Why Deliveroo is leaving Australia? What happened to its market? Explained

Deliveroo, a British food delivery service, terminated its Australian operation on Wednesday, citing a challenging economic climate as customers reduced their takeout orders as costs increased. Let’s see Why Deliveroo is leaving Australia in detail.

Why Deliveroo is leaving Australia?

Deliveroo said the market was extremely competitive and the business did not maintain a broad foundation of strong local locations. Rivals include American powerhouse DoorDash and Uber Eats, among others.

According to the company, the Australian division contributed about 3% of Deliveroo’s overall gross transaction value (GTV) in the first half of the year.

The business said in an email to customers on Wednesday that it had made the “sad announcement” to cease operations in Australia and had appointed KordaMentha as administrators.

KordaMentha said in a statement,

“Administrators had no alternative but to cease operations immediately in the absence of financial support.”

Because the firm has been placed in administration, creditors will now have to decide whether to wind it down, which administrators KordaMentha have stated is their priority.

Any outstanding debtors will be classified as creditors, which may delay payment until the subsidiary’s financial health is assessed.

The company said,

“This has been a difficult decision to make.” 

“Deliveroo, like all other companies, is now doing business in challenging economic conditions, which requires us to take difficult decisions. We always aim to deliver the best possible service for our consumers wherever we operate, and if we cannot do that we will be prepared to review our position.”

The company said it had concluded that

“achieving a sustainable position of leadership in the market is not possible without a disproportionate level of investment which would have highly uncertain returns”.

Chief operating officer Eric French said in a statement,

“This was a difficult decision and not one we have taken lightly.” 

“Our focus is now on making sure our employees, riders and partners are supported throughout this process.”

According to French, the business concluded that significant financial investment was necessary to operate at a sustainable and profitable size in Australia.

Deliveroo Australia Pty Limited, a local subsidiary, had been placed under voluntary administration and would soon permanently stop operations, the firm announced in a statement.

Deliveroo’s Market

Along with Uber Eats, Menulog, HungryPanda, and DoorDash, Deliveroo was one of several food delivery services available in Australia.

Deliveroo declared that while it will no longer accept orders through the app.

On Wednesday, consumers who attempted to place an order in the app were met with an error message.

As a commission, Deliveroo took a portion of the order price from hospitality establishments like bars, convenience stores, and restaurants. 12,000 locations reportedly used it for deliveries.

Deliveroo left the German market in 2019 and has already left the Netherlands and Spain this year. Some people in the area are surprised by how quickly it made its decision to wind up.

However, those who research the takeout gig economy could finally understand its choice to leave Australia. Deliveroo faced competition in Australia from Doordash and MenuLog in addition to Uber Eats.

Shop owner’s statement

Deliveroo, according to Vulent Gulson, the proprietor of Flaming Kebabs in Melbourne’s western suburbs, is only a minor rival to other players in the space like Uber Eats.

Vulent Gulson told ABC News,

“I don’t know why people used [Deliveroo],”

“The drivers were always late, and the food gets cold.”

According to Vulent Gulson, his kebab shop received about $300 worth of Deliveroo orders each week, as opposed to over $8,000 worth of orders from Uber Eats.

According to Mr. Gulson, Deliveroo has begun giving businesses a lump payment on Wednesdays for orders. He still doesn’t know if the business would pay him for orders filled in the last few days.

He replied,

“I don’t know yet, we’ll just have to wait and see.”

Another business owner nearby Flaming Kebabs claimed that Deliveroo’s performance had been so bad that he had stopped using the service to deliver takeout a few months ago.

Hamed Allahyari, who owns Cafe Sunshine, said,

“When you come to our cafe we make the food fresh, they deliver it cold,”

“There were not many customers coming from Deliveroo. In one week, we maybe had two customers.”

What happened to Deliveroo workers?

After Deliveroo abruptly left Australia overnight, business owners and delivery riders are rushing to find a replacement.

Due to the difficult economic climate, experts warn that Deliveroo’s closure could be the beginning of other food delivery firms going out of business.

In addition, delivery prices may increase to make the industry more viable. The company’s app no longer works, and its website was erased overnight.

Riders claimed they received no notification of the company’s closure plans.

Worker’s statement

Rodrigo, a Deliveroo rider said,

“I was working in the morning, stopping at midday and then suddenly when I wanted to start working again, this notification pops up on the screen of the app,”

“And I went to the emails [to] check [and they said] that they cease immediately, effective immediately . So I couldn’t even finish the day yesterday.”

While studying in Australia, Rodrigo worked for Deliveroo out of Sydney for roughly 30 hours a week, sending money back to Argentina to support his daughters.

However, Deliveroo promised better money, therefore he would now be looking for other jobs. He stated that he would try to gain more work with other applications.

Based on their annual earnings, the corporation certified that the employees would be qualified for four weeks of remuneration.

However, Dr. Rob Nicholls, an associate professor at UNSW Sydney, claimed that delivery employees might be the ones to suffer the most from the company’s shutdown.

Dr. Rob Nicholls said,

“No restaurant is going to say ‘well, if Deliveroo is out of the game, we’ll stop using a delivery service’,” 

“They’ll shift to one of the other big three services almost certainly.”

TWU’s statement

A member of the Transport Workers’ Union, Rodrigo expressed his hope that the federal government will strengthen the rights of gig workers.

“We’ve been fighting so hard against these kinds of companies … They are exploiting us and they are not treating us like workers. So we don’t have rights. We don’t have any benefits … nothing at all. We are not even considered workers for them.”

On Wednesday, the TWU declared that it was urgently seeking a meeting with Deliveroo’s executives to discuss the closure’s effects.

The union claimed that Deliveroo had been the “outlier” in the sector and had been against changes to worker standards that Uber and DoorDash had supported.

The union’s national secretary, Michael Kaine, said on Wednesday,

“Deliveroo’s sudden and cowardly act, treating workers as callously in exit as it did in operation, highlights the urgent need for the federal government to enact gig reform,” 

“Transport workers were hit first and hardest by the gig tsunami and are now being left high and dry by Deliveroo at the first indication that it can’t rely on exploitation to make profits.”

Government’s Promise

Australia-wide governments are working harder to control the sector. According to a pledge made by the federal government, “employee-like kinds of labor” will be subject to minimum wage and working conditions directives made by the Fair Work Commission.

Janet Rice, a spokeswoman for the Greens on social services, claimed that the closure will leave many people without a source of income, many of whom are ineligible for Jobseeker, demonstrating the need for a guaranteed living income.


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