California DoorDash workers protested outside of the home of DoorDash CEO Tony Xu on Thursday, prompted by a recent California Superior Court Judge ruling calling 2020’s Proposition 22 unconstitutional. Prop 22, which was passed last November in California, would allow app-based companies like DoorDash, Uber and Lyft to continue classifying workers as independent contractors rather than employees.
A group of about 50 DoorDash workers who are affiliated with advocacy groups We Drive Progress and Gig Workers Rising traveled caravan style to the front of Xu’s house in the Pacific Heights neighborhood of San Francisco. They demanded that DoorDash provide transparency for tips and 120% of minimum wage or around $17 per hour, stop unfair deactivations and provide free personal protective equipment, as well as adequate pay for car and equipment sanitizing.
“Dasher concerns and feedback are always important to us, and we will continue to hear their voices and engage our community directly,” a DoorDash spokesperson told TechCrunch. “However, we know that today’s participants do not speak for the 91% of California Dashers who want to remain independent contractors or the millions of California voters who overwhelmingly supported Proposition 22. The reality is, the passage of Prop 22 has addressed in law many of the concerns raised today through its historic benefits and protections: workers earn 120% of their local minimum wage per active hour in addition to 100% of their tips, receive free PPE and enjoy access to healthcare funds.”
DoorDash drivers say getting paid for the time they’re “active,” meaning actively driving to either pick up food and drop it off, rather than when they’re online and waiting for gigs to come through, leads to inadequate pay. They also say much of their living wage comes from tips, which should be an added bonus, but ends up helping make ends meet based on DoorDash’s pay structure. Prop 22 is also meant to guarantee a reimbursement of 30 cents per engaged mile, which drivers say “would be great if it were true.” DoorDash did not respond to follow ups regarding its pay structure or claims from dashers that they have not been given free PPE.
Rondu Gantt, a gig worker who’s been working for DoorDash for two and a half years and also drives for Uber and Lyft to get by, says his base pay from DoorDash is often as low as $3 per hour, and that around 40% to 60% of his money comes from tips. Although this model sounds similar to the restaurant industry in the United States, which can be quite lucrative for servers and bartenders, for a delivery driver, it’s an unsustainable way to make a living because tipping culture isn’t nearly as strong.
“DoorDash pays so low because they want to make it affordable for the customer, but I would say for the driver it becomes unaffordable,” Gantt told TechCrunch, citing the costs of owning, maintaining, parking and fueling a vehicle as potentially crippling. “Last week, I drove for 30 hours and I made $405. That’s $13.50 per hour, which is below minimum wage.”
Gantt said drivers also have had to deal with pressure to drive in unsafe conditions, and we can look to the images of delivery drivers in New York City during Hurricane Ida as an example of some conditions drivers feel compelled to accept. Over the past two years, DoorDash drivers have also been deemed essential workers, interacting with and providing services for many people during a pandemic at the risk of their health.
Gig Workers Rising says DoorDash workers “have received little to no safety support” with some workers reporting “being reimbursed as little as 80 cents per day for cleaning/sanitizing equipment and PPE that they use to keep themselves and customers safe.”
“Right now gig work isn’t flexible,” a spokesperson for Gig Workers Rising told TechCrunch. “Workers are at the mercy of when there’s demand. If they were employees the work would change as they’d work in the knowledge that they’ve healthcare and can take a sick day off.”
Because Prop 22 was ruled unconstitutional, the spokesperson said by rights it shouldn’t be in operation.
“The gig corporations violate that law everyday by choosing not to comply with it,” he said.
For Gantt’s part, he doesn’t necessarily want to be an employee, he just wants to make sure that he’s being paid what he deserves.
“Which is not minimum wage,” he said. “Minimum wage would be unacceptable as well. The cost of doing this, the danger, makes minimum wage unacceptable pay. And realistically, they’re only sometimes paying you minimum wage before taxes. After taxes you’re definitely making less.”
TechCrunch was given access to DoorDash workers’ dashboards that break down their pay. For the week of July 12 to July 19, one dasher was paid a total of $574.21 for 53 deliveries, $274 of which came from customer tip. His “active time” was 14 hours and 21 minutes, and his “dash time,” or when he was logged onto the app waiting for gigs to come through and doing deliveries, was about 30 hours.
