Introduction had a revenue growth of 611% throughout the

Introduction

Deliveroo presents itself as a ‘British
start-up success story’, according to their own report to the European Commission
(European Commission, 2016). The goal of the firm is to bring great local
restaurants together with individuals who admire this local taste. According to
Will Shu, founder of the company and the first delivery boy, People could only
enjoy delivery meals by famous local restaurants if the restaurant offered
delivery services themselves. He found this a waste and a missed opportunity,
and set as the goal of the company to bring local restaurants and local people
together.

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            This
formula has proven to be a great success. According to the firm’s financial
report, the company had a revenue growth of 611% throughout the year 2016
(Roofoods Ltd, 2016). Furthermore, in the statement to the European Commission
a vast list of cities where the service has also expanded was added, and the
firm is still looking for more and more expansion possibilities.

 

According to the Oxford Dictionary (Oxford
Dictionary), a sharing economy occurs when assets or services are shared
between people, typically through the means of a digital platform. Deliveroo
has positioned itself in the sharing economy as the company connects
restaurants and consumers with each other.

 

            However,
the success of Deliveroo has had great downsides. Deliveroo has created a gig
economy were workers act as independent ‘partners’ for the company. This means
that Deliveroo riders have own responsibility, no minimum wage, no insurance
and no safety net in case something happens to them. There is no government
regulation whatsoever in this system the firm has created. This is causing
clashes between the government, Deliveroo and workers (Zhou, 2017). According
to the Guardian, drivers are pushing for more than minimum wage and they want
to get rid of the term sub-contractors. Deliveroo as a company determines their
wage per kilometre, leaving riders with no bargaining position. In a similar
Uber case about the self-employment system that is also relevant for Deliveroo,
a UK employment board ruled the policy as ‘fictional’, leaving the message that
changes have to be implemented. The defence of Deliveroo against this claim is
that riders do not have a fixed contract and can work for services like
Deliveroo and Uber simultaneously. According to Reuters (Ryan, 2017) the
government is also negatively influenced by the tax returns, as self-employment
is less heavily taxed than regular fixed contracts. Although unemployment
reached an 11-year low in 2017, the government would be better off if these
flexible workers would have a fixed contract.

 

            So,
regulation of Deliveroo’s system is of better interest for both workers and the
government. This means changes in the current policy are bound to occur. These
regulations may have great effect on the firm’s policy. Therefore, the central
question of this essay is:

“To what extent will new laws and
regulations change Deliveroo’s personnel policy and how will this affect their
position in the sharing economy?”

 

            The
research method used in this paper is a literature review. This means that this
paper is compiled of an analysis of multiple academic articles, referring to
the central question.

Theoretical Framework

Descriptive/analytic

According to
Malcolm Sargeant (Sargeant, 2017), Deliveroo describes itself as a
tech business, and not as a delivery company. If Deliveroo would claim the
latter, all riders can be seen as people in service of the company. Now, these
workers are seen as independent self-employed entrepreneurs. This perfectly
connects to the gig economy: a labour market where flexible contracts are
preferred over permanent jobs, according to Oxford Dictionaries. According to
N. Zhou from the Guardian (Zhou, 2017), instead of hiring their own delivery
drivers, restaurants outsource their business to Deliveroo. Restaurants do not
have to set up their own distribution network, and they can lift on the existing
network of Deliveroo. The latter can ask for commission on every delivery, and
can cut on labour costs as riders work as independent self-contracted workers
with a flexible contract. In fact, three actors are present in this system.
Deliveroo is connecting local restaurants with individuals willing to work
under self-employment. According to Van Alstyne, Parker and Choudary (2016), such a system connects four main components with each other.
Deliveroo should be seen as the provider,
a platform where users get their information of. The owners are the ones that own this website and have the legal and
intellectual rights of Deliveroo, in this case. Producers are the ones that provide their services to make the
platform work. In the case of this discussed firm, riders are the producers as
they make it possible for restaurants to get their food to the customers. The
last group is the consumers, those
benefiting from the services that the producers
deliver. This definition is applicable to restaurants as they make
financial offerings to benefit from the services of the riders.

 

The firm’s place
in the sharing economy is that it has become a platform to connect the services
of individuals, with restaurants willing to buy these services. The trade-off
is between services and fees.  

