00:00:00
When was the last time you wanted delivery
and you actually called a restaurant
00:00:03
to place your order?
00:00:03
It's probably been a while, and it's
thanks to apps
00:00:05
like Grubhub, UberEats, and DoorDash.
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So if a few apps have totally changed
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the delivery marketplace,
they must be making bank right?
00:00:13
Their revenue is in the hundreds
of billions.
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Investors have poured billions into them.
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But none of these apps
have ever been profitable.
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They have a few problems
a complex business model, low margins.
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But their biggest problem is
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that they've never really figured out
how to pay their labor.
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And they've been experimenting a lot
with that.
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So much
that governments have had to intervene. So
00:00:33
all of these problems raised the question
can these apps, in their current form
00:00:38
exist for much longer?
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So yeah, I've been reading up
on financial statements and legislation,
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but there was no way I was going
to make a video about food delivery
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without actually delivering some food.
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Oh, So chaotic.
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Derek, I'm doing my best.
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I'm really jealous of your lunch.
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Are my tires flat? No.
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Making an app for people to order food
delivery might seem pretty simple, but
00:01:09
in reality, all the pieces that the apps
are trying to balance are pretty complex.
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These apps work within a four sided
marketplace of the apps, restaurants,
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deliveries, and finally,
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the customers and the apps control
each aspect of the marketplace.
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Historically, they just took a loss
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and made sure everyone else got paid
while they focused on growth.
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Here's how one order broke down in 2019.
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As best as we can figure out, because
they don't release the stuff publicly.
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When a driver got paid from DoorDash,
49.4% came from the base pay,
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which is the flat amount they're
guaranteed when accepting an order.
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12.3% came from bonuses
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and 38.4% came from the customer
to pay for Uber Eats, drivers got 71.7%
00:01:45
from base pay, 7.5% from bonuses and 20.9%
from the customer tip.
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The apps have a few levers they can pull
to get closer to profitability.
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They can charge the restaurants more,
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but restaurants already
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have such thin margins that they might not
want to keep selling on the apps.
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And some restaurants are already
inflating their menu prices
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on the apps to make up for the costs.
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They could charge customers more,
but people are already fed up
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with how much the apps cost,
and they could pay themselves less,
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but they're already not making a profit,
so that seems unlikely.
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So that leaves just one
side of the marketplace, the deliverers.
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All right. I just got to my first order.
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it's somewhere right over here.
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Does that work?
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Now I have to take a picture.
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Beautiful.
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Thank you so much.
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Derek, I'm doing my best with your lunch.
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I'm so sorry.
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It says we're supposed to deliver
within three minutes,
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which is never going to happen.
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No wonder, like,
your DoorDash order is always late.
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This is why it's incredible
that it's ever been on time.
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And I'm earning $5.75 for this.
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Just so we're all aware.
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All right.
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We just got to Derek's.
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We are currently 11 minutes late.
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Hi, I have a DoorDash order for Derek.
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Thank you.
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The reason that the apps are able
to get so creative with how they pay
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their employees is that they're not
actually classified as employees.
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Legally, they're contractors.
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Gig workers, 51% of their income on every delivery on
average is coming from the customer.
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That is Ryan Green.
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He's the CEO of Grid Wise, a companion
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app for gig workers that collects data
so they can maximize their earnings.
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The consumers are being relied on
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to actually front the pay
for the gig worker more than ever before.
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The apps wanted to lower cost
by paying workers less,
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but they didn't want to lose workers,
so they started encouraging customers
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to tip more so the workers wouldn't
see as much of a drop in pay.
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Here's how the pay breaks down before
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and after the changes for DoorDash
based pay decreased to 48.2%.
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Customer tips increased to make up
51.8% of drivers total pay.
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Uber Eats had an even bigger
jump in customer tips, jumping almost 30%.
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So now drivers are getting pay.
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That's
highly variable and dependent on tips,
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but how does that compare to
what the apps promised?
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We see how, like Uber, Grubhub,
continuously recruit
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and have a strong marketing campaign
to sell the perception that look,
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these are easy, accessible jobs.
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That's Ligia Guallpa.
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She's the executive director of the Workers
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Justice Project, which advocates
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for the city's gig workers,
domestic workers and construction workers.
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What these companies failed to inform
and communicate to workers
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is that these are jobs that do not offer
the flexibility that they promised.
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With the companies
advertised to potential deliverers.
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Is being able to work on your own time
at your own pace.
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But Ligia says in practice,
that's not how it works.
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Companies is incentivizing workers
to drive faster,
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to do more deliveries, to work more hours.
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Another piece of these labor issues,
especially in New York,
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is that many of these workers
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are working illegally as they wait
to obtain a work permit in the US.
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One of those immigrants
working on an illegally rented Uber Eats
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account is Mayco Milano an immigrant
from Venezuela who's been delivering
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food in New York City
since he arrived almost a year ago.
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Renting the account
means he actually earns
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even less money because he has to pay
the person who actually owns the account.
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A woman named Jessica. Mayco is hardly alone.
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He told us that he started working in food
delivery because his friends told him
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it's the only job you can work
without having a work permit.
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And the apps are aware of this,
a senior policy manager at Uber
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told The New York Times.
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Uber supports open access to work,
but we have processes in place
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to help prevent and take action
on fraudulent behavior on Uber's platform,
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and will take additional steps
if warranted.
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So these apps already weren't profitable.
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They have a s*#t show of labor issues
with figuring out pay, trying
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to live up to promises, dealing
with workers renting out accounts.
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And then the government showed up.
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More on that later.
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Got another order.
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It's time to go.
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I have a DoorDash order for John.
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Thanks.
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This one was an easier pickup
than the last one for sure.
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All right, we're supposed to deliver
within six minutes.
