Deliveroo's collapse in Australia takes the nation's food delivery sector closer towards a monopoly – which could ultimately impact hospitality venues, gig economy workers, and consumers.
Deliveroo's British parent company announced this week that it is exiting the Australian market.
It's subsidiary here has already been put into administration, and orders have been ceased, effective immediately.
The tech app was an intermediary between consumers and hospitality venues to organise the delivery of food, drinks and groceries.
The owner of Flaming Kebabs in Melbourne's western suburbs described Deliveroo as a distant competitor to others in the market, such as Uber Eats.
""I don't know why people used [Deliveroo]," Vulent Gulson told ABC News.
"The drivers were always late, and the food gets cold."
Like Uber Eats, Deliveroo used so-called gig economy riders who did deliveries on a contract basis, without typical employment entitlements.
Deliveroo made money by taking a chunk of the order price off hospitality venues, like bars, corner stores and restaurants, as a commission.
It is estimated 12,000 venues used it for deliveries.
Vulent Gulson said his kebab shop got only $300 worth of orders from Deliveroo a week, compared to around $8,000 worth of orders from Uber Eats.
Mr Gulson said Deliveroo had been paying businesses a bulk sum for orders on Wednesdays.
He hasn't heard yet whether the company will pay him for orders processed in the last few days.
"I don't know yet, we'll just have to wait and see," he said.
A spokesperson for Deliveroo in Australia told ABC News that it is up to the company's administrators to decide how hospitality venues will get money owed.
The company being placed in administration means that creditors will now have to vote on winding down the company, which administrators KordaMentha have said is their priority.
Any entities still owed money will be treated as creditors, which could drag out the process for them to get payouts as the subsidiary's financial state is evaluated.
“Administrators had no alternative but to cease operations immediately in the absence of financial support,” KordaMentha said in a statement.
Down the road from Flaming Kebabs, another shop owner said Deliveroo had been performing so poorly that he had stopped using the app to deliver takeaway a few months ago.
"When you come to our cafe we make the food fresh, they deliver it cold," Hamed Allahyari, who owns Cafe Sunshine, said.
"There were not many customers coming from Deliveroo. In one week, we maybe had two customers."
Deliveroo got out of the German market in 2019, and already this year has quit the Netherlands and Spain.
The speed of its decision to wind up is surprising some in the space.
However, ultimately its decision to exit Australia was understandable to those who study the takeaway gig economy.
Aside from Uber Eats, Deliveroo was also competing with Doordash and MenuLog in Australia.
"Ultimately, the sector is a difficult one where getting up to scale is very important," UNSW Business School Associate Professor Rob Nicholls said.
"Deliveroo was the fourth in a very competitive sector."
In a statement to media, Deliveroo's parent company acknowledged this situation.
"In Australia, the market is highly competitive with four global players, and Deliveroo does not hold a broad base of strong local positions," the British parent company said.
It added that Australian takings overall accounted just 3 per cent of the global company's overall takings.
"This was a difficult decision and not one we have taken lightly," chief operating officer Eric French said in the statement.
What will happen to competition now?
Dr Rob Nicholls said the takeaway food delivery sector is competitive because it operates on high volume to turn a profit.
In a small market such as Australia, that makes taking a slice of the pie can be difficult for multinationals that need to justify investment and operations.
"They're all competing for two things. For restaurants. And for riders," Dr Nicholls said.
"It's one of those sectors where it's a winner takes all or winner takes most area. And you only expect a few to survive. In this case, the first to fall over was Deliveroo."
Dr Nicholls said it is still unclear if the sector can sustain three — Doordash, Uber Eats and MenuLog — or if it will further consolidate towards a duopoly or even a monopoly.
The concern about less competition is that once a so-called consolidation is complete, companies left playing in the market could chase after higher profits by rising prices or margins.
This could mean raising the amount of cash they charge restaurants to use the app, adding extra delivery fees or subscription fees for consumers, or lowering how much they pay contract drivers.
"Going from four to three (companies) means consumers have less choice," Dr Nicholls told ABC News.
"Its not good for consumers. Its not good for restaurants. And its not good for drivers."
Uber Eats declined to comment about Deliveroo's collapse.
In a statement, Doordash and MenuLog both said they were encouraging drivers from Deliveroo who had lost work to come over to their apps.
"Our team is also working to contact restaurants and retailers who have lost business overnight," Doordash said.
What will happen to Deliveroo's drivers?
Rodrigo Burgos is one of the estimated 15,000 drivers who Deliveroo used in Australia.
He said the app suddenly stopped working on the November 15, as the company announced it was leaving Australia.
"I am pretty upset and sad," he told ABC News.
"I am pretty disappointed with the way they have managed this.
"The way they managed this was rude.
"They should have at least given us two weeks notice to help us find another job."
A spokesperson for Deliveroo in Australia told ABC News that it will give its contractor drivers a payout of two weeks pay immediately.
The tailored payout each driver receives will be an average of how much they worked every week for the last 12 months.
Deliveroo's spokesperson said it was also advising the failed subsidiary's administrators to pay out drivers a further two weeks pay – however this decision will ultimately come down to voting by secured creditors.
Mr Burgos said driving for Deliveroo had been his main source of income, and he spent 30 to 40 hours on deliveries for it a week.
The Argentinian migrant said Deliveroo's exit from Australia had left many drivers like him "hanging without jobs suddenly".
Mr Burgos said he had been subsidising driving for Deliveroo with working for other takeaway delivery apps.
"I'll have to spend more time on the other apps," he said.
"It's going to affect all of us in a massive way."
