Top of the food chain: Deliveroo and the app economy

Will Shu founded Deliveroo in 2013. Now, rumour has it the company will soon be worth $1bn.

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In the past few years, a new character has appeared on the streets of Britain’s cities. He – it’s usually a he – appears at dusk. He speeds along quietly. The box on his bike bears the distinctive turquoise-and-white logo of a kangaroo. Somewhere along the road, a door opens and city-dwellers get a glimpse into a lamplit, middle-class home before the customer takes his dinner and shuts the door.

Deliveroo, a service that delivers food from its users’ favourite restaurants, is the latest manifestation of the app-based economy. Just pop in your postcode and feast on the choices. But Deliveroo’s real recipe for success is a network of more than 3,000 bike riders and scooter drivers.

Will Shu, the 36-year-old who co-founded Deliveroo in 2013, knows the worlds of both the rider and the customer. As a US expat investment banker working late in Canary Wharf, east London, he dreamed of feasting on his favourite dishes instead of the same Tesco ready-meal every night. As well as being the co-founder of the start-up, he became its first delivery man. He made early sales to fellow bankers, who were amused at the prospect of summoning their friend to their door with food. These days, Deliveroo is reportedly nearing “unicorn” status – a start-up valued at more than $1bn, in industry parlance.

After protests by Deliveroo riders, however, Shu finds himself cast as the fat-cat CEO. The dispute boils down to a new pay plan. Before, riders were paid £7 per hour, plus £1 per delivery. Now, they would be paid £3.75 per delivery, with no hourly rate at all.

A significant number of riders in London turned up to protest at the company’s headquarters. Not only did they fear that they would earn less on the new contract, but they were worried that their earnings would be less predictable, especially in the slow summer months. Anonymous riders began to post stories online of long hours and instability. Deliveroo members of the courier branch of the Independent Workers Union of Great Britain (IWGB) began to strike.

Then politicians joined in. The shadow business secretary Jon Trickett described the new plan as “Victorian”. The government said that Deliveroo should pay workers at least the “National Living Wage” of £7.20 per hour, unless the company could get a court to rule that drivers and riders are self-employed.

In response, Shu launched a charm offensive. He told BBC Radio 4 that the riders were “the lifeblood of our company”. They made roughly £9.20 an hour, he said, and would earn more under the new scheme. It was also only a trial, and riders could choose to be on it. After all, he explained, he knew how demanding the job could be: “I was a rider every single day myself, seven days a week for the first nine months of the company, eight hours a day.”

The union negotiators were unconvinced. According to the IWGB, this “choice” was conditional on workers accepting new delivery areas. There are also concerns about payment outside peak hours.

Even if Shu’s dispute with his workers comes to an amicable end, Deliveroo is just the latest start-up to become embroiled in this kind of furore. Uber, the low-cost taxi service, works on the premise that drivers are self-employed and that the firm simply connects them to customers. In July, the GMB union brought two cases to an employment tribunal to test the firm’s claim that its workers were self-employed. Union research suggests that some Uber workers earn significantly below the minimum wage.

This is not just a problem for fashionable start-ups. Since the 2008 financial crisis, the number of self-employed people in the UK has risen sharply. In May, it stood at 4.8 million, a record high. Though the government presents this as evidence of Britain’s “entrepreneurial spirit”, it is, in fact, a symptom of our new labour market, in which responsibility for profits has been shifted to the employee.

Another legacy of the crisis is depressed wages. Consider what the Deliveroo riders are demanding: the right to be paid roughly the minimum wage per hour. These are not bankers’ wages. Based on the SpareRoom website’s rental index, a Deliveroo driver making one delivery per hour would have to work nearly 74 hours to cover the average UK rent for a single room. It’s no wonder that 90 per cent of them have another job.

Speaking to the BBC, Shu again put himself in his drivers’ shoes. “I know exactly what it’s like,” he said. “I know the hardships.” But when asked what he was paid, he replied: “I didn’t take a salary.”

This is telling. Shu clearly had enough savings from his banking days to support himself through those uncertain months. His decision to throw himself into self-employment came after a stint at business school.

Uncertainty is all the more damaging when you have rent to pay, you don’t earn enough to save, and the chances of falling off your bike in traffic are much higher than those of becoming a top-of-the-food-chain CEO. Shu has already changed the street life of the UK’s cities and spiced up urban dinners. In resolving this dispute, he has the power to change his riders’ lives, too. 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

This article first appeared in the 18 August 2016 issue of the New Statesman, Corbyn’s revenge