If other European capitals follow suit, the profitability of food delivery platforms will become more difficult.

Deliveroo, the UK-based food delivery service platform backed by Amazon, will close its business in Spain on November 29, six months after the Spanish government announced the change in the legal status of food delivery riders. The company first announced its intention to leave Spain this summer, shortly before the so-called “riding technique” took effect. The law requires platforms such as Deliveroo to hire full-time delivery workers instead of self-employed workers.

Horseback Rescue

In Spain, like most countries/regions, platform companies tend to provide couriers with zero contract hours, no sick pay, or paid holidays. Since the blockade last year, these workers have become more important cogs in the rapidly developing digital economy. Since rights or benefits are zero, and their own social security must be paid, they enable food delivery companies to operate with the lowest profit margins. For these companies, the blockade is a godsend, although many of them, including Deliveroo, still managed to report operating losses in 2020.

In recent years, more and more takeaway riders have requested recognition as paid employees and corresponding rights, such as paid vacation and sick leave.As reported by Open Democracy in an article in February 2020 Cross post The pressure provided by NC prompted some of the largest platforms, including Uber and Deliveroo, to launch a “good work charter.” As Yves wrote in the preface of this article, the initiative is nothing more than “an empty charter that pretends to deal with odd working conditions.”

Nearly two years later, Spain’s center-left government has taken its own actions, which may prompt other European countries to follow suit. Its rider law stipulates that the rider who delivers the meal is an employee, not a self-employed person. It is part of the government’s ongoing campaign against the so-called “false self-employment”.This is Wikipedia Definition of the term:

“False self-employment means that a person registered as a self-employed, freelancer or temporary worker is actually an employee engaged in professional activities under the authorization and subordinates of another company… [It is] It is usually a way to circumvent social welfare and employment legislation, such as evading the employer’s social security and income tax contributions. ^{Although the modern’gig economy’ encourages more temporary employment practices for labor flexibility, the extent to which this conceals the unstable employment and deprivation of rights has attracted more and more attention from the authorities. “}

In Spain, the Supreme Court first took action against abuse in the gig economy. In September last year, a former worker of Glovo, Spain’s largest food delivery company, won the case. The court argued that “the relationship between the rider and Glovo’s business is of a professional nature.” nation notes“This is the first time that the Spanish Supreme Court has admitted that food delivery workers are employees, not self-employed.”

Bypass the law

When the government passed the Riders Act after six months of negotiations with labor unions, industry groups, and delivery riders’ associations, companies in the industry had three months to formally determine the employment status of their delivery riders. But many people refuse to play together.

Deliveroo, which was listed in London earlier this year, said it is exiting the market due to the need for large investments and uncertainty about future returns. In the process, the company put 100 full-time employees and approximately 3,700 self-employed delivery workers into trouble. The report shows that workers will receive 45 days of wages and a minimum compensation of 1,000 Euros per year.

For Glovo, Spain is its domestic and most important market. Therefore, it will not go anywhere. Instead, the company simply chose to ignore the law when appropriate. The largest shareholder of the Barcelona-based company is German food delivery giant Delivery Hero, which has hired 2,000 new employees for its own online supermarket or commercial customers with which it has concluded deals. But six months after the law was passed, its other food couriers (numbering between 8,000 and 10,000) were still self-employed. The company raised 450 million euros in new funds in April, and it has also expanded to small towns in the rural provinces of Spain. It currently operates in 400 cities. according to Top secret.

But it still won’t abide by the law of knights. The government is making it pay.Last week, the Labor and Social Security Inspectorate Fined by the company 8.5 million euros were used to formalize the contract for its deliveryman in the city of Seville.

As one might expect, California giant Uber Eats Workaround selected This mainly involves subcontracting out workers who use its platform through an intermediary logistics company. Uber Eats insisted that it complied with the “Passenger Act,” but the union disagreed, accusing it of “illegal dismissal of workers” and insisting that “the platform should have its own employees.” The company’s attempts to dissociate itself from the workers fulfilling the orders by outsourcing the orders to other companies may also violate the law, but at the same time, it can continue to operate as usual.