 

Barriers to enter
the platform industry are relatively low as firms like Deliveroo are expanding
very quickly worldwide, so their demand rises and rises. According to Cotton (2016), the supply of labour for Deliveroo has become so plentiful because
it offers an alternative for the stuck market of fixed contracts. The flexible
working form Deliveroo offers sounds like a fairy tale. Workers get to choose
their own times and the barriers to enter the firm are not that high. An
individual just has to be in the possession of a bicycle or scooter, and some
knowledge of the area is required. This system is especially very attractive to
immigrants or individuals who are unsuccessful in finding a new job. According
to Valerio di Stefano (2015), apps like Deliveroo position itself as an app
with minimal support. He finds the existence of the internet the most
fundamental part of the system the firm is using. The internet has made it
possible for Deliveroo to be very successful with offering very limited
technical support. Also, through the internet, the firm was able to keep its
distance from riders. This offers possibilities as Deliveroo does not have to
‘take care’ of them by the means of minimum wage and insurance.

 

According to the
firm’s financial report (Roofoods Ltd, 2016), Deliveroo had a 611% growth in
revenue from 2015 to 2016. However, there was also a 129% loss due to the rapid
expansion of the platform. The success of the platform is clearly noticeable in
the rapid growth. Furthermore, looking at a market analysis of the company
(Mumtaz, n.d.), Deliveroo has attained a big market share in a highly
competitive market, with competition of Uber, Amazon, and Just Eat. However,
the company is still making losses and investments made in the company cannot
be paid back just yet. The firm is also in a legal battle with their riders
about simple labour issues. This could increase their cost burden dramatically
as Deliveroo has the intention to expand to even more countries. The firm’s
situation can change any minute, and the stability of the company is questioned
due to the huge losses. (Roofoods Ltd, 2016)

 

Opinion

Deliveroo has
become a big player in the sharing economy through the recent year. Their
success has opened up a lot of new possibilities for restaurants and unemployed
workers. This development has come with multiple advantages and disadvantages.

 

On the one hand,
Deliveroo has created a platform that promotes collaboration and sharing,
according to Hamari,
Sjöklint, and Ukkonen (2016). The authors also state
that the creation of sharing platforms has boosted the economy as consumption grows
through the existence of services like Deliveroo. Investors are also more keen
to put their money into other start-ups due to the great success of the online
delivery platform. According to Fleming (2017), the rise of the sharing economy
gives people the opportunity to exploit capitalism as much as possible.
Individuals do not have to pay taxes for others, they can pick their own working
hours and they can create their own revenues. Furthermore, according to Koopman,
Mitchell and Thierer (2014), the outsourcing of
delivery to the digital firm allows specialization for both local restaurants
and Deliveroo. The first can focus on improving dishes and services, whilst
delivery riders from the latter can improve their efficiency in doing their own
job. Theoretically, a platform like Deliveroo sounds ideal.

 

On the other hand,
however, the concept of a sharing economy can bring dangers with it, and the
creation of Deliveroo is no exception to this. Stories of Deliveroo or Uber
riders causing accidents appear regularly, according to Zhou N. (2017). The
relationship between a rider and Deliveroo is structured in a way that the
first is completely responsible for all damage suffered. As the worker is
officially self-employed, the company is not associated with this individual in
relation to liability. This means the rider has to carry the burden, whilst the
damaged party is left with empty hands. Furthermore, another disadvantage of
self-employment is the uncertainty that comes with it, according to Fleming
(2017). In the case of Deliveroo, riders are highly dependent on demand. Wages
rise if demand is high, wages lower if not many people are interested in
delivery food. Also, Deliveroo riders are not entitled to sick pay, parental
leave, timely notice in case of employment ending, protection against legal
issues, help in case of emergencies and a payment when the services of a rider
are no longer needed. Self-employed workers earn on average half of an
individual with a fixed contract, and the latter also have a safety net in the
form of insurances, a pension fund and minimum wage. The issue of the firm’s
policy also causes unfair competition. Regular delivery riders working for
restaurants are much more expensive, as they have minimum pay and the right to
certain insurances. These people will be replaced as restaurants outsource their
deliveries to Deliveroo. Another example of legal issues concerning Deliveroo
occurred in Belgium. A company called SMart introduced a solution for the
labour issues the delivery firm had with insurances and minimum wage, according
to a paper by Kilhoffer and Lenaerts (2017). This company offered
workers insurance, in exchange for a share of the percentage riders earned.
However, Deliveroo ended the collaboration with SMart. The ending of the
collaboration came from Deliveroo’s side. They claimed ending the deal was more
profitable for Deliveroo and its riders. Drivers could earn more and they would
still be insured for liability, whilst the firm is looking for a new deal. The
problem here lies with legislation in connection to the sharing economy again,
as it was a one-sided decision from Deliveroo to end the partnership. However,
this is not legal in Belgium, as an employee of a company should always be
involved in this decision-making process.