The dasher’s “guaranteed earnings” from DoorDash for the week was $300.21. (DoorDash did not respond to clarification on how guaranteed weekly earnings are calculated or what they’re based on, but a post on the company’s site says that guaranteed earnings are incentives for dashers in specific areas.) His base pay ended up at about $257.62, but DoorDash added an additional $42.59 to adjust to guaranteed earnings. If we divide the amount DoorDash paid by the number of hours of “active time,” the worker was paid about $21 per hour. If we divide it by the “dash time,” it looks more like $10 per hour.
Again, this is before tax. Independent contractors are usually advised to put aside around 30% of their paycheck because they have to pay self-employment tax, which is 15.3% of taxable income, federal income tax, which varies depending on tax bracket, and potentially state income tax. After taxes, this dasher’s total pay for 30 hours of work, including his $274 worth of tip, would be around $402, which comes out to $13.40 per hour.
Tips were of concern at the protest on Thursday as drivers called for transparency. Gantt says dashers can see a cumulative amount of tip earnings per week, as well as how much tip they’re receiving from each order, but they don’t trust the amount they’re receiving is actually the amount customers are tipping them.
Gantt and other drivers aren’t just being paranoid. Last November, DoorDash agreed to pay $2.5 million to settle a lawsuit alleging the company stole drivers’ tips and allowed customers to think their tip money was actually going to the drivers. The suit, filed by Washington, D.C. attorney general Karl Racine, alleged DoorDash reduced drivers’ pay for each job by the amount of any tip.
One of the rallying cries of the protest was for Xu to “share the wealth.” In 2020, the CEO was reportedly the highest paid CEO in the Bay Area, making a total salary of $413.67 million. During the second quarter, DoorDash saw a $113 million profit adjusted for EBITDA, but was overall unprofitable with a net loss of $102 million.
“We all work for money and how that money gets distributed when they go through their earnings is telling you who matters and who doesn’t matter,” said Gantt. “It’s a clear sign of who’s important, who has value. If they don’t pay you, they don’t value you.”
Massachusetts Attorney General Maura Healey gave a coalition of app-based service providers like Uber and Lyft the go-ahead to start collecting signatures needed to put a proposed ballot measure before voters that would define drivers as independent contractors rather than employees.
Backers of the initiative, which is essentially a MA version of Proposition 22, would need to gather tens of thousands of signatures for the measure to make it to the November 2022 ballot. Despite the fact that last year Healey filed a lawsuit that challenged Uber and Lyft’s classifications of drivers as contractors who are therefore not entitled to benefits like sick leave, overtime or minimum wage, on Wednesday, the AG certified the current measure met constitutional requirements.
The news comes nearly two weeks after a superior court judged ruled California’s Prop 22, which was passed in 2020, unconstitutional. The union-backed Coalition to Protect Workers’ Rights urged Healey to reject the measure under the same grounds, and told Reuters that it is considering suing to challenge the measure.
The Massachusetts Coalition for Independent Work, the coalition of members including Uber, Lyft, DoorDash and Instacart, filed the petition for this ballot initiative last month, a move that Uber CEO Dara Khosrowshahi said he thinks is “the right move.” The proposed initiative would also allow drivers to earn a minimum of $18 per hour in 2023 before tips and provide those who work for at least 15 hours per week with healthcare stipends. Drivers would also be guaranteed at least 26 cents per mile to cover vehicle upkeep and gas.
The coalition has until December 1 to collect and file 80,239 signatures from voters. If they miss that deadline, they can gather an additional 13,374 signatures by July 6, 2022 to get the initiative on the ballot.
TikTok is making it easier for brands and agencies to work with the influencers using its service. The company is rolling out a new “TikTok Creator Marketplace API,” which allows marketing companies to integrate more directly with TikTok’s Creator Marketplace, the video app’s in-house influencer marketing platform.
On the Creator Marketplace website, launched in late 2019, marketers have been able to discover top TikTok personalities for their brand campaigns, then create and manage those campaigns and track their performance.
The new API, meanwhile, allows partnered marketing companies to access TikTok’s first-party data about audience demographics, growth trends, best-performing videos and real-time campaign reporting (e.g. views, likes, shares, comments, engagement, etc.) for the first time.
They can then bring this data back into their own platforms, to augment the insights they’re already providing to their own customer base.
TikTok is not officially announcing the API until later in September, but it is allowing its alpha partners to discuss their early work.
One such partner is Captiv8, which tested the API with an NRF top 50 retailer on one of their first TikTok campaigns. The retailer wanted to discover a diverse and inclusive group of TikTok creators to partner with on a new collaboration and wanted help with launching its own TikTok channel. Captiv8 says the branded content received nearly 10 million views, and the campaign resulted in a “significant increase” in several key metrics, which performed above the Nielsen average. This included familiarity (+4% above average), affinity (+6%), purchase intent (+7%) and recommendation intent (+9%).
