Over the past couple of months Zomato cut payments and incentives of delivery boys by up to 40 percent.
The dark circles under Sukhdev’s eyes because of endless sleepless nights show the perils of staying up through the night to deliver food to customers ordering them online on Zomato, the Gurugram-based food-tech startup.
“For people like us, there are few options… Who wants to work at midnight? There is a problem with joblessness,” Sukhdev, who has studied till Class XII, said. He works at the bank as an office boy during the day. As a part-time Zomato delivery boy, he earned an additional Rs 6,000 every week, but not anymore.
Sukhdev is one the thousands of men who are trying to earn their livelihoods in Delhi, the country’s capital, through contractual gig-economy jobs. Wearing a black helmet and the red Zomato jacket, he starts making deliveries at 7 pm every evening on his Bajaj Pulsar motorcycle. “Deliveries earn us good money…I make more than my day job, but don’t want to leave the bank. Zomato is not a permanent job,” Sukhdev said. He has his reasons to believe so.
Over the last two-three months, the income of Zomato’s delivery boys has dropped by 30-40 percent due to reduction in delivery commission and incentives. For some, the drop is as high as 50 percent.
Even for full-time delivery boys, there has been a significant drop in earning. “I used earlier earn Rs 1,600-1,700 per day, now I make only Rs 1,000-1,100,” said Sandeep Kumar, another delivery boy for Zomato, who didn’t find any other job after he finished his Class X. He had to support his family and had two options: becoming an e-commerce delivery boy or carry parcels of food. He chose the latter. “I can’t carry so much of weight as that of an e-commerce delivery boy,” Kumar said. He has a back problem.
Sukhdev and Kumar represent hordes of underemployed young men who joined food-tech startups like Zomato and Swiggy to deliver food at the doorsteps of India’s growing tech savvy urban middle-class consumer.
As Zomato and Swiggy added more restaurants to their online ordering catalogues, and more orders poured in, the number of delivery boys continued to grow. Food delivery has taken off in in the past two years, thanks to huge investments. In February, Zomato raised $40 million from Glade Brooke Private. In 2018, it raised more than $400 million, which funded the high commissions and incentives for delivery boys to join the platform.
The commissions were high, as much as Rs 60 per order at its peak about a year ago. There were separate log-in incentives, which have now been discontinued. Commission per order has dropped 25 percent to Rs 30 in the past couple of months. Also, the rating-based incentive (of Rs 10 per order) has been changed. Delivery boys earn Rs 50 if consumers give them a five-star rating in at least five out of 10 orders.
The reduction in delivery fees and incentives comes at a time when Zomato is facing multiple challenges in India: it recently handed over pink slips to 10 percent of its workforce because of rising automation in the company, and is also at loggerheads with the National Restaurant Association of India (NRAI) for deep discounting through its loyalty programme Zomato Gold. Deepinder Goyal, CEO and co-founder of Zomato, recently sent out a series of tweets calling for a truce after restaurants started delisting from the platform.
“The same thing happened with Uber drivers,” said Rituparna Chakraborty, Co-Founder & Executive Vice President, TeamLease Services. In the first few years, Uber drivers made close to a lakh every month. That’s down to Rs 20,000-25,000. “After a while, the commissions start getting rationalised. After all, they are utilising the funds of investors, and at some time they will have to start looking at profitability,” Chakraborty explained.
Other experts blame it on the nature of the gig economy, which is not stable. “The biggest challenge of a gig worker is lack of (job) security,” said Gurprriet Siingh is a Senior Client Partner in Korn Ferry, a talent search firm.
Meanwhile, amid falling incomes for delivery boys, Zomato is shifting towards a different payment model, in which a full-time employee can earn up to Rs 20,000 if he completes a minimum number of hours and orders every day, said a company insider. “Payout will be formula-based and standardised, but the minimum wage will vary from city to city depending on numbers of orders, size of the city, number of delivery boys, and other parameters,” the person said.
Without disclosing specifics, a Zomato spokerperson said, “Different metrics such as base pay, user satisfaction, delivery touchpoints, minimum guarantee, etc help us appreciate our delivery partners in accordance with their efforts. Reduced average delivery time (less than 30 minutes) and increased system efficiency have enabled our delivery partners to deliver more in the same amount of time.”
But, Zomato is not the only food-tech company to have slashed rates. Its arch-rival has also started cutting commissions. “Earlier we received Rs 40 per delivery and the distances were short. Now, they pay us Rs 35. For every Rs 400 of commission I make, we earn Rs 100 as an incentive. Now, we deliver more orders to earn the same amount of money,” said Ankit Sharma, a Swiggy delivery boy, who works as a computer and laptop repair mechanic during the day. “If the incentives stop, it won’t be sustainable,” he said.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.
