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Delivery food for thought

Deliveroo, Foodora, Menulog – your local meal delivery service may already be a big, multinational cheese.

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
Twitter: @AlanKirkland