The only large digital platform that seems to truly comply with the spirit of the law is Deliveroo’s British competitor, Just Eat. The company has publicly expressed support for reforms and has begun to work with the union regarding its Spanish head, Patrik Bergareche (Patrik Bergareche). Negotiations for the intermediary business. The industry’s “first collective bargaining agreement.”

Reasons for Deliveroo Packing Bags

As for Deliveroo, it denies any possible connection between the riding method and its decision to leave Spain, and attributes it to operational issues: “At Deliveroo, our goal is to provide the best food delivery service in the world, and it means creating The service that applies to all our restaurants, passengers and customers. As long as we cannot fulfill this responsibility at the level we want and you deserve, we will not carry out our activities.”

However, the layoff notice issued to workers more clearly stated the company’s motives.Spanish daily reason report Deliveroo lists four ways the new law will affect the industry. First, it said that it would increase wage costs, “thus reducing the profitability of the company” (given that Deliveroo never made a profit, this should probably be: “thereby increasing the loss-making capacity of the company”); secondly, given that “some couriers do not want to change “Their contractual relationship”, it will reduce the total number of workers in the department; third, “many restaurants will lose business, because delivery platforms will be forced to close in areas that cannot meet the cost of hiring delivery drivers;” Finally, ” Consumers will get less efficient and more restrictive services.”

If Deliveroo stays in Spain, not only will it continue to lose money, but it will also increase significantly. It is estimated that Deliveroo’s Spanish operations will have a loss of 8.8 million euros at the end of 2021. If it stays and incorporates its delivery workers into its workforce, these losses will increase to 20 million euros in 2022.

Deliveroo’s biggest problem has always been its meager profit margins and fierce competition from large competitors. In the UK, there are three giants in the market, Deliveroo, Just Eat and Uber Eats. There are 6 in the United States and more than 20 in Europe. In Spain, Deliveroo’s market share in 2020 is only 10%, which is mainly due to Glovo’s hegemonic rule, which controls almost half of the market. Just Eat accounted for about 28%, Uber Eats accounted for about 19%, according to A study of the personal finance application Fintonic.

“For many platform companies, this is the same old story,” Tweet Spanish economist Gonzalo Bernados (Gonzalo Bernados). “They reach a country, lower prices, lose money, and if they don’t get a large enough market share to grant them monopoly power, they will leave. Their main goal is to eliminate competition.”

Dying due to lockdown

Deliveroo has not announced a single annual profit in its nine years of existence. It even lost money during the blockade last year.In fact, the UK’s first blockade almost killed it, as the connection report:

When the first lockdown began, Deliveroo is the worst preparation One of the three largest food delivery companies in the UK. Its biggest attractions-KFC, Burger King and Wagmama-were forced to close. The bottom is due to the decline in demand for large-scale takeaway chains. Deliveroo does not have the resources of Uber, nor does it have the list of local restaurants for Just Eat to fill the gap. But in the form of a £575 million investment led by e-commerce giant Amazon, rescue is within reach.

The British Competition and Markets Authority (CMA) blocked this move for nearly a year. But on March 17, Deliveroo told the CMA that it had failed and the regulator allowed the transaction to proceed.Thanks to this transaction, Amazon has learned valuable lessons about the European food delivery market at a negligible cost after failing in its restaurant delivery business in the United States.

Deliveroo’s revenue last year increased by 72% to 476 million pounds. But at the same time, its loss also increased by 16.6%, from 199 million pounds to 232 million pounds, because it invested heavily in the entire network and opened business in 250 cities. Like Uber, it has an extraordinary talent for burning money but failing to generate profits. But it now has Amazon, the world’s largest e-commerce monster, behind it, learn from it, and may wait for the opportunity to pounce on it.

In March of this year, Deliveroo was publicly listed. Financial Times Called “The worst IPO in London history. After pricing was at the bottom of the range, the stock price plummeted 31%. Now, Deliveroo faces the prospect of other European capitals following Madrid’s approach and cracking down on the digital platform’s exploitation of their false self-employed passengers. If this happens, it’s the same for Deliverooo. For companies, profitability will become more difficult.