           

            So,
looking at the upsides and downsides of Deliveroo’s role in the sharing
economy, the platform desperately needs regulation. The state in which the
connector of restaurants and riders is remaining now is not healthy for both
parties. The platform is operating in a grey area of the law according to Zhou
N. (2017). The platform is not breaking any laws as their riders are officially
self-employed. However, workers’ movements are coordinated by Deliveroo, and
riders have no say in the direction of the firm. Therefore, according to local
governments, workers should be registered as Deliveroo employees. After all,
what is a delivery company without any delivery men and women?

 

Research

Looking at the
downsides of Deliveroo’s role in the sharing economy, legislation comes up most
often. The company is operating in a grey area of the law and due to multiple
strikes (Osborne and Farrell, 2016), governments have made the decision to create and enforce regulation
on platforms operating in the sharing economy. Therefore, a fitting research
question would be: To what extent will new laws and regulations change
Deliveroo’s personnel policy and how will this affect their position in the
sharing economy?

 

First, a point
of discussion would be how new laws and regulation for the platform would
affect the multiple actors in this case: the platform, restaurants and
consumers. According to Koopman et al. (2014), regulatory
actions are often intended well but very often have a negative side effect in an
economic sense. An example given in his paper is the colour of taxi cabs in big
cities in the United States like Washington and New York City. Forcing cabs to
have the same colour eliminates the possibility of differentiation, because
every cab looks the same from the outside, making it a homogeneous product.
This reduces competitive rivalry, and taxi drivers have less intention to improve
the quality of their taxi services, as again, all cabs are the same. A
counterproductive effect of regulation on Deliveroo is that it can have a
catastrophical effect on their revenues. According to their financial filings
(Roofoods Ltd. 2016), the firm is still taking losses due to their rapid
expansion and low profit margin. Raising their costs by obliging them to have
official employees with minimum wage and insurances  will only increase their losses.

 

Any limitations
of this study would have to do with the lack of academic articles of Deliveroo
specifically. A suggestion for further research would be along the lines of an
in-depth analysis of Deliveroo. Another limitation is that uncertainty exists
looking at the ‘threat’ of regulation for the firm. A possible subject for
further research would be on the likelihood of government action in response to
developments of the sharing economy.

 

So, considering
a possible hypothesis for the research question, laws and regulations will most
certainly affect Deliveroo’s handlings, but the extent of these effects can
only be seen as these laws and regulations are implemented. Due to low profit
margins and heightened labour costs it is a sure thing changes will be applied
to Deliveroo’s policy. As of their place in the sharing economy, the changing of
the dynamics of the firm’s personnel due to government regulations can have a
drastic impact. Now, Deliveroo has its place as a connection between the
self-employed and restaurants. If the first become part of the firm as
employees, the company is not a connection anymore. Their position would be
debatable.

Conclusion

Deliveroo is a digital platform that serves
as the connection between local restaurants and independent self-employed
riders. The company takes its supplies from the overcrowded labour market and
restaurants willing to differentiate. The firm positions itself as a digital
platform that stands separate from both restaurants and riders. Technical
support is little and the company has little tangible assets. The main
advantage of Deliveroo’s existence is that the system promotes collaboration
and sharing. Furthermore, development of an individual’s own well-being is
highly encouraged through the system. Individuals can make their own working
hours, do not have to pay taxes for others and create their own profit. Last,
through outsourcing courier services to Deliveroo, restaurants can focus on
finetuning their operations, which has a positive side for consumers. However,
the policy of the firm also has its downsides. Self-employed riders carry their
own risks, insurances and have no minimum wage. On average, delivery men and
women earn less than individuals with a fixed contract. Outsourcing to
Deliveroo also brings unfair competition as couriers interested in a fixed
contract are left aside due to the cheaper labour of Deliveroo riders. These
issues prove the company has to be held responsible for some legislative
issues.

 

            The
research question applying to this paper is: “To what extent will new laws and
regulations change Deliveroo’s personnel policy and how will this affect their
place in the sharing economy?” The outcome of the raised questions have
everything to do with labour issues the company has with its riders and the
government. The chosen hypothesis to this question is that there will be
changes in legislation for sure, but the negative effects on the firm can only
be seen as they are implemented. However, it is certain that Deliveroo’s place
in the sharing economy will be affected, as the dynamics between the platform,
riders and local restaurants will change due to these new laws.