What can you eat today: pizza, burgers or sushi? More home and fewer restaurant visits pushed food platforms such as Lieferando or Mjam. While investors certainly like the share price development, the working conditions of systemically important platform workers are extremely unappetizing in times of corona.
Boom in digital food platforms
The business model is uncomplicated and simple: Restaurants that do not have their own delivery service can still use an app to add this option and improve their sales. Hungry city dwellers get their food delivered quickly and easily to their homes or offices. For this placement service, we often generous commission due on the entire order value (Gross Merchandise Value). As a result, 30% of the order value often goes directly to the platform. In Austria alone, the GMV in 2019 was Lieferando at 19.8 million euros and rose by +33.8% compared to the previous year 2018. Due to the “winner-takes-it-all” principle, the platform economy is controlled by a few, increasingly powerful digital platform companies. In the digital age, there are often only a few powerful providers who dominate virtually the entire market and siphon off the profits. For example, eBay established a global top dog as an auction platform, while Amazon dominates e-commerce and Google dominates the search engine market. The principle of network effects is no different in the case of digital food platforms. At first, there were many suppliers who were gradually being bought out and the market was concentrated on a few big players.
The two big players: Takeaway.com and Delivery Hero
The delivery service Lieferando, which is active in Austria, is part of the Dutch group Takeaway.com and the food platform Mjam (formerly Foodora) is part of the German group Delivery Hero. Overall, the gross merchandise value at Takeaway.com was around 3 billion euros in 2019 and Delivery Hero, which is active in 44 countries worldwide with 21 brands, generated a GMV of 7.4 billion euros.
It has already been shown in the past that the assumptions and expectations of Company valuations from many platform companies were overblown. In the case of the two food delivery majors, it can be read from the balance sheets that both companies were still in the losing zone. Delivery Hero's profit after tax was in the red of -663 million euros and at Takeaway.com the loss was just under -116 million euros in 2019. Delivery Hero's equity reserves amounted to around 1.9 billion euros at the end of 2019 and the total equity at Takeaway was around 1.1 billion euros. Still, the company valuations of both online food platform companies were at an all-time high on June 2, 2020. Delivery Hero logs where the riders are from Berlin-Mitte using an app and GPS. The startup was founded in 2011 and the company went public in June 2017. At the beginning of June 2020, the market capitalization was 16.6 billion euros, with the individual share being 87 euros. Delivery Hero is therefore rated higher than many heavyweight ATX companies (e.g. OMV, Verbund, Erste Bank). An insight into the comparison of Delivery Hero's equity and market value illustrates that investors are prepared to pay more than 8 times the book value of the equity for the share. In the event of further market disruptions or lower growth assumptions, this immensely high valuation effect can quickly become negative.
Bicycle couriers: stressful, precarious and systemically important
They're racing against time. It's a lot more dangerous on the roads than you think. The call during the shutdown not to leave one's own home, the closure of restaurants and the relocation of many employees to work from home have led to a run of food deliveries in recent months. However, the question never arose as to whether the delivery of meals on wheels plays a relevant key role — because it obviously has one. In addition to the usual time stress, physical stress, risk of traffic injuries and low pay, platform workers have also had the risk of infection with Covid-19 since mid-March. A bicycle courier from Vienna provides more detailed insights into the precarious situation.
“It's a job, not a hobby,” says a bicycle courier from Vienna
No face masks, no disinfectants and no tips
“It's a job, not a hobby. ” The US American living in Vienna (whom we have changed his name in this post and address as Mark) has been working full-time as a bicycle messenger for the Mjam meal delivery service in Vienna for over a year. Like 500 of his colleagues in Vienna, he is under contract as a freelancer. The remuneration consists of a basic rate of 8 euros gross per hour and overpayments from a certain number of orders per hour worked. He is not entitled to paid vacation, sick leave or vacation and Christmas benefits. Mark describes the first few weeks of lockdown as chaotic and difficult. It was not clear which restaurants were open, there were often empty runs and the waiting times were much longer than usual. The “contactless handover” procedure, which was introduced by the platform, also made the process more difficult. Above all, contactless handover reduced an essential part of income: tips. After the order has been delivered, the bicycle carrier depends on the processes being well timed and customer contact is also an integral part of the work. According to Mark, apart from weekly informational emails — which urge caution — there was no support from the company. Protective equipment such as masks and disinfectants was organized by the drivers themselves. It happened more and more often that food delivery people themselves were not allowed to use the toilet facilities in the restaurants.
Better working conditions needed for platform workers
For years, small and medium-sized companies set the tone in the bicycle messenger sector. Over the last few years, international corporations have expanded across the food delivery market and shaken up the industry. Since 2020, there has also been a collective agreement for bicycle messengers, but due to Diversities of employment and service relationships The sector is still characterized by precariousness. A good proportion of platform employees work as freelancers or as one-person companies for a client. They often fall through the social network that is needed right now. The corona crisis has shown that there are extremely precarious circumstances in many occupations that are classified as systemically important. It is incomprehensible why people in precarious employment relationships are applauded as everyday heroes, but are denied access to the social system and rights that real workers take for granted. Works councils can take care of them, but they have no control over the employer. Gaps in legislation and control have always been used by companies to save costs. The argument is based on price pressure, which does not cover an employment relationship. In addition, customers would not be willing to pay the real price for the service. Cost accuracy for services is a component of detachment from precariat, but also a strong representation of atypical employees who, without lobby, find it difficult to assert their income against overpowering corporations and established companies. The proof that they are subject to an employment relationship and not to self-employment or a freelance service contract is the responsibility of the employees concerned and is invariably associated with job loss. This power imbalance must be broken and the atypical workers must be given a strong lobby in order to reduce precarious working conditions and to be able to guarantee the same rights and protection to all workers. Platform operators must assume their social responsibility role. This step has already been taken in California with the Assembly Bill No. 5 implemented by having to hire GIG workers from the platform. Because even with Work 4.0 The quote from Bertolt Brecht applies:
“Whoever fights can lose, whoever doesn't fight has already lost. ”