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It says take a seven minutes to get there.
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We are doing pretty good
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on time here.
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All right,
John is rich.
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If John doesn't tip.
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Thank you John!
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I'm sorry for everything I said
about maybe you weren't going to tip.
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You did. Thank you.
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Late last year, New York City
became the first place in the country
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to implement
a minimum wage for delivery drivers.
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But that's not per hour.
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Its per active hour, which,
according to DoorDash, is
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from when I accept an order to when
that order is dropped off.
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So all this time that I'm biking
back to the order hot spot
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or waiting around for an order, I'm
not actually being paid.
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Even though I am doing something
that is crucial to the job
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so the don't have to pay
this wage up front.
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But if at the end of a pay period, my
earnings during those active hours isn't
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at least that minimum, then the companies
adjust my pay and make up the difference.
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Despite this asterisk
and how hours are counted,
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the new law has benefited
delivery drivers.
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We have seen how workers are making
anything between 20 to 50% more.
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The apps claimed that the law
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would force them to serve less areas
and affect customers and restaurants.
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So they fought the minimum wage
hard in court and appealed it.
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And once it was in place,
the made big changes in response.
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We're seeing companies
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who are retaliating, making it harder
for workers to receive tips.
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Here's the easiest way
to see what the apps have done
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in response to the new minimum wage.
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I'm placing identical orders,
but one is in New York City
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and one is in Oklahoma,
where DoorDash hasn't changed anything.
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We're using DoorDash
because it's biggest delivery
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app, and Oklahoma
because my sister lives there
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and I just needed somewhere
to send this food.
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Ignoring the difference in meal price,
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which is just cost of living,
there's a lot that the app has changed.
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It explicitly says that they removed
the option to pre-tip in response
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to the new law.
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While over here
we have a tip automatically selected
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and messaging
that says why tips are important.
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New York
also has this regulatory response fee,
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which is just passing the cost of the new
law onto you.
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The customers.
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Now that a dasher has been assigned,
I can tip on the New York order,
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but I don't normally reopen the app
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after I've ordered,
so I don't know that I would see this.
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Also, this little ad tip
button is so small and once I do click it,
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the auto options are lower than
the Oklahoma ones relative to order cost.
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It also only lets me tip once per order,
whereas the Oklahoma order.
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I can add more of a tip later
if I want to.
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It's a tale as old as time.
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A well-intentioned new government
rule causes businesses
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to change their practices, which creates
a whole mess of new issues and questions.
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This while also brings up the matter of
independent contractors versus employees.
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Delivery workers here are still classified
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as independent contractors,
just with extra minimum pay guarantees,
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but the idea of reclassification
as employees
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and guaranteeing a minimum wage
is spreading throughout the gig economy.
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Wisconsin, Minnesota, Massachusetts
and California have all recently
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considered laws around the classification
of gig workers, as employees,
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and several other states have considered
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or implemented extra protections
and minimum pay for gig workers.
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There's even a new federal law
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around gig worker classification that
businesses are fighting hard. For the apps.
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All of this just means more hurdles
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to profitability
and continuing day to day operations.
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So realistically,
where do the apps go from here?
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The more that you can batch orders,
then you're able to actually make
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the economics work more favorably.
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Even exploring batching across category,
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picking up a food delivery order
and then maybe an e-commerce
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order and batching those together
and delivering them out.
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Ryan also says that the big growth
and money this year will be in the grocery
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delivery space, because those orders
are much easier logistically.
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DoorDash is investing heavily in grocery
delivery now,
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so everyone's coming in and Instacart
and coming to Walmart Spark.
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The apps have another idea.
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Almost all of them have launched
subscription services,
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which is the favorite tactic
among almost all companies
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looking to make their income
a little more predictable.
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And of course, they're trying to cut out
the piece that's making this also hard.
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The labor DoorDash is trying
drone delivery on a small scale for now.
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Uber Eats just started
using self-driving cars to deliver,
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and Walmart is expanding its drone
reach for grocery delivery.
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We just got an $8 order guaranteed.
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No tip.
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All right,
we're going to seventh Street Burger.
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This sucks because I'm so hungry.
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Thank you.
00:10:08
Danielle, your lunch is coming.
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It's so close. It's a three minute bite.
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Oh no. It's because there's two pickups.
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Now we have to go get Levain.
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Danielle, you need dessert.
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All right. Fine.
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We'll go to Levain. Danielle.
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Danielle, I'm here.
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Done.
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Finished.
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All right.
00:10:34
I'm headed back to the office
now. That was a crazy hard day.
00:10:37
This job is so fast paced.
00:10:38
You're running around, you're
trying to find the order at a restaurant,
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then you're at someone's apartment.
00:10:42
You're trying to figure out where
the elevator is, how to get upstairs.
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You know, you're talking to the doorman,
you're navigating office.
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It's a lot of work.
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I'm definitely rethinking.
00:10:50
Every time I made the DoorDash driver
come up instead of
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going to meet them downstairs,
which would be much more helpful.
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I'm rethinking every time.
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I didn't tip as much
because the order was late,
00:11:00
because that is realistically
out of their control a lot of the time.
00:11:03
Also, I definitely
did not make the minimum wage today,
00:11:06
so DoorDash is going to have to adjust
my pay later.
00:11:08
The food delivery industry
00:11:09
is still relatively young,
but it's in a very tough spot right now.
00:11:13
They've still never been profitable,
and have there ever present labor issues,
00:11:16
and now they have to figure out
how to work with these laws,
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requiring them to change their business
practices and pay their labor more.
00:11:22
Whatever the path forward is
for these apps,
00:11:24
they have a long way
to go to become profitable.
00:11:26
That is, unless they can replace their
entire labor with robots fast enough.
