Thursday, January 20

Covid should have been a blessing for Deliveroo, but has yet to make a profit | Food and beverage industry

IA year in which entire industries collapsed, food delivery apps seem to have had an easy ride. Income from Uber Eats it surpassed those of the company’s taxi service; Just Eat merges with Dutch firm, and then bought the American Grubhub app; Y Deliveroo got a $ 575 million investment in Amazon, managing to squeeze out a sliver of operating profit of the toothpaste tube of your business model. This week, Deliveroo went public with its IPO, which the company initially expected would result in a valuation close to £ 8bn.

But take a closer look and there is a persistent complaint about the apparent success of food delivery apps. In a year where everyone has been stranded at home and tired of their own kitchen after a week, delivering food to people should be like playing pandemic in “easy mode”. But Uber Eats isn’t winning it. it’s just losing less than a year ago, while the pre-tax losses of Just Eat, a business that used to be profitable, increased 67% in 2020. Meanwhile, Deliveroo’s shares crashed by 30% within the first 20 minutes of its listing on the London Stock Exchange.

Making money is something of an outdated goal for a modern business. The pandemic may not have made food delivery apps profitable, but it has given them something much more important: new customers. Even people who previously said they hated apps now have to admit that they are convenient. Have all the restaurants in your neighborhood been added to make the job easier? Wait times of only 20 minutes? Delivery for £ 4? All the theory in the world counts for nothing beside the almost immediate delivery of any burrito within a two-mile radius.

Writer Barclay Bram calls this kind of digital facility a “frictionless reality”. In pursuit of customer convenience, applications such as Deliveroo or Uber Eats make the work involved in preparing food invisible. Every aspect of its infrastructure is geared towards this goal: from drivers competing with each other to deliver orders faster, to delivery kitchens that take the hassle out of running a restaurant. Restaurants used to live by the mantra of “the customer is always right”, but apps say that not only is the customer right, but all the others are irrelevant.

Delivery apps aren’t doing anything revolutionary here. In fact, they are simply the latest form of modern corporation. Will Shu, co-founder and CEO of Deliveroo, rightly called Amazon the “most consumer-obsessed company in the world”. Amazon: a company that makes almost nothing, owns little real estate and often doesn’t even employ its own workers as staff – has restructured the entire delivery industry towards greater convenience. Even the term “on demand,” the preferred phrase for gig economies, makes customer whims central. The demand is there, these companies say: all they are doing is meeting it.

How Deliveroo advertises itself as a “British Technology Success Story” by Chancellor (and make no mistake, it is is a British technology success story on all parameters except making money), it is vital that we question what the cost of this convenience is. Restaurants have long complained about commissions of up to 35% charged by food delivery apps. But what restaurants are beginning to realize is that they have given up control of their customer base. As more customers start ordering through apps, the ambiguity about who the customers really are is growing. Restaurants are free to leave, but how many of your customers would go with them? Some drivers get an even worse deal. TO recent report by the Bureau of Investigative Journalism exposed huge discrepancies in the salary of drivers, with many paying less than the minimum wage.

As we get used to the convenience, we also get used to its hidden costs. Ten years ago, the idea of ​​bringing a McDonald’s double cheeseburger to your doorstep would have looked like an act of fin de siècle decadence, now we’re complaining about artificially low shipping rates.. Just Eat Takeaway is already testing free delivery, forcing Uber Eats and Deliveroo into a mutually assured race to the bottom. That cost will have to come from somewhere. Technology promised us a utopia, but convenience still rests on the downsides of those with the least power: restaurant workers and delivery drivers.

Perhaps clients have ventured too far into this frictionless reality to go out alone. Unions like the Independent Workers’ Union of Great Britain have done an amazing job pushing applications, win battles in health and safety protection. But the war will be won with regulation. The news that some Asset managers will reject Deliveroo’s IPO it has little to do with concern for workers and more to do with the risk of investing in a company that may be one piece of legislation away from disaster. This is why Deliveroo often looks like a political lobbyist as much as a food delivery company – its communications gear resembles a fancy crossover sword cabinet (it has employed former Priti Patel special advisers David Miliband , Iain Duncan Smith, and George Osborne, as well as David Cameron’s speechwriter).

Deliveroo has desperately not announced this IPO. It could have resisted private investment and positive thinking longer, but the IPO will give early investors an exit and new investors a chance to enter the lottery. The timing is cunning. Not only has the company been boosted by the pandemic, but the IPO was announced at a time when the city is crying out for a post-Brexit push. The news that Deliveroo would be listed in London instead of Amsterdam has been received by segments of the Treasury with the kind of flag-waving normally reserved for Robert Jenrick’s daytime television appearances.

But it will also come with new problems. In a infamous New York Times op-ed, economist Milton Friedman said the corporation’s role was “to engage in activities designed to increase its profits” without additional social responsibility. Its responsibility is to its shareholders, Friedman argued, not to society. You wonder what Friedman would do with delivery apps. So far, Deliveroo has not fulfilled any responsibility. Soon you will have to do it in at least one. There is only so long that a business can survive just for convenience.

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