Image Credits: TikTok Creator Marketplace website
Capitv8 is now working with TikTok’s API to pull in audience demographics, to centralize influencer offers and activations, and to provide tools to boost branded content and monitor campaign performance. On that last front, the API allows the company to pull in real-time metrics from the TikTok Creator Marketplace API — which means Capitv8 is now one of only a handful of third-party companies with access to TikTok first-party data.
Another early alpha partner is Influential, which shared it’s also leveraging the API to access first-party insights on audience demographics, growth trends, best-performing videos and more, to help its customer base of Fortune 1000 brands to identify the right creators for both native and paid advertising campaigns.
One partner it worked with was DoorDash, which launched multiple campaigns on TikTok with Influential’s help. It’s also planning to work with McDonald’s USA on several new campaigns that will run this year, including those focused on the chain’s new Crispy Chicken Sandwich and the return of Spicy McNuggets.
Other early alpha partners include Whalar and INCA. The latter’s integration stems from the larger TikTok global partnership with WPP, announced in February. That deal provided WPP agencies with early access to new advertising products marketing API integrations, and new AR offerings, among other things.
Creator marketplaces are now common to social media platforms with large influencer communities as this has become a standard way to advertise to online consumers, particularly the younger generation. Facebook today offers its Brands Collabs Manager, for both Facebook and Instagram; YouTube has BrandConnect; while Snapchat recently announced a marketplace to connect brands with Lens creators. These type of in-house platforms make it easier for marketers to work with the wider influencer community by offering trusted data on metrics that matter to brands’ own ROI, rather than relying on self-reported data from influencers or on data they have to manually collect themselves. And as campaigns run, marketers can compare how well their partnered creators are able to drive results to inform their future collaborations.
TikTok isn’t making a formal announcement about its new API at this time, telling TechCrunch the technology is still in pilot testing phases for the time being.
“Creators are the lifeblood of our platform, and we’re constantly thinking of new ways to make it easy for them to connect and collaborate with brands. We’re thrilled to be integrating with an elite group of trusted partners to help brands discover and work with diverse creators who can share their message in an authentic way,” said Melissa Yang, TikTok’s head of Ecosystem Partnerships, in a statement provided to select marketing company partners.
Update, 8/31/21, 3:22 PM ET: INCA is currently using the API in the U.S. and U.K. An earlier version said it was U.K. only, based on information provided by TikTok. We’ve since corrected.
Hello friends, and welcome back to Week in Review! Last week we dove into Bezos’s Blue Origin suing NASA. This week, I’m writing about the unlikely and triumphant resurgence of the NFT market.
If I could, I would probably write about NFTs in this newsletter every week. I generally stop myself from actually doing so because I try my best to make this newsletter a snapshot of what’s important to the entire consumer tech sector, not just my niche interests. That said, I’m giving myself free rein this week.
The NFT market is just so hilariously bizarre and the culture surrounding the NFT world is so web-native, I can’t read about it enough. But in the past several days, the market for digital art on the blockchain has completely defied reason.
Back in April, I wrote about a platform called CryptoPunks that — at that point — had banked more than $200 million in lifetime sales since 2017. The little pop art pixel portraits have taken on a life of their own since then. It was pretty much unthinkable back then but in the past 24 hours alone, the platform did $141 million in sales, a new record. By the time you read this, the NFT platform will have likely passed a mind-boggling $1.1 billion in transaction volume according to crypto tracker CryptoSlam. With 10,000 of these digital characters, to buy a single one will cost you at least $450,000 worth of the Ethereum cryptocurrency. (When I sent out this newsletter yesterday that number was $300k)
When I published this back in April, the cheapest CryptoPunks were $30k, today the cheapest one available for sale is just shy of $300k https://t.co/X4iTSl6FjC
— Lucas Matney (@lucasmtny) August 27, 2021
It’s not just CryptoPunks either; the entire NFT world has exploded in the past week, with several billions of dollars flowing into projects with drawings of monkeys, penguins, dinosaurs and generative art this month alone. After the NFT rally earlier this year — culminating in Beeple’s $69 million Christie’s sale — began to taper off, many wrote off the NFT explosion as a bizarre accident. What triggered this recent frenzy?
