The food app revolution will eat its drivers

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WangXing, co-founder of Meituan Dianping, aspires to “make life better for everyone”, says the prospectus for the world's largest food delivery company, which floated this month in Hong Kong at a value of $53bn. That is an impossible dream, but his company is changing how millions eat.
 Uber's on-demand taxi service used to be the ultimate disrupter, but rides for people are being challenged by delivery of food. Motorcycles and bikes speed around cities, carrying meals for millennials without the time or inclination to cook themselves. Uber hopes to grab more of an expanding market in Europe and Asia by partnering with Deliveroo, one of its delivery rivals.
 Serving pizzas does not sound like a bigger deal than driving humans; take away food was not invented by Deliveroo, UberEats or Meituan. But the growth of personal services on two wheels — in Indonesia, on-demand massages and beauty treatments are available, as well as meals — is a cultural revolution.
 Like other revolutions, it is breaking out on the streets. The emblem of food delivery in London is a large red L — the learner driver sign fixed to motorcycles that shows two things. Many couriers have not yet qualified to drive safely and responsibly, and most of these companies do not require it.
 Pity the casual courier as well as those who have to share the urban streets with them. Uber Eats drivers protested outside its office in east London last week at a reduction in the basic rate for delivering each meal. Since the platforms treat drivers as self-employed contractors rather than as direct employees, they can change terms easily.
 Casting off responsibility is, as the technology industry would say, a feature not a bug. GrubHub, the US food platform, defeated a claim from a former driver for employment rights in a California court in February by proving that it exercised little control over him. It did not check that he wore a uniform, and “never inspected or even saw a photograph” of his car.
 The strategy extends beyond simply trying to offer meals as cheaply as possible (Meituan estimates that its labour cost is $1 per delivery in China, and that the figurehasbeenfallingby7per cent a year). Food delivery companies are not only competing with each other: they want to push the price down enough to persuade swaths of consumers to stop cooking at home.
 It is not as implausible as it seems. UBS, the investment bank, compares app-based delivery with people buying ready-made clothes in shops or online rather than making their own garments. Many families in developed economies did the latter a century ago, but then “supply chains were established and mass consumption followed”. Home cooking could go the same way.
 Meals on demand are already alluring, especially in cities where apartments are small and it is easier to order than to devote half an hour to preparing food. But there is still a financial gulf — UBS estimates that a two-person meal delivered from a UK restaurant costs an average of £19, compared with £6 of food for home cooking.
 The first step to narrow the gap has been taken by app platforms — gathering a large number of meal orders to be fulfilled speedily by courier networks.  

Delivery companies' ultimate dream is large logistics hubs, with meals dropped by drones

Tapping a cheap, flexible labour pool is essential to the model. As one study of NewYork City's 80,000 app-based drivers concludes, it “depends on a ready availability of idle drivers to minimise passenger wait times”.
 Not offering employment benefits such as sick pay and paid leave reduces labour costs by an estimated 20 to 30 per cent, but the industry remains ripe for cost-cutting and rationalisation. One obvious inefficiency is the need to collect meals from widely dispersed restaurants rather than placing kitchens in hub and spoke networks, as Amazon does with warehouses.
 The next step is “dark kitchens” — facilities detached from restaurants that prepare meals centrally. Deliveroo has been building these in car parks and offices, calling them “hubs where we host collections of handpicked restaurants”. This has enabled it to let customers choose meals from different menus, cooked in adjacent kitchens and delivered by single couriers.
 The need to transport food fast limits the size of hubs at the moment, but what if meals did not have to be taken by road? The ultimate cost-efficient dream of delivery companies is large logistics hubs, with meals cooked by robots and delivered by air in drones. They would not need to skirt around employment laws to limit costs; drones would happily work all hours.
 More meals could be made in factories like clothes, rather than being cooked at home, and streets would be quieter and safer. But all revolutions have a human cost, and this one is no exception. What happens to the drivers who work for platforms and what would it mean for high street restaurants that increasingly rely on delivery to supplement dining revenues?
 Given the pace at which the business is changing, these are not idle concerns. Mr Wang's ambition to make life “better for everyone” is plausible, if by “everyone” he means consumers. Those in the supply chain face tougher times.

BY John Gapper

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