February 2017
Over summer I was lucky enough to spend some time travelling outside
Australia. I was struck by how many of the businesses that are part of my
daily life are global enterprises.
From clothing retailers to tea shops - turn a corner in a major city and
you'll probably see some of the same stores you see at home.
This was even more obvious with online businesses. Over the last year I'd
started to see bicycle couriers for new food delivery services like
Deliveroo and Foodora on my local streets and assumed they were local
innovations. But it turns out that they're multinational operations,
dispatching delivery riders in snowy conditions on the other side of the
world. Even the home-grown option, Menulog, is now owned by a British
rival.
And this got me thinking about what this means for consumers.
CHOICE has supported the emergence of new business models that find new
ways of meeting consumers' needs in established industries.
In the transport industry, new ridesharing services have given consumers
more choice and forced the taxi industry to improve its online booking
services.
When it comes to food, meal delivery services have made it easier to find a
local restaurant that delivers the cuisine you want, and order and pay
online. There are also benefits for restaurants, which have instant access
to an income stream that was harder to build in the past.
But if the global market for meal delivery services – a relatively new type
of business – is already dominated by a few major players, this gives them
a huge amount of power.
They can dictate the fees they charge to both restaurants (who can't afford
not to be listed) and to consumers (who'll have few other options as
restaurants abandon their own direct delivery services).
They can also dictate the terms for cyclists and delivery drivers, who are
mostly engaged as 'freelancers', with no award rates, superannuation or
leave entitlements.
There are similar risks with Uber, which established its virtual monopoly
in ridesharing services in Australia before cutting the amounts paid to
drivers.
It is too early to say whether these risks warrant intervention. Many of
them will hopefully be sorted out by the market itself, as new models
emerge that offer better terms, and consumers and workers respond.
But if we don't see that happen, we'll need to ask whether some players are
too big to be good. Just as we're concerned about market power in big
traditional industries, we need to be alert to the risk of excessive market
power in new and emerging sectors.
Alan Kirkland, CHOICE CEO
Email: alan@choice.com.au
Twitter: @AlanKirkland
