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Contractor vs employee cost comparison for grocery courier services?


Ex-head of strategy at on-demand giant

Guest: Usually, food on-demand fulfillment cost is somewhere between £3.5 -  £4.5 for, I think, the bigger players, which means you will need a higher basket size on a high end of delivery fee to adjust this as a blended fee.

For hyper-local grocery delivery, on a per order basis probably burned a lot of money right now. They also have these people as full-time couriers, a few of the companies have that and a few workers on the gig economy system. The unit economics of the industry is not standardized anywhere at this point.

It's not a gig economy system. They have X number of employees that are doing deliveries. It's slightly different from what happens with Uber eats, where they have contract workers doing delivery. A lot of these dark stores are hiring couriers as full-time employees because they want to have more control over the entire supply chain because they're trying to promise standard 15 minute delivery time.

It's too early to determine whether it's a good idea or not. At least two or three of the players that I know have full-time employees. If you look at, Getir, for example, even their bikes to get to your bikes are actually branded. That is the direction that that space seems to be going in. I don't know if that's there to stay or how that's going to change the gig economy system.

In the gig economy system, the number of orders or the highest amount of frequency in an hour or an hour with higher efficiency, we'll keep the cost base low because he's a gig economy worker, which technically means that, if I'm doing two orders per hour, if I had to fulfill an hourly wage as a benchmark, I essentially, need lesser income than if I'm doing one. On the other side, when you're looking at a fulfillment logistics that is completely owned, then you're essentially kind of like you're looking at a fixed wage, or an hourly wage, which is not something that scales up and down. So the more orders you get in, the more efficient you can be. You can start building batching. You can do a bunch of things after that which is very far away for this space.

I think essentially at this point, it's fairly safe to assume that the actual footprint of order fulfillment or the average cost of order fulfillment, is basically extremely higher at this point because your actual number of orders is very low. So you can't get those economies of scale that you get on a per order basis.

Find this answer in Former head of strategy at a global on-demand giant on the economics of grocery delivery
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