Amid the standoff between Blinkit, an app-based 10-minute delivery service, and its delivery partners, CapitalMind's Deepak Shenoy has offered a possible solution --"Own the vehicles, employ the riders."
His comments come days after Zomato-owned Blinkit told delivery workers, who have been on a strike against the lowering of payouts, that some of its Gurugram dark stores are being shut down permanently. The move resulted in further protests until on Wednesday when Blinkit reopened the stores.
In a lengthy Twitter thread, the Bengaluru-based CEO explained that quick commerce as a "low-unit-value, low-margin, high-cost delivery" is not a business. "It's like buying an airline. I deliver groceries and look, it helps so many people, but I don't make money," Shenoy wrote. "But if you try to make money, you'll squeeze the delivery people."
Calling the Blinkit worker strike "interesting", he said, "They converted what was supposedly a 'gig', a part-time job, to a full-time occupation. They were complicit in that - ask anyone what it cost to get a 'delivery person' before and after these portals came about."
"The offer was simple: Get yourself a bike and a phone. You'll get orders from us. You collect stuff and deliver it. We pay per order. Do it all day, and you get like Rs. 1000 with the 'incentives'," Deepak Shenoy tweeted. "This 'all day' is the problem - to make the incentives which make the bulk of the real return, people needed to get enough orders. For which they have to wait all day. Otherwise, you get paid Rs 30-Rs 50 per trip, which in many cases just about makes petrol cost."
The CapitalMind boss added that while Blinkit charged Rs 30-50 per trip, the amount was subsidised by the company. "Customers weren't willing to pay, mostly. Platforms would make delivery free after say Rs 299 -- but what are the margins at Rs 299? They need 15 percent margins just to pay for delivery. In retail, 15 percent is god-level. Lucky mortals make 8 percent," he said.
Deepak Shenoy also pointed out that the 10-minute mostly-free delivery orders are mostly of low value. "You order exactly what you need, cos there's no point thinking too much. At Rs 50 delivery fee, you'll plan, order in bulk and reduce transaction velocity. Not good for their metrics."
Read more: Ashneer Grover on Blinkit row: 'Problem is 10-minute delivery has no economics'
Highlighting the problem with delivery executives, he added that what was once a gig is considered by many as a full-time job with several working long hours to make the incentives. And when incentives are cut down to reduce cost to the company, since customers won't pay, the delivery workers will protest.
Admitting that it's a tough business to handle, Shenoy said, "I know this is sacrilege, but the one thing that can change it is: own the vehicles, employ the riders. This gives you the incentive to optimise routes, vehicles, driver wearables, bike storage etc. Currently very little effort beyond a clunky cloth type bag."
"It's much more expensive, of course, to start with. But it means a transition to EV will actually work. It means rider costs can be reduced (hire less when you optimise!)" he added.
Read more: Zomato rises 5% as Blinkit stores reopen after wage protests
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