Daybreak - The delivery-partner fee you’ve paid, but haven’t really

Episode Date: October 30, 2023

Delivery partners who work for Swiggy or Zomato are paid per order. The fee which includes variables like base fee, surcharge, etc, depends on how many kilometres they’ve travelled from pickup to delivery destination. These payments though, are never consistent and gig workers, who make our lives so convenient, struggle with earning a stable income. So when Zomato says on their bill under the delivery partner fee, ‘fully goes to them for their time and effort,’ we appreciate it thinking the money we’ve paid has gone to the delivery partner.Except, it doesn’t.Tune in.FREE READThe pandemic couldn’t kill Bookmyshow, but it definitely changed its faceDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

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 Ganesh, 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 an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts 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. Earlier this month, thousands of delivery partners of Swiggy went on strike in Mumbai. The protest was against the changes in their payout structure, and it continued for over three days.

Naturally, Swiggy's operations were hit in different parts of the city. Now, this, of course, as we all know, is not a one-off incident. Delivery partners who work with different platforms like Swiggy, Zamato, Blinket and the likes have been hitting the road time and again. So today, I'm going to take you back to revisit an early episode of Daybreak on whether the delivery fee that these food delivery giants charge fully goes to delivery partners at all. Are you one of those people who carefully go through their Zumato or Swiggy bill after receiving your order?

I am not, but I do know that the delivery partner fee that these platforms charge has gone up lately. It can even go up to 100 rupees per order and more if it is raining or if you've ordered from a restaurant that is far from you. Delivery partners who work for Swiggy and Zomato are paid per order. The fee which includes variables like base fees, surcharge, etc., depends on how many kilometers they've traveled from the pickup to the delivery destination. These payments are never consistent. Now, because of this, the gig workers who make our lives so convenient struggle with earning

a stable income every month. The companies who offer them these jobs have the power to change their wages when they want and how they want. All because an employer-employee relationship does not even exist when it comes to gig work. And of course, this is something that we're all well aware of. How many protests and strikes by delivery workers have we seen happen demanding minimum wage and better work conditions? Many of us also think that the delivery partner fee that we are charged goes to the delivery partners fully. And on what basis do we make this assumption? Because that's what Zomato claims at least. On a Zamato bill, just below the delivery partner fee, it says, and I'm quoting, fully goes to them

for their time and effort. Now, my colleague, Shivani Varma, is someone who likes to keep a track of these bills. Also because she's been covering India's gig economy for over a year now. So recently, she decided to ask a Zomato delivery partner if he was getting the full fee. Guess what? He was not. She was charged 68 rupees as delivery fee and the partner got only 26, not even half. So I thought, let me ask the Swiggy delivery person who got my dinner last night the same question. Here is how the conversation went and I apologize for the not-so-great recording quality.

Sir, I paid $75 for this delivery. Okay, madam. And you work with Swiggy? Yes, ma'am. So how much did you get, total? $59, madam. Okay, so from there, basic $27. Suar bonus, $10.

Surge bonus is $10. Rainmode, $22. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Dha 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 Monday the 30th of October. Shivani checked two more orders that were placed with Zomato and spoke to the respective delivery partners. Same results.

For the first order, the customer paid 35 rupees for which the delivery partner received only 27. For the second order, the delivery fee was $45 and what the delivery partner got was $37 only. So, Shivani tried to understand how these calculations were being made. But the bills offer no possible explanation for the deductions. Turns out, it is the same with somato gold subscribers for whom food deliveries are free from all restaurants within 10 kilometers and on orders above $199. For these orders, a gold user sees a checked-off delivery fee, which they probably think is passed on to the riders. Well, the bill for an order placed by a Zomato gold customer that the Ken looked at showed a $43 delivery fee, but the rider got only 33.

A Zomato delivery partner we spoke to told us, and I'm quoting, we usually don't get the full delivery fee. Even if the delivery distance is nearby, Zomato may charge the customer extra and not pass down the same amount to us. Some of it goes to them. End quote. Now, as we know, inadequate wages to delivery partners has been a problem in the gig economy for quite some time now.

But the experience of a few other customers suggests something more is going on. Because a few partners are also receiving more than what the customers are paying as the delivery fee. The Ken went through the details of eight Zomato orders. Out of these, six partners were paid less than what the company charged the customers. But again, we have no way of finding out how Zomato decides who gets how much. The dynamic nature of these fees makes it all very hard to understand. Stay tuned to find out more, but before that, my colleague Akshya has a quick message for you.

