As food delivery aggregators feel the macroeconomic pressures, some are responding with major layoffs.
Just Eat Takeaway’s United Kingdom arm, for its part, is gearing up to let go of 1,700 of its courier employees, part of a move to return to a gig worker model wherein drivers are self-employed contractors, as The Guardian reported Tuesday (March 21). Additionally, the aggregator is letting go of 170 employees at its head office, with the majority of these layoffs also affecting the company’s U.K. business.
“Just Eat U.K. is reorganizing and simplifying its delivery operation as part of the ongoing goal of improving efficiency,” a spokesperson for the company commented. “As part of this process we have proposed to transition away from the worker model for couriers, which is a small part of our overall delivery operations – running in certain parts of six U.K. cities. There will be no impact to the service provided to partners and customers.”
The move comes at a time when inflationary pressures are prompting many consumers to rethink their spending, making it harder to justify, say, the added fees and other costs associated with the delivery channel, if the U.S. population is any indication. Data from the February edition of PYMNTS’ Connected Dining study, “Connected Dining: Rising Costs Push Consumers Toward Pickup,” which draws from a census-balanced panel of more than 2,100 U.S. consumers, reveals that in the face of inflation, nearly half of all consumers (48%) have been more likely to pick their restaurant orders up themselves rather than have them delivered.
Consequently, aggregators, which rely on consumers’ willingness to spring for delivery to make the model work, are seeking ways to reduce their expenses. For instance, Just Eat U.K. rival Deliveroo announced last month that it is laying off 9% of its global workforce due to economic challenges, with approximately 350 expected to be affected. CEO Will Shu added that the company expects the final tally to be closer to 300 once redeployments are accounted for.
These cost-cutting measures are having the desired effect. The company reported in its full-year 2022 financial results Thursday (March 16) that it beating its prior estimates in its efforts to reach profitability.
“We’ve made excellent progress in our path to profitability. We delivered positive adjusted EBITDA in the second half of 2022,” CEO Will Shu told analysts on a call. “We said we would do this in second half 2023 or first half 2024. So, well ahead of schedule. We’re really, really proud of this.”
Just Eat Takeaway, for its part, has been in some turmoil in recent months. Earlier this month, the company announced that Grubhub CEO Adam DeWitt is stepping down at the start of May and that Howard Migdal, CEO of Just Eat’s Canada-based aggregator SkipTheDishes, will take over the role, also gaining the title of executive vice president of North America for the parent company. Additionally, the aggregator shared in a presentation accompanying its earnings report a few weeks ago that orders fell 10% year over year in the U.K. and Ireland in 2022.
Overall, the delivery market in the U.K. is more favorable than in other countries. The U.K. edition of PYMNTS’ “Global Digital Shopping Playbook,” which draws from surveys of more than 13,000 consumers across Australia, Brazil, Mexico, the UAE, the U.K. and the U.S, reveals that British eCommerce shoppers’ preference for getting purchases delivered directly to their homes was 10% higher than the 71% average across all six countries surveyed.