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Deliveroo eyeing Netherlands exit as losses and challenges grow

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Another European market exit looks to be on the cards for UK-based on-demand food delivery startup, Deliveroo, which says it’s consulting on shutting down its service in the Netherlands.

The platform’s service footprint currently spans 11 markets — namely: Australia, Belgium, France, Hong Kong, Italy, Ireland, the Netherlands, Singapore, United Arab Emirates, Kuwait and the UK. But that could soon be reduced to ten.

In a half yearly financial report to investors, Deliveroo said the Netherlands represents less than 1% of its gross transaction value for the first half of 2022 — and that it would, essentially, cost it too much to try to increase usage in the market to boost its positioning.

“The Company has determined that it would require a disproportionate level of investment, with uncertain returns, to reach and sustain a top tier market position, and therefore has decided to consult on ending its operations in the Netherlands,” it writes, adding: “Deliveroo anticipates that the consultation process with relevant stakeholders will commence in August and is working towards a potential date for the final day of operations in the Netherlands towards the end of November.”

Asked about the potential exit, a Deliveroo spokeswoman also told TechCrunch:

“We have announced our intention to consult on proposals to leave the Netherlands and will shortly commence a process of consultation with relevant stakeholders. We are working towards a potential date for the final day of operations towards the end of November. This is not a decision we have taken lightly and we want to thank all of our employees and riders, who will be supported throughout this consultation process.”

There are growing headwinds (some might say mighty gales) for on-demand platforms with the economic downturn and crippling inflation biting into consumer demand for the kind of extraneous app-based delivery convenience they’ve been built to encourage — whether for a hot meal or grocery deliveries (and food price inflation doesn’t help either).

Unsurprisingly, as Reuters reports, Deliveroo’s losses widened in the first half of the year — with the company reporting a pretax loss of £147M ($177M) vs £95M ($115M) lost a year ago.

Many gig platforms also face growing regulatory challenges on the labor rights front, especially in Europe, with lawmakers turning their attention to bolstering protections for precarious workers who, typically, face micromanagement by algorithm without being provided with the full safety net of employment rights.

European Union lawmakers are debating a platform worker regulation — presented last December by the Commission — that’s targeted at so called ‘bogus self-employment’ and includes a rebuttable presumption of employment for workers on digital labor platforms.

If the law passes it’s set to have a major impact on how on-demand platforms can operate across the region, which has 27 Member States. (Five of Deliveroo’s 11 markets are currently in the EU.)

Deliveroo appears exposed here — since, last year, it shut down its service in Spain following the approval of a similar reform of the country’s labour law which reclassified on-demand platform workers as employees.

Earlier this year, it also lost a legal challenge in France over the ‘freelancer’ status it clams for couriers — although it has sought to challenge the judgement on appeal (and is currently continuing to operate in the market).

Notably, in the Netherlands, Deliveroo has faced a similar legal challenge over couriers’ employment status.

A Supreme Court decision on the case is expected in December — but in a June opinion an advisor to the court took the view that its couriers are actually in an employment contract with it, in line with earlier court rulings. So that could have factored into its cost projections.

Deliveroo writes of its proposed Netherlands exit that it is “consistent with the Company’s disciplined approach to capital allocation”, and adds: “Management is committed to driving profitable growth and delivering on the path to profitability and sustainable cash flow generation.” (Its investor report also notes that “legal and regulatory settlements and provisions” contributed £29.1M to its first half operating loss.)

Deliveroo’s home market of the UK looks safer for it on the labor rights front as it successfully fought off a string of employment classification and workers rights challenges over the years — including, last year, another challenge over collective bargaining right.

That may explain why the GMB Union agreed a deal with Deliveroo in May which gave the union rights to collective bargaining on pay for the company’s 90,000+ riders, and “consultation rights” on benefits and other issues like rider health — simultaneously agreeing to recognize that Deliveroo riders are self-employed. (The latter is of course the critical piece for the viability of Deliveroo’s business model as the costs of employment are not merely wages; there’s tax and social security contributions to factor in, too.)

In Italy, meanwhile, which (like the UK & Ireland) Deliveroo’s investor report refers to as a “key” market, the company was one of a handful of on-demand delivery firms to band together in a lobbying coalition (aka Assodelivery) — back in 2020 — and ink a deal with a far right union to push a self-interested package of gig worker ‘protections’ in a bid to derail more fulsome rights being baked into national law.

The EU’s platform worker reform may derail such local lobby efforts, however. And in cases where lawmakers refuse to bend to platform pressure to grant them carve outs from workers rights — and the Commission at least has sounded firm about the need to hold the line against a mass dilution of’ employment rights across the bloc — the regional road ahead for ‘gig’ platforms looks bumpy.

Deliveroo’s investor report acknowledges both that the majority of litigation it’s facing is taking place in European territories, and there are “jurisdictions which may seek to regulate the on-demand economy and as a result the [legal] risk may be heightened”. On “regulatory challenge” it also warns investors it is “difficult at this time to quantify the probable economic outflow in the event of an adverse outcome”.

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