The three business models of delivery platforms

In recent years, a new form of consumer delivery has developed in urban centers: crowd-delivery, or “crowd delivery”. This is a practice that falls within the scope of initiatives stemming from “crowd-sourcing”. Crowd-delivery by definition consists of freeing up a crowd of individuals to take charge of the final delivery to consumers.

Proposed in urban centers by many start-ups, these initiatives are developed for the distribution of meals (e.g. Deliveroo), for products from large food retailers (e.g. Instacart), or even consumer products within the meaning of large (ex: Postmates).

Such devices are based on the fact that, nowadays, individuals can easily be informed and mobilized through the use of the Internet and smartphones. This new possibility then allows these start-ups to take advantage of the physical and logistical resources of the crowd by using these varied resources (driving force, personal vehicles, public transport, etc.) to make the crowd carry out part of the logistical operations. required in any supply chain: delivery.

What follow-up strategies for crowd-delivery companies?

The rise of crowd-delivery is causing a lot of ink to flow, in particular because of the social models that frequently exploit delivery people. Without neglecting these aspects, we have imposed ourselves more particularly in a research published in the journal Finance Control Strategy the strategies followed by crowd-delivery companies to penetrate the distribution sector. Crowd-delivery seems capable of challenging the competitive balance of the sector by superimposing, in an already complex omnichannel context, a new way of delivering products to consumers.

Some start-ups offering crowd-delivery services have already reached impressive sizes. Instacart has thus gone from a valuation in 2017 to 3.4 billion dollars to 39 billion in 2021! The platform announced in 2019 will mobilize 500,000 the buyers and employer of 5,261 people, it works with 600 distributors representing 45,000 points of sale.

How Instacart works.

As for Postmates, estimated in October 2016 at 460 million dollars, it raised 140 million additional funds to end up being bought in 2020 by Uber for 2.65 billion. In several sectors (hotels with Airbnb, passenger transport with Blablacar, etc.), the emergence of these digital and collaborative players is therefore disruptive.

Crowd-delivery as a logistics service provider

The analysis that we carried out on around thirty cases of crowd-delivery companies reveals three types of business models. The first is for companies to offer distributors a crowd-sourced delivery service to the end consumer. These companies then play the role of logistics service provider, their service aiming to enrich the urban delivery offer of distributors.

We can cite as an example You2you, now Yper, present in more than 5,000 French cities. One of the emblematic companies of this model in France is shopopop, which operates by simple individuals delivering deliveries from mass distribution, specialized distribution, from independent traders, florists, wine merchants, etc. The Nantes-based company, born in 2015, raised 20 million euros in December, it serves half a million customers in France and is expanding in Europe via Italy, Portugal and Belgium to begin with.

This service provider has always remained faithful to the delivery by the crowd and put forward on its site that the the buyers who claims to join it do not need self-employed status. The 300,000 delivery people thus mobilized thus work exclusively within the framework of an income supplement.

The three types of roles played by crowd-delivery companies.

Crowd-delivery as an online urban distributor

The second type of model is presented by companies that offer consumers an online shopping platform that includes a crowd-delivery service. They will act as an online urban distributor, their service aiming to provide consumers in an urban area with the offer of a variety of existing producers/distributors.

We can cite Instacart, which sends the buyers Americans take classes in supermarkets, or of course Deliveroo, which provides access to a range of restaurants from their phone. Here, the individuals who ensure the deliveries are more often auto-entrepreneurs than simple individuals looking for a side job.

It is not uncommon for them to work in parallel for many platforms and their working conditions are often degraded. That said, the model is continuing to expand, attacking medium-sized French cities after the metropolises, as the appetite of consumers for home delivery is already strong, a type reinforced by the Covid period.

Crowd-delivery as the pivot of an integrated offer

The third model concerns companies that market their offer themselves by having it delivered by the crowd. These firms control the design and production of the offer they deliver to customers with the help of the crowd. One example is PopChef, which delivers the meal it makes itself through bike delivery people. This model contains contrasting initiatives.

It is indeed taken over by the “ghost kitchen” or “dark kitchen”, the virtual restaurants which have developed in particular during the confinement based on the limitation of human resources (no service) and the low importance of location to develop their profitability.

Unsurprisingly, while restaurateurs sometimes close their physical outlets to opt for this model, it is often very attractive to the big makers of the previous model who are looking to move up the value chain: it was Deliveroo that launched the first shared kitchen concept for restaurateurs in England in 2017.

The disruptive potential of the online urban retailer

Among these three models, the one with the most disruptive character is undoubtedly that of the online urban distributor. Indeed, the applications implemented by the start-ups to reference and distribute the offer of the distributors, if they allow the latter a visibility and an appreciable increase in sales, are not content to capture part of their margins. The rise of these new intermediaries is likely to cause distributors to lose direct contact with consumers.

Thus, if American consumers continue to use Instacart in large numbers, nothing prevents this player from putting traditional distributors in competition with each other to grant discounts for its users. The danger is all the greater for distributors as crowd-delivery start-ups are no longer anonymous service providers but deploy aggressive marketing (viral communication, promotion of the company’s name on means of transport , etc.). These start-ups strive to be highly visible to individuals: both potential employees (the crowd) and potential customers (of the platform). By advancing in this “masked” way, these companies are reorganizing distribution.

What strategic response from distributors?

However, it is not certain that the companies affected by will come to take the place of the distributors because the latter have become aware of this threat, and seek to avoid the loss of direct privilege with the consumer. The challenge is that their points of sale do not become simple warehouses where the “personal shopper” of the crowd-delivery would draw to meet the demands of their customers.

For this, some develop their own crowd-delivery services, and use, like Walmart, their own employees. Others have bought out a crowd-delivery player, like Monoprix did with epicery.

The American giant Walmart uses its own employees for its crowd-delivery services.
Random Retail/Flickr, CC BY-SA

But for as much this logic of “dark stores” multiplies and worries. One of the challenges is perhaps to play on experiential marketing, in order to make consumers want to visit the physical point of sale! Beyond this point, the other question is related to the weaknesses of their own social model.

Instacart thus saw 31,000 members of its “crowd” initiate collective action against the company’s wage practices, which raised serious questions about the viability – in the long term – of its contractual model.

What regulation of the sector by the public authorities?

While, as we mentioned at the beginning of the article, the social model of these companies is debated, it is clear that their future will depend on the regulations that will or will not be imposed by the States. The observation that we can make today is that there is an urgent need to act to give a real protective framework to the work of delivery people and to promote deliveries that did not have a significant environmental impact.

The public authorities must take their responsibilities, to avoid the drift that we observe: start-ups which do not pay their taxes in France, while capturing part of the value from companies which are deposited there, by using a workforce with very little protection, which in order to deliver quickly tends more and more to mobilize polluting scooters and produces tons of cardboard! In short, a social and ecological disaster to satisfy a hurried and unaccustomed consumer?

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