Roadblocks on the path of on-demand delivery

on-demand delivery

On September 14, 2021, Barcelona-based on-demand food delivery platform Glovo made the headlines again for the acquisition of Spanish platform Lola Market and Portuguese platform  Mercadão, with the purpose to extend its presence in these countries. The two new acquisitions will initially expand in Poland and Italy, strengthening the hold of Glovo in Southern and Central Europe after other acquisitions in CEE countries took place in April 2021.

Glovo said its Quick commerce (Q-commerce) segment is on track to reach an annual Gross Transaction Value of more than €300m just in 2021, hoping it will total over €1bn by 2022. However, this figure is not indicative of the company’s ultimate profit. The main problem with the on-demand sector is that despite soaring revenues experienced throughout the Covid-crisis, few companies have been able to make any profits, highlights the whitepaper “The Future of on-demand delivery in a post-COVID world”. However, it suggests how successful Glovo has been over the past year. On the back of the network of dark stores, a widespread presence in 21 countries, its operations cut across several verticals, including FMCG and pharma, but also serving supermarkets and restaurants.

Overall, it has not all been smooth sailing for the company; in early July 2021, Glovo’s subsidiary Foodinho was found guilty of violations of EU privacy legislation by the Garante per la protezione dei dati personali, the Italian data protection authority. Foodinho allegedly broke GDPR principles of transparency, notification, the lawfulness of processing, and carried out discrimination against gig workers based on how its booking and assignments algorithm functions. The Garante also highlighted concerns over how Foodinho’s system uses ratings and reputational mechanisms to further control its labour.

On-demand grocery delivery businesses have been characterised by the use of technology from their inception, usually an app through which customers order and make payments. Being born digital and achieving growth on the back of a pool of gig workers delivery drivers, however, it is worth wondering whether there could be backlash over improper use, as is the case with Foodinho. There are other recent examples; in August 2021 the Spanish government showed signs of wanting to regulate the market, while previously in March 2021, the EU had carried out a consultation for the same purpose. As of February 2021, around 11.0% of the EU’s workforce, or about 24m of people, were estimated to have provided services through digital platforms at least once, of which 3m used such platforms as a primary source of income.

It is worth remembering that the on-demand grocery delivery business or Q-commerce is relatively new in Europe. As highlighted by Alexander Kremer from TechCrunch, out of more than 10 companies currently competing across Europe with an instant grocery delivery business model, half of them were established in 2020, the year when the COVID-19 pandemic started.

Moving forward, regulations, processes and procedures need to be implemented to oversee the use of technology and the right of workers in the new businesses that the pandemic has generated. Otherwise, the race to keep delivery prices down for retail customers by using technology and a pool of delivery drivers willing to work on flexible terms and low remuneration while maintaining healthy margins, risks becoming a reputational risk based on the company’s implementation of regulations and labour laws.

Source: Transport Intelligence, September 21, 2021

Author: Caterina Ciccone

This brief has been inspired by a larger paper, ‘The future of on-demand delivery in a post-covid world’ by Ti’s CEO John Manners-Bell, Raghu Ramachandran and Ti’s Advisory Board member Ken Lyon. This paper is available exclusively to GSCi subscribers. Each week, Ti’s team of senior analysts and industry experts deliver analysis covering the latest logistics and supply chain trends exclusively to users of GSCi.