their monthly earnings) but the transferring of the cost to the riders is perhaps indicative of the growing competition in the Malaysian market.
After all, since May 2018, the extremely well-funded ride-hailing group, Grab has also been operating food deliveries. This is a conflict between titans, fought across different national battlegrounds and generally with other people’s money.
Grab is estimated to be worth some US$14bil (RM58.6bil). The group raised a further US2bil (RM8.4bil) alone in fresh funding this year. Meanwhile, Foodpanda’s parent Delivery Hero listed on the Frankfurt stock exchange back in 2017 (the largest IPO of that year in Germany) has a market capitalisation of around US$8.4bil (RM35.2bil).
Intriguingly, motorbike riders work under very different contractual terms across Southeast Asia. Whilst there is no golden rule – it would appear that medical and accident insurance is patchy at best.
Nonetheless, in the Philippines – a market three times the size of Malaysia – GrabFood is clearly on an ambitious expansion drive. Mary France Pascua Bal’ot, a 32 year-old who supports her mother gets a booking fee, per km compensation as well as 20% of the cost of the order. These terms seem lavish when compared to those on offer in Malaysia and even Indonesia.
In Vietnam, the calculations are even simpler and more generous. At the moment, Grabfood pays 60% of the size of the order.
In Indonesia, after considerable turmoil the authorities have had to step in. They were forced to put an end to a cut-throat discount war between the two huge “decacorns”, GoJek and Grab.
Interestingly, Foodpanda closed down in Indonesia in 2016. Indeed, it would appear that standalone food delivery services are vulnerable in markets where motorbike hailing services dominate.
For Gojek, food delivery is just one of a slew of services. Even then the Indonesian start-up’s CFO, Andre Soelistyo states that they are the second largest on-demand food delivery service in the world, outside of China with over 15 million meals delivered since inception.
With Malaysian authorities currently mulling the entry of motorbike hailing app, GoJek, the future could be far less promising for Foodpanda.
Riders need to realise that they are merely tiny cogs in a global contest of hugely capitalised giants.
Grab, Gojek and Delivery Hero will switch strategies and resources between markets at will. Indeed even politicians and governments are often caught flat-footed by the speed of these changes.
Young men (and women) like Muhammad Hajid would be very unwise to try to make a long term career in the gig economy.
Payment terms, commissions, bonuses will keep on changing and could even disappear – especially as drones become more sophisticated and reliable! Remember it’s all about the money.