Home delivery postponed after fines and “rider law”: less investment and doubts about viability | Economy

Winner takes all; Whoever wins will keep it all. The world of startups, or startups, and especially the home delivery platform sector, tend to operate under this premise. And in this race, players change positions. On April 15, Stuart announced that it would exit the Spanish market and lay off around 200 employees. Two days later…

Winner takes all; Whoever wins will keep it all. The world of startups, or startups, and especially the home delivery platform sector, typically operate under this premise. And in this race, players change positions. On April 15, Stuart announced that it would exit the Spanish market and lay off around 200 employees. Two days later, Just Eat announced it would be investing less in southern Europe. And Delivery Hero, owner of Glovo, admits the company may not be viable, this newspaper reported..

Behind all this is a change in the market context that prevents uncontrolled growth, even at a loss. But also the effect of the pressure that justice and audits put on companies because of their labor model, and which for two and a half years also came from outside rider law. The differences in how companies have adapted to the ruling are at the heart of their struggle to get the whole pie.

Until recently, venture capital money flowed through the veins of Glovo, Deliveroo, Stuart, Uber Eats or Just Eat – companies that, with their colorful backpacks on the backs of cyclists and motorcyclists, were changing the landscape of Spanish cities or their cities. large parent companies that did not demand immediate profitability, but rather an aggressive race to gain the largest possible market share. And they achieved this in two ways: low prices and low costs.

Restaurants that do without platforms

Now the context is different: funds take on less risk and demand greater returns, and companies must demonstrate that their accounts are reliable. This makes it harder to fight for the price they offer to consumers, and companies can’t forever increase the fees they charge restaurants because they have a cap. Many people decide to do without home delivery through these platforms.

In terms of costs, they have increased due to regulation: first due to the sanctions that the courts and labor inspectorates have imposed on many companies, and then due to increased fees associated with the need to comply rider law, which requires the hiring of delivery drivers who previously worked as false self-employed workers. In 2021, even before the rule came into force, Deliveroo decided to stop operating in Spain.

Stewart herself acknowledged this in a statement explaining her restructuring process. The company, founded in 2015 between Paris and Barcelona and which was acquired late last year by the German group Mutares, says it took the decision to “cope with the impact of inflation, rising operating costs and the recent use of owned rider law in Spain, which directly impacted the ability to achieve profitable growth in the Spanish market.”

The company clarified that this market represents less than 1.4% of the group’s revenues and that from now on it will focus on more profitable markets, although it will retain its technology center in Barcelona. In February, a court in Barcelona ordered Stewart to pay 237,000 euros to the General Treasury of Social Security in fees for 108 couriers who worked for the autonomous company, although they should have been full-time employees.

Complex profitability

Just Eat also believes that achieving profitability in the Spanish market is very difficult. Patrick Bergarece, executive vice president of the southern region of Just Eat Takeaway.com, explains that “Spain continues to be a key market for the group” and that they will continue to invest here. However, he also remembers that southern European markets are “less mature and the level of competition tends to be higher, so it’s harder to create scale.” Group CEO Jitse Groen already admitted in April that they were investing less in southern Europe.

In the case of Spain, Bergares adds that there is comparative dissatisfaction: “These high levels of investment (that Just Eat is making in Spain) are not enough to compensate for the unfair benefit that some of our competitors receive by operating under the false self-employed worker model, which allows them to save about 40% of labor costs,” he notes.

Just Eat explains that its model adapts to what is known as Ryder’s Law, hiring delivery drivers, often through temp companies, when other companies do not. “They use the savings gained from not complying with this law to increase their visibility through marketing and advertising campaigns or close cooperation agreements in an environment that is very difficult to counter,” says Bergares. However, he is confident that time, regulators and fairness will bring everyone to the same level: “When the tide goes out, we will see who is in a swimsuit and who is not. The accumulation of fines accumulated by those who do not comply with the law amounts to hundreds of millions of euros.”

Comparative tort

Both Stewart and Just Eat are referring to Glovo, the company that is the industry leader in Spain and the least compliant. After a series of fines and sanctions imposed on launch Barcelona, ​​the latest rebuke is a report from the Ministry of Labor with hundreds of cases where delivery workers are still falsely self-employed, which has prompted a criminal investigation by the Barcelona prosecutor’s office.

Glovo’s parent company, Delivery Hero, admits in its annual report that fines, Social Security payments and the hiring of delivery drivers could represent a cost of €450 million. “There is significant uncertainty regarding Glovo’s ability to continue as a going concern,” the German parent company said.

Despite the struggles she says she’s going through, will the company that’s least compliant with the law get the biggest piece of the pie? Eduard Alvarez, professor at the Department of Economics and Business of the UOC, believes that it is too early to talk about this. Remember that not all companies are the same. And that Stewart has focused more on business-to-business parcel delivery, while Just Eat is, as Bergares himself explains, “the benchmark brand in the delivery market”, despite still having a small footprint in sectors other than restaurants.

Alvarez emphasizes that it is not easy to determine the percentage of market share each holds, but he believes Glovo leads with about 50%, followed by Just Eat in second place with 25%, and Uber Eats in third place with 20%. “These three operators will remain in the market. They won’t leave, and it’s very difficult for new people to enter because the market is starting to become quite saturated,” explains the professor, who believes that the consequences of this more closed market will have negative consequences not for the consumer, but for small restaurants, whose commissions will be raised as much as possible higher.

In the pursuit of the largest piece of the pie, strange friends arise. This week, Uber’s headquarters in San Francisco (USA) gave the go-ahead for an investment of around $1.25 billion (just over €1.15 billion at current exchange rates) in German group Delivery Hero. The company, which, as the owner of Glovo, competes in many markets, including Spain, with home food delivery company Uber Eats.

Those proceeds – the bulk, $950 million, will come from Uber’s purchase of Delivery Hero’s business in Taiwan, with the rest, about $300 million, coming from acquiring shares in the German group as part of a capital raise – will allow Delivery Hero to take a breather after registering losses last year of 2.305 million euros. Glovo, which is 99% owned by the German group, is expected to make losses of 209 million euros in 2023, an amount it has provided to the National Court as a guarantee to defer the payment of some fines it has received. . In the race to capture the entire market, even competing large multinational corporations help each other maintain their piece of the pie.

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