Deliveroo, a UK-based company known for on-demand food delivery services, is considering pulling out of the Netherlands market.
Currently operational in 11 countries, including Australia, Belgium, France, and others, Deliveroo may soon reduce its footprint to 10 countries.
In their recent half-year financial report, Deliveroo revealed that the Netherlands contributes less than 1% of its total transactions in the first half of 2022.
The company has determined that attempting to increase its market share there would require a substantial investment that may not yield sufficient returns.
Deliveroo stated that continuing operations in the Netherlands would demand a disproportionately high level of investment with uncertain outcomes.
They plan to begin consultations with relevant stakeholders in August. Their goal is to finalize the cessation of operations in the Netherlands by late November.
Deliveroo is exploring the possibility of withdrawing from the Netherlands and will initiate discussions with stakeholders soon.
They anticipate finalizing the shutdown by late November. This move comes amidst broader economic challenges, including a downturn and significant inflation that have dampened consumer interest in app-based delivery services.
According to Reuters, Deliveroo’s financial report for the first half of the year revealed an expanded pretax loss of £147 million ($177 million), up from £95 million ($115 million) in the previous year.
These financial pressures underscore the difficulties faced by on-demand platforms in current economic conditions.
Many gig economy platforms are facing increased regulatory scrutiny, particularly in Europe. Lawmakers are focusing on improving protections for freelance workers who often lack full employment benefits despite being closely managed by algorithms.
In the European Union, discussions are ongoing about a new regulation designed to address ‘bogus self-employment’ among platform workers.
Proposed by the Commission in December, this regulation proposes a presumption that workers on digital platforms should be classified as employees unless proven otherwise.
If adopted, this law could significantly impact how on-demand platforms operate across the EU’s 27 Member States, including five of Deliveroo’s current markets.
This regulatory change could reshape the industry’s landscape and enhance worker protections.
Deliveroo is encountering substantial issues in Europe. It ceased operations in Spain last year due to a revised labor law that categorizes platform workers as employees.
In France, it recently faced a legal setback regarding the classification of couriers as freelancers, though it’s appealing the ruling and continues to operate.
Likewise, in the Netherlands, Deliveroo is navigating a legal challenge over the employment status of its couriers.
A Supreme Court ruling anticipated in December could uphold previous decisions considering couriers as employees, influencing Deliveroo’s operational strategy and financial outlook.
Deliveroo’s decision to leave the Netherlands aligns with its disciplined financial strategy, aiming for profitable growth and sustainable cash flow.
The company’s investor report notes significant legal costs contributing to its operational losses in the first half of the year.
Meanwhile, Deliveroo has faced and overcome various legal challenges concerning worker classification and rights in its primary market of the U.K., including disputes over collective bargaining rights last year.
In May, the GMB Union struck a deal with Deliveroo allowing the union to negotiate pay collectively for more than 90,000 riders.
They also gained consultation rights on benefits and rider health issues, while acknowledging that Deliveroo riders are classified as self-employed.
This distinction is vital for Deliveroo’s business model as it avoids additional costs such as taxes and social security contributions.
In Italy, Deliveroo plays a significant role, alongside the U.K. and Ireland. In 2020, Deliveroo, along with other delivery firms, partnered with a right-wing union under the Assodelivery coalition.
Their goal was to advocate for a package of gig worker ‘protections’ that served their interests, potentially hindering broader labor rights reforms in Italy.
The EU’s proposal to reform platform worker regulations might disrupt local lobbying efforts. If lawmakers resist pressure to exempt gig platforms from labor laws, the Commission’s commitment to upholding employment rights across the EU could pose challenges for these companies.
Deliveroo’s investor report notes that most of its legal battles are centered in European nations. It also acknowledges the potential for heightened legal risks as jurisdictions consider regulating the on-demand economy.
In terms of regulatory challenges, Deliveroo cautions investors about the uncertainty regarding potential financial impacts if legal outcomes are unfavorable.
The report offers initial estimates related to ongoing legal proceedings, including new legal provisions, but emphasizes that these estimates are preliminary.
