Thursday, August 4 2022
  • Milkrun closed one of the biggest raises in Australian history on Thursday, raising $75 million.
  • She’s one of a legion of “instant commerce” companies that market themselves as alternatives to the gig economy, offering their staff permanent jobs.
  • Here’s how startups like Milkrun and Voly make money – and why their model is different.
  • Visit the Business Insider Australia homepage for more stories.

Two things have happened over the past few days that signal an interesting new phase in the growing battle over the gig economy in Australia and beyond.

The first is that Victoria’s Industrial Relations Minister Tim Pallas has announced new draft standards for the gig economy, which would tie platforms like Uber, Deliveroo and Airtasker to new pay transparency measures and a process independent review.

“This Victorian Government initiative will help and support gig and non-salaried workers who often have little bargaining power and sometimes few options to earn a decent income in a precarious and precarious work environment,” Pallas said.

The second was this morning’s announcement that rich young Lister Dany Milham had closed one of the biggest early raises in Australian history for his super-fast delivery startup Milkrun, with $75 million.

Milkrun is one of a legion of companies popping up in metropolitan areas across the country, including Voly and Send, which promise groceries delivered in less than 15 minutes. They use a network of ‘dark stores’ – essentially miniature supermarkets stocked with a more tightly controlled range of goods than you’d find at Coles or Woolworths – and a fleet of cyclists to deliver your groceries to you at lightning speed. flash.

These startups are now vying for dominance in our dense city centers, and if you’re not already using one of them, you’ve no doubt been exposed to their overwhelming advertising blitz over the past few months, or seen their brilliantly equipped riders whistle between the buildings.

Unlike Uber and Deliveroo, these companies do not use the gig economy model. Their riders are employed on full-time, part-time and casual contracts, and receive the benefits one would expect from these arrangements, including paid holiday entitlements, where applicable.

In fact, you’ll quickly find that these bustling startups are keen to present themselves as different from competitors like Uber and DoorDash, which also offer grocery delivery. The fact that they are separate from the gig economy is deeply rooted in marketing.

On its website, Milkrun explicitly states that it is “not part of the gig economy” and that its riders receive time off and a pension. Milham, co-founder of Koala, told the Australian Financial Review he was determined to hire his riders and provide them with benefits for “moral reasons”.

“It’s not the gig economy,” Voly says on his endorsement request form. “Real infrastructure. Real career and development opportunities.

This commitment to providing cyclists with career opportunities and lasting benefits through full-time employment can be, as Milham argues, a true moral choice. The fact that it is so prominent in the marketing blitz also shows that there is an audience for this sort of thing as well – potential employees and customers who find the gig economy model exploitative and would rather not participate. You might even start to think that Uber might take inspiration from Milkrun’s book.

But once you take a look under the hood of these companies, it becomes clear that it’s not so much a moral choice as an entirely wise choice for the model that they have chosen. Despite the fact that the Milkrun and Voly riders appear to be doing more or less the same job as an Uber driver, the Business and Earnings Playbook – inspired by similar businesses in the US and Europe – is actually quite different.

Ddifferent from the gig economy

Here’s how it works for companies like Uber and Deliveroo.

The runners of these companies are flexible “delivery partners” who accept jobs given to them through their applications. This largely involves the delivery of restaurant food, groceries from large supermarkets like Coles and Woolworths, or items from smaller convenience stores. The rider or driver will receive an order and will need to travel to the site, pick up the items and deliver them to their final destination.

The platform will charge businesses a commission on the items ordered and also charge a service fee for the customer. Between these two charges, basically, this is where the delivery platform makes its money.

Riders are paid per order – the more deliveries they make, the more they get paid. But, since they deal with a range of companies supplying all sorts of items, a lot can throw the system off. A restaurant may take longer than expected to prepare dishes, for example, or there may be a stock problem in a supermarket. A rider can end up making two deliveries in an hour or six, depending on a range of factors, many of which are totally beyond their control.

These new lines of startups, inspired by companies like Jokr in the US, work a little differently. They are fully vertically integrated, which means they own all the experience: the applications, the passengers and the goods themselves. Rather than relying on Woolies for supplies, they buy their own products and distribute them in their dark little stores. Each suburb supported by the platform typically has at least one dark store associated with it, meaning any given customer is no more than a few miles away.

Because everything comes from one place and is delivered to nearby customers, there is much less uncertainty. Assuming dark shops stay stocked – and there are enough employees to keep up with demand – a runner can quite reliably make a delivery every 10-15 minutes.

The company can work on this assumption when determining staffing levels and the number of people to hire. The gig economy model of having a flexible workforce that is encouraged to work harder and faster with various incentives, like Uber’s Quest system, wouldn’t quite fit. It makes much more sense to hire these riders on a permanent basis.

Instant delivery companies make money from the markup on items sold. Despite the fancy app and sleek startup vibe, it’s basically the business model of a regular old supermarket. Milkrun has much more in common with Woolworths than with Uber. In fact, it would be very surprising if Australia’s supermarket duopoly didn’t look to its instant trade challengers for pointers – or a possible acquisition.

To look forward

As it stands, the model isn’t actually making money for any of these new players, who are focused on growth rather than profitability. After raising $18 million in seed funding, Voly co-founder Thibault Henry told Business Insider Australia the company doesn’t expect to turn a profit until 2023.

“We have a road to profitability – [it] is very clear, but the goal for the next two months is definitely to grow as quickly as possible,” he said.

There could be challenges on the horizon. The Information reported earlier this month that New York-based instant trade darling Jokr, valued at $1.2 billion on paper, was burning through venture capital at an incredible rate, losing as much as $159. per order in its third month of business in the United States. .

But if these new challengers manage to succeed and find a comfortable price for customers that also translates into profits for the business, they might have found a truly viable model outside of the increasingly gig economy. more controversial.

So while it’s true that these hot new startups have real moral objections to the gig economy, that’s not the only reason they’re hiring their staff more permanently. It just makes sense.

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