Daybreak - Swiggy’s 1000 crore plan to save itself from the delivery partner crisis

Episode Date: April 19, 2023

The Blinkit delivery workers' strike that began last week has brought the spotlight back on the delivery personnel crisis in India. Just last year in July, Swiggy’s delivery partners in Bangalore too had gone on strike. Their issues range from wages to the lack of basic employee benefits.With an IPO scheduled for 2024 and its 1000 plus crore rupee investment in the bike-taxi company Rapido, the stakes were high for the food delivery platform. It had to find a solution and it had to be soon. So, it came up with a plan.It gave its delivery personnel the option to double as bike-taxis during non-peak hours. This was to incentivise them for doing more work in a day and also retain them during peak hours. But can a food delivery rider deliver meals and also ferry people? Tune in to find out.(Edit note: Earlier, we mistakenly said Swiggy's investment in Rapido was 100 crore rupees instead of 1000 crore rupees. The error is deeply regretted)

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Over the last one week, thousands of delivery partners who work with the Zomato-owned instant delivery service called Blinket have been on a strike. If you live in the Delhi NCR region, then the Blinket app may have even stopped working for you. According to news reports, Blinket has shut down over 100 dark kitchens in Delhi, Gurgao, Faridabad, Ghaziabad, Noida and Greater Noida.

So what is going on? Blinket partners are protesting against the change in the company's payout structure. The company has reduced the payout for each delivery by a considerable margin, from 25 rupees to 15 rupees now. Delivery partners are saying that this will cut down their earnings by as much as half. Now, we all are aware of this crisis in the world of instant deliveries. A lot of questions have been raised and rightly so about the kind of pressure delivery folks would have to face after the likes of Zamato, Zepto and Dunzo enter the 10-minute delivery space. After all, convenience does come with a price other than just money.

But money is at the core of the delivery partner crisis in India. Just last year in July, Swiggy's delivery partners in Bangalore had gone on a strike. The reasons were many, but it was mainly wages. Now if you remember, just a few months before this, in March 2022, Swiggy had made a 100-crawl-rupee investment in Rapido, the bike taxi company. And with the IPO approaching next year, Swiggy has to do everything it can to reach profitability. So it got thinking. On one hand, it had the delivery partner crisis and on the other the approaching IPO. Could it hit both targets with one arrow? Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickda Sharma, and I don't chase the news cycle. Instead,

thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Wednesday, the 19th of April. Swiggy has nearly 300,000 delivery partners who deliver two million orders. daily. Out of these three-fourths of food. Now, for a food delivery executive, a day is usually divided into peak hours and non-peak hours. For example, during breakfast, lunch and dinner time, they hardly have time to breathe. The delivery personal shortage is at its most acute during these hours. But after 3pm, there are hardly any orders for at least two hours. Everything depends on the number of orders for a food delivery executive.

They get paid on a per-order basis and the extra incentives too are based on how many deliveries they make. So the non-peak hours mean little or no money. So Swigy came up with a plan in January this year. It launched a pilot project. The plan involved Rapido, the company in which it acquired a 15% stake last year. Swigy decided to reach out to delivery partners who sit idle in the non-peak timings. You see, most of these delivery partners are gig workers, meaning they usually work for the platform that will pay them the most money. And the bidding wars for delivery personnel drive up the cost for these platforms.

So here's what Swiggy did. It gave its delivery personnel the option to do bike taxi rides during non-peak hours. This was to incentivize them for doing more work in a day and also retain them during these peak hours. Earlier this year, the food delivery platform had conducted a trial run in Chennai. This was to gauge the delivery partner's interest in this service and whether it led to increased earnings for them. So what did Swigy discover? Stay tuned to find out. The results from the trial run in Chennai were kind of mixed. Yes, there was an increase in earnings for delivery partners, but it did not meet the company's early expectations.

Plus, the manually done integration with the platform was full of road bumps. Some delivery partners were not comfortable with the new experience, specially carrying a pillion rider. But many Swigy employees suggested that the company will take feedback into account and continue with the experiment till it perfects it. Now, Swiggy's approach is quite clear. Instead of offering more than others for the same work, it wants to give the delivery partners the opportunity

to earn more by working more. An employee of the company told Ayush that most partners are any way doing different deliveries like with Shadowfax. Shadowfax is a third-party logistics or 3PL tech platform that serves as a gig marketplace. So the question is, if we can address our delivery partner shortage by providing demand to the existing fleet all day, and then put an incentive structure in line to make them work longer hours or all peak hours with us. But this approach to create more opportunities through different kinds of work through its own platform

was questioned by several delivery partners that the Ken spoke to. Sheikh Salaluddin, the National General Secretary of the Indian Federation of App-based Transport Workers, pointed out that a lot of the time delivery partners are part-time, like students or employed in more stable jobs full-time. And they don't necessarily want more work. They would rather simply go with a platform that pays them the most. But despite the mixed feedback, Swiggy is going to continue with the experiment. Why you ask? Stay tuned to find out.

The biggest attraction for Swiggy comes from the fact that the peak timings for both the businesses, the food delivery and Rapido are complementary. Rapido is used by office goers and the stress hours are post-breakfast around 9 to 11 a.m. and then evening between 5 to 7pm. And Rappato riders are relatively free after 8pm, which is when Swiggy sees its biggest surge. Also, before investing in Rapido, Swiggy had been using 3PL or third-party logistic partners

like Shadowfax, Lodshare and Rapido itself. These currently account for 12 to 15% of Swiggy's overall orders. An employee explained the problem with using these third-party partners to us. They said, and I'm quoting, 3PL is even slightly cheaper for us, but not easy to scale up or down as per requirements. If anyone becomes unavailable, it is tough to divert orders that late. But now that it has a stake in Rapido, nearly half of Swiggy's 3PL orders are being serviced by the company. A Rapido employee told us that not much has changed internally, but the product teams are working together closely and the integrated has improved. And last but not the least, like I told you earlier, Swiggy is preparing for an IPO in

24 with profitability goals in mind. Solving the delivery partner shortage is crucial and Rapido is central to it all. Swiggy cannot afford to increase payouts frequently to compete with other gig employers like Zomato. The company's strategy is to focus instead on longer retention and prevent partners from switching to other platforms that offer short-term payout surges. So what is next for Swiggy? Stay tuned to find out. As you can tell, Swiggy's next move vis-a-vis rapido will be critical. It could hold on to the investment or it could potentially even acquire the company.

There have also been talks about opening the delivery fleet to non-competing third-party deliveries such as medicines for online pharmacy, Apollo, or meet delivery for platform Licious. Instamart and the pickup and drop service Swiggy Jeannie are also meant to provide work during non-peak hours. Many Swiggy employees indicated to us that delivery personnel are warming up to its solution. But the growing competition in the space also means that counters from its competitors will be emerging soon.

But most of all, the resolution of the delivery workers' problems will be the key for things to work out in the long run for Swiggy. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps, and podcast extras.

Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my content. League Rajiv Sien.