The three business models for 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 framework of “crowd-sourcing” initiatives. Crowd delivery by definition consists of using a crowd of individuals to take responsibility for the final delivery to consumers.

Proposed in city centers by many start-ups, these initiatives have been developed for distribution of meals (e.g. Deliveroo), to products from major food retailers (e.g. Instacart), or even consumer products in the broad sense (ex: postmates).

Such devices are based on the fact that individuals today can be easily informed and mobilized through the use of the Internet and smartphones. This new connection then allows these start-ups to take advantage of the volume of physical and logistical resources by using these various resources (propulsion, personal vehicles, public transport, etc.) to get the volume to perform some of the logistical operations required. in any supply chain: delivery.

What strategies do crowd-delivery companies follow?

The increase in crowd delivery is causing a lot of ink to flow, especially due to the social models that often lead to the exploitation of delivery people. Without neglecting these aspects, we were particularly interested in research published in the journal Financial management strategy the strategies followed by crowd-pleasing companies to penetrate the distribution sector. Crowd delivery seems to be able to challenge the competitive balance of the sector by superimposing an already complex omnichannel context a new way of delivering products to consumers.

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

How Instacart works.

In terms of Postmates, estimated in October 2016 at $ 460 million, it raised $ 140 million additional funds to end up being purchased 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 we performed on about 30 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 providing logistics services, and their service aims to enrich distributors’ urban delivery services.

We can mention 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 supplies from mass distribution, specialized distribution, from independent dealers, florists, wine merchants, etc., from private individuals. 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 been true to the crowd, and highlights on its website that traders who want to join do not need the status of self-employed. 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-pleasing companies.

Crowd delivery as an online city distributor

The second type of model is presented by companies that offer consumers an online shopping platform that includes a crowd-sourced delivery service. They play the role of an online urban distributor, and their service aims to give consumers in an urban area access to the offer from a number of existing manufacturers / distributors.

We can quote Instacart, which sends traders Americans to shop in supermarkets, or of course Deliveroo, which provides access to a variety of restaurants from their phone. Here, the people who secure the supplies are more often auto entrepreneurs than simple people looking for a side job.

It is not uncommon for them to work in parallel on many platforms, and their working conditions are often degraded. That said, the model continues to expand and attack mid-sized French cities after the metropolises, as consumers’ appetite for home delivery, which is already strong, has strengthened from the Covid period.

Crowd delivery as the focal point of an integrated offering

The third model concerns companies that market their offers themselves by having it delivered by the crowd. These companies control the design and production of the offer they provide to the customers using the quantity. An example is PopChef, which delivers the meals it makes itself through bicycle dispensers. This model contains opposing initiatives.

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

Not surprisingly, while restaurateurs sometimes close their physical stores to choose this model, it is often very attractive to the major manufacturers of the previous model who want to move up the value chain: It was Deliveroo that launched the first communal 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 the online city distributor’s. The applications that start-ups implement to reference and distribute the distributors’ offerings, if they give the latter a noticeable visibility and an increase in sales, are not satisfied with capturing part of their profits. 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 putting traditional distributors in competition with each other to negotiate discounts for its users. The danger is all the greater for distributors, as start-up crowd-delivery companies 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 advancing in this “masked” way, these companies are reorganizing distribution.

What strategic response from distributors?

However, it is not certain that the companies in question will succeed in taking the place of distributors because they have become aware of this threat and are trying to avoid the loss of direct connections to the consumer. The challenge is that their outlets do not become simple department stores where the “personal shoppers” of the crowd delivery would pull in 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 a crowd-delivery player, just 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 in spite of all this, this logic of “dark shops” is manifold and worrying. Perhaps one of the challenges is to play on experience-based marketing, to make consumers want to visit the physical point of sale! Beyond this point, the second question concerns the weaknesses of their own social model.

Instacart has thus seen 31,000 members of its “crowd” initiate a class action lawsuit against the company’s pay practice, which raises serious questions about the viability – in the long run – 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 the subject of debate, it is clear that their future will depend on the rules that will or will not be imposed by the states. The observation we can make today is that there is an urgent need to act to provide a real protective framework for the work of delivery people and to promote deliveries that do not have a significant environmental impact.

Public authorities must take responsibility for avoiding the slippage that we observe: start-ups that do not pay their taxes in France while deriving some of the value from companies established there, by using a workforce with very little protection, as in To be able to deliver fast tends more and more to mobilize polluting scooters and generate tons of cardboard! In short, a social and ecological disaster to satisfy a hasty and unfamiliar consumer?

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