Everybody loves a good underdog story, right? It's the vicarious thrill of winning that makes it such a go-to genre of movies for most of us. Well, the story of India's online movie-ticketing giant book my show is one such. The pandemic, as we all know, dealt a knockout blow to book my show. It may be hard to picture this right now,

but back then, no one knew of people would ever walk into a theater again. 90% of BookMy show's revenue suddenly evaporated in 2021. It had to do away with two-thirds of its workforce, and the future looked bleak and uncertain. But instead of losing hope, BookMy show hunkered down and lived to tell the tale. The tough pandemic years were the gestation period.

It was innovating and reinventing itself behind the scenes. For instance, did you know that BookMy show now has a story, streaming service of its own, where you can rent and buy classic exclusive movies that are not available on any other OTT platform? Yes, Book My Show is no longer just a ticketing service. It has revamped its strategies and diversified its revenue streams. If you're interested in knowing how Book My Show powered through the pandemic storm, this story by the Ken's staff writer Ayrwal is for you. The story has been made available for free. for exactly 24 hours.

Just for today, the 30th of October. And the link is in the show notes. So go ahead, give it a read, and share away with your friends before the counter runs out. I am Akshya from the Ken's Newsroom. Thank you for listening to us. If you like what we do, please rate and review us wherever you get your podcasts.

And now, back to your host, Snigda. Dig a bit deeper into all of this, we decided to examine Zomato's shareholders' letter and results for the quarter that ended in March 2023. Customer delivery charges saw a 14% fall from the previous quarter. From more than 400 crores, it fell to a little more than 350 crores. Zomato also failed to noticeably bring down its delivery cost per order in the year that ended in March 2023.

Now, that explains some of it at least, doesn't it? In the company's public disclosures, Dipendor Goel, Zomato's CEO, was asked a question based on a chart. And I'm quoting this part. The question was, two things stand out from the chart above. A, customer delivery charges have been flat

and B, delivery cost has not reduced much. Why? Here goes Goyell's answer. And I'm quoting. Keeping delivery charges low has been a part of the strategy to drive growth. For example, orders from Zomato Gold members with free delivery benefit now comprise as much as 30% of our total GOV or gross order value. However, the order frequency of these customers has on average increased by 60% post-becoming members. Delivery costs haven't seen significant improvement in the last year in spite of a lot of effort and great work done by the team.

Our efforts to increase the efficiency of our delivery network were reversed to some extent by factors like high inflation, investing in increasing choice of customers by increasing delivery radius, etc. Anyway, we are going to continue trying harder to bring our delivery costs down without impacting the earnings of our delivery partners and are hopeful of making progress over the next few quarters. End quote. So you see, Zomato needs to achieve profitability at the parent company level. That is the goal that it has. And it can do it by making the food delivery business profitable. And what would definitely help is lowering delivery costs. The other way is to quickly

reduce losses in its quick commerce business blanket, which makes up for a majority of Zomato's cash burned right now. Interestingly, after it, a quote, quiet Blinket, Zomato also made some big changes to the delivery partner payouts on Blinket as well. Next, we look at what is going on at Rival Swiggy. Things are a bit different at Swiggy. Unlike Zomato, it does not claim that the full delivery fees goes to the delivery partner. It only tells the users that the delivery fee goes quote unquote fairly to the delivery partners. So it's not even promising that it will transfer.

for the complete delivery fee. The ken looked at four orders from Swigy. The delivery fee charged on all of them was more than what the riders were being paid. The additional rain surge fee of 20 rupees also did not go to the riders fully. Swiggy passed down only 15 rupees. The case is the same for delivery charges

shown to Swiggy I members who get free delivery. Also, unlike Zumato, Swiggy, which delivers more than 1.5 million orders per day also charges two rupees per order as platform fee. Earlier in May, Sri Harsha Majjati, co-founder and CEO of Swiggy, had said that the company's food delivery business had achieved profitability in the quarter that ended in March 20203, while also bringing the benefits to its delivery partners and customers.

While we don't know if that is actually true for customers, but for delivery partners, it is a big question mark. Swiggy's delivery partners have been voicing their concerns about better pay and working conditions ever since the lockdown was lifted. The most recent strike was in Chennai just this May. Shivani sent both Swiggy and Zamato questions about this last Sunday, but so far we've not received any responses. 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 Sharmaa, your host, and today's episode was edited by my colleague Rajiv Sien.