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 under the initiatives arising from “crowdsourcing”. Crowd delivery, by definition, consists of using a crowd of individuals to make the final delivery to the consumer.

These initiatives, proposed by many start-ups in urban centers, have been developed for the distribution of meals (e.g. Deliveroo), for products of major food retailers (e.g. Instacart), or even consumer products in the broad sense (e.g. Deliveroo). postmates).

Such devices are based on the fact that today individuals can be easily informed and mobilized through the use of the internet and smartphones. This new connectivity then allows these start-ups to take advantage of the crowd’s physical and logistical resources by using these various resources (propellant, personal vehicles, public transportation, etc.) to make the crowd part of the logistical process. operations required in any supply chain: delivery.

What strategies do crowd delivery companies follow?

The rise of crowd delivery has caused a lot of ink to flow, especially through the social models that often lead to the exploitation of deliverers. Without neglecting these aspects, we were particularly interested in research published in the journal Financial Control Strategy the strategies followed by crowd-delivery companies to penetrate the distribution sector. Crowd delivery appears to be able to test the industry’s competitive balance by introducing a new way of delivering products to consumers in an already complex omnichannel context.

Some start-ups offering crowd delivery services have already reached impressive size. For example, Instacart has gone from a valuation in 2017 to 3.4 billion dollars to 39 billion in 2021! The platform announced 500,000 . to mobilize shopping public and employs 5,261 people, it works with 600 distributors representing 45,000 points of sale.

How Instagram works.

As for Postmates, which was valued at $460 million in October 2016, it has raised an additional 140 million to be bought by Uber in 2020 for $2.65 billion. In various 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

Three types of business models emerged from the analysis we conducted on about thirty cases of crowd delivery companies. The first is that companies offer distributors a crowd-sourced delivery service to the end consumer. These companies then play the role of logistics service provider, their service is aimed at enriching the urban delivery offer of distributors.

As an example we mention You2you, now Yper, present in more than 5,000 French cities. One of the emblematic companies of this model in France is shopopop, which provides mass distribution, specialized distribution, from independent traders, florists, wine merchants, etc. by private individuals. The Nantes-based company, born in 2015, raised 20 million euros in December, serves half a million customers in France and is expanding in Europe via Italy, Portugal and Belgium to start with.

This service provider has always been faithful to the delivery by the crowd and emphasizes on its site that the shopping public those who want to join this do not need an independent status. The 300,000 deliverers thus mobilized therefore work exclusively within the framework of an income allowance.

The three types of roles played by crowd delivery companies.

Crowd delivery as an online city distributor

The second type of model is presented by companies that offer consumers an online shopping platform with a crowd-sourced delivery service. Playing the role of an online urban distributor, their service aims to provide consumers in an urban area with access to the offerings of a variety of existing producers/distributors.

We can quote Instacart, who sends shopping public Americans shop in supermarkets, or of course Deliveroo, which gives access to numerous restaurants from their phones. Here, the people who take care of the deliveries are more often car entrepreneurs than simple people looking for a side job.

It is not uncommon for them to work in parallel for many platforms and their working conditions have often deteriorated. That said, the model continues to expand, attacking mid-sized French cities after the metropolises, as consumers’ appetites for home delivery, already strong, are strengthened by the Covid period.

Crowd delivery as the hub of an integrated offering

The third model involves companies marketing their offerings themselves by having it delivered by the crowd. These companies master the design and production of the offerings they deliver to customers with the help of the crowd. An example is PopChef, which delivers the meals it makes itself via bicycle delivery companies. This model contains contrasting initiatives.

Indeed, it is being taken over by the “haunted kitchen” or “dark kitchen”, virtual restaurants that have developed especially during the incarceration based on the limitation of human resources (no service) and the low importance of the food 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 major makers of the previous model looking for a higher value chain: it was Deliveroo that launched the first shared kitchen concept. for restaurateurs launched in England in 2017.

The disruptive potential of the online urban retailer

Of these three models, the one with the most disruptive character is undoubtedly that of the online city distributor. Indeed, the applications implemented by the start-ups to refer to and disseminate the distributors’ offer, if they provide the latter with a noticeable visibility and an increase in sales, are not content to take part of their margins. The emergence of these new intermediaries is likely to cause distributors to lose direct contact with consumers.

So if US consumers continue to use Instacart in large numbers, nothing will stop this player from competing with traditional distributors to negotiate discounts for its users. The danger is all the greater for distributors as crowd-delivery start-ups are no longer anonymous service providers, but use aggressive marketing (viral communication, promotion of the company 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 making progress in this “masked” way, these companies are reorganizing distribution.

What strategic response from distributors?

However, it is not certain that the companies involved will succeed in taking the place of the distributors, as they have become aware of this threat and try to avoid losing direct links with consumers. The challenge is that their points of sale do not become simple warehouses where the crowd delivery “personal shoppers” would flock to meet the demands of their customers.

Some are developing their own crowd-delivery services for this purpose and, like Walmart, use their own employees. Others have bought out a crowd-delivery player, as 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 all that, this “dark shops” logic is multiplied and disturbing. One of the challenges may be to respond to experience marketing, in order to get the consumer to come to the physical point of sale! Beyond this point, the other question concerns the weaknesses of their own social model.

For example, Instacart saw 31,000 members of its “crowd” launch a class action against the company’s wage practices, raising serious questions about the long-term viability of its contract model.

What regulation of the sector by the government?

While, as we mentioned at the beginning of the article, the social model of these companies is under discussion, it is clear that their future will depend on the regulation that may or may not be imposed by the States. The observation we can make today is that urgent action is needed to provide a real protective framework for the work of delivery drivers and to promote deliveries that do not have a significant environmental impact.

Public authorities must take responsibility to avoid the anomaly we observe: start-ups that do not pay their taxes in France, while acquiring part of the value of companies established there by deploying staff with very little protection, who in fast delivery tends more and more to mobilize polluting scooters and generate tons of cardboard! In short, a social and environmental disaster to satisfy a rushed and unusual consumer?

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