Zomato, Swiggy and Zepto, among others, are seeing delivery timelines being stretched as workers battle rising fuel prices and inflation in the overall economy, with some even choosing to return to pre-pandemic jobs.
Gig workers are freelancers and do not receive benefits offered to permanent employees.
The effects of this supply side crunch are already showing. Food-delivery firm Swiggy has temporarily shut its pick-up and drop-off service Genie across major metros, including in Mumbai, Hyderabad, and Bengaluru, according to a person privy to the development.
The company confirmed the development to ET. “Swiggy Genie is temporarily unavailable in three out of the 68 cities,” said a spokesperson. “The cricketing and festive season resulted in a surge in demand for servicing the requirements for both the food marketplace and Instamart, and therefore we have prioritized these deliveries accordingly. We hope to summarize Swiggy Genie in the impacted cities soon.”
The development reflects the broader trend in ultra-fast grocery and food-delivery firms, which have been facing severe rider shortages for the last 6-8 weeks. This is largely driven by fuel price hikes failing to reflect in their compensation structures, according to sources. The price of petroleum breached the Rs 100 mark in several cities. Mumbai has the highest fuel cost with petrol retailing above Rs 120 and diesel being sold at Rs 104.
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Delays in delivery
The churn in delivery personnel on food delivery apps has been hovering around 40% on a monthly basis, according to two people familiar with the matter. That means 40 delivery partners out of 100 leave or switch platforms.
ETtechWhat’s compounded the attrition is that many of these online delivery companies have been unable to increase payouts to their riders despite spiraling fuel prices.
Zomato did not respond to ET’s query about the delivery fleet supply crunch and if they have revised payouts to the staff.
A Swiggy spokesperson said to counter the rising fuel costs last year it had introduced a permanent component in rider payouts that would be indexed to changing fuel prices on a monthly basis. “We have revised our permanent components in April and May in line with this policy and will continue to keep a close watch on the hike,” the person added.
Between March and April, rider assignment time increased around 10%, but the delivery time went up 2.5 times, according to data analyzed by restaurant ordering and discovery platform Peppo.
“Not only is it taking slightly longer for the network to find riders, but the riders are traveling longer distances for every order, said Naman Pugalia, founder of Peppo. “There is a supply crunch, which has led to two kinds of inflationary pressures. Anecdotally, I am seeing orders which should take 20 minutes (to deliver) because the restaurant is nearby, is taking 45 minutes or longer. Both festival and macro factors are at play. There has also been a slight increase in the cost of last-mile delivery, which we are passing on to the customers,” Pugalia added.
A quick search on multiple food delivery and ultra-fast grocery apps over the last few weeks showed longer delivery times across Bangalore and Mumbai. While the demand has expanded, the supply hasn’t been able to keep up with the pace, industry experts said.
Grab.in, a last-mile logistics solution company that provides delivery staff to Swiggy, Zepto, JioMart, said it had registered a 10% decline in April compared to March for food riders. Swiggy is clubbing multiple orders in food delivery to tackle the situation of shortage of riders.
quick commerce boom
Zepto founder Aadit Palicha told ET that the company had “revised rate cards to reflect the rising fuel costs for riders.” “We’re compensating them in accordance with the fuel they’re spending, among other factors,” said Palicha.
Sources said that well-funded startups such as Zepto, which recently raised $200 million, have the ability to throw money to attract gig workers to retain them, while Swiggy and Zomato are looking for solutions that won’t impact their profitability.
The quick commerce service experienced a shortage on account of Ramadan, Palicha said, which impacted the business by 3-4%.
Restaurants also hit
Restaurant partners say their business has also been impacted in double digits due to the supply crunch. Those that operate their own delivery fleet are increasing the compensation for gig workers. “We have compensated our riders for the increase in fuel prices. However, the weather conditions (rains in Bengaluru, extreme heat in Delhi- NCR) have also caused the crunch, both by a surge in demand and lesser riders showing up at work,” said Anshul Gupta, cofounder of Eatclub Brands, that uses its own fleet and uses aggregators like Swiggy and Zomato.
“The shortage of delivery partners is about 10% on normal days and would go up to 25% if there is a surge in demand on Mother’s Day.”
Another restaurant partner said, on the condition of anonymity, that food delivery companies are internally prioritizing quick commerce grocery deliveries over food. They have seen a 20% dip in business after fuel price hikes, these people said. “ One main reason is delivery partners ask for a hike, and aggregators do not match their expectations,” said the person quoted above.
Exploring other options
Riders are looking at other options, including moving to bike taxis, and e-commerce deliveries. “Delivery companies have increased the pay-out, but I am making less than what I used to before fuel prices were increased,” said a quick commerce delivery executive ET spoke with. “What everybody in the industry has done is that when fuel prices go up, the payment to riders increases, but the incentive comes down which affects the overall income negatively…,” said a Swiggy executive quoted above. Incentives are additional bonuses paid to riders when they achieve a certain milestone, like 100 deliveries.
Hiring industry executives are of the view that demand for gig workers by quick commerce startups has exacerbated the supply shortage, especially in Bengaluru, Mumbai and New Delhi.
Young delivery partners had joined the gig workforce in droves during the pandemic as employment options dwindled. Now, with the economy reopening, those jobs are coming back in the mix again, said Rituparna Chakraborty, co-founder and executive vice president of Teamlease, a job site for blue-collar workers.
EVs the way forward
Increasing the supply for the long run may be the only option for these companies. Grab.in has increased its focus on electric vehicles (EVs). “Because of the hike in fuel pricing, there has been a surge in the adoption of electric vehicles (EVs). This will save the cost for delivery associates and the last mile logistic operations,” said Nishant Vora, co-founder and director of Grab.in.
“In a more recently developed model, Grab is providing EVs at subsidized cost to be purchased by delivery partners. The vehicles are given at an exclusive one-third of the actual EV cost. By adopting such initiatives, we are helping riders to reduce their dependence on fuel,” he added.
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