Part of it has been a resurgence of cryptocurrency prices toward all-time-highs and a desire among the crypto rich to diversify their stratospheric assets without converting their wealth to fiat currencies. Dumping hundreds of millions of dollars into an NFT project with fewer stakeholders than the currencies that underlie them can make a lot of sense to those whose wealth is already over-indexed in crypto. But a lot of this money is likely FOMO dollars from investors who are dumping real cash into NFTs, bolstered by moves like Visa’s purchase this week of their own CryptoPunk.
I think it’s pretty fair to say that this growth is unsustainable, but how much further along this market growth gets before the pace of investment slows or collapses is completely unknown. There are no signs of slowing down for now, something that can be awfully exciting — and dangerous — for investors looking for something wild to drop their money into… and wild this market truly is.
Here’s some advice from Figma CEO Dylan Field who sold his alien CryptoPunk earlier this year for 4,200 Eth (worth $13.6 million today).
Just getting into NFT’s? Welcome!! It’s a fascinating world and this is just the very start :)
My unsolicited advice: exercise caution + restraint. There are a lot of speculators in the space right now. Buy things you love / plan to hold forever and don’t expect prices to go up!
— Dylan Field (@zoink) August 28, 2021
Image Credits: Kanye West
Here are the TechCrunch news stories that especially caught my eye this week:
OnlyFans suspends its porn ban
In a stunning about-face, OnlyFans declared this week that they won’t be banning “sexually explicit content” from their platform after all, saying in a statement that they had “secured assurances necessary to support our diverse creator community and have suspended the planned October 1 policy change.”
Kanye gets into the hardware business
Ahead of the drop of his next album, which will definitely be released at some point, rapper Kanye West has shown off a mobile music hardware device called the Stem Player. The $200 pocket-sized device allows users to mix and alter music that has been loaded onto the device. It was developed in partnership with hardware maker Kano.
Apple settles developer lawsuit
Apple has taken some PR hits in recent years following big and small developers alike complaining about the take-it-or-leave-it terms of the company’s App Store. This week, Apple shared a proposed settlement (which still is pending a judge’s approval) that starts with a $100 million payout and gets more interesting with adjustments to App Store bylines, including the ability of developers to advertise paying for subscriptions directly rather than through the app only.
Twitter starts rolling out ticketed Spaces
Twitter has made a convincing sell for its Clubhouse competitor Spaces, but they’ve also managed to build on the model in recent months, turning its copycat feature into a product that succeeds on its own merits. Its latest effort to allow creators to sell tickets to events is just starting to roll out, the company shared this week.
CA judge strikes down controversial gig economy proposition
Companies like Uber and DoorDash dumped tens of millions of dollars into Prop 22, a law which clawed back a California law that pushed gig economy startups to classify workers as full employees. This week a judge declared the proposition unconstitutional, and though the decision has been stayed on appeal, any adjustment would have major ramifications for those companies’ business in California.
Image Credits: guirong hao (opens in a new window) / Getty Images
Some of my favorite reads from our Extra Crunch subscription service this week:
Future tech exits have a lot to live up to
“Inflation may or may not prove transitory when it comes to consumer prices, but startup valuations are definitely rising — and noticeably so — in recent quarters. That’s the obvious takeaway from a recent PitchBook report digging into valuation data from a host of startup funding events in the United States…”
OpenSea UX teardown
“…is the experience of creating and selling an NFT on OpenSea actually any good? That’s what UX analyst Peter Ramsey has been trying to answer by creating and selling NFTs on OpenSea for the last few weeks. And the short answer is: It could be much better...“
Are B2B SaaS marketers getting it wrong?
“‘Solutions,’ ‘cutting-edge,’ ‘scalable’ and ‘innovative’ are just a sample of the overused jargon lurking around every corner of the techverse, with SaaS marketers the world over seemingly singing from the same hymn book. Sadly for them, new research has proven that such jargon-heavy copy — along with unclear features and benefits — is deterring customers and cutting down conversions…”
In a late Friday night blow to Uber, Lyft and other gig worker-centered companies, a superior court judge ruled that California’s Proposition 22, which was passed in 2020 and designed to overrule the state’s controversial AB-5 law on the employment status of gig workers, violates the state’s constitution.
Frank Roesch, a superior court judge in Alameda County, which encompasses Oakland, Berkeley and much of the East Bay, ruled that the law would limit “the power of a future legislature” to define the employment status of gig workers. The lawsuit was filed by the Service Employees International Union (SEIU) in January, after a similar lawsuit was rebuffed by the California Supreme Court and referred to a lower court.
The court’s decision will almost certainly be appealed and further legal arguments are to be expected.
The superior court’s decision is just the latest in a long line of victories and defeats in the battle between companies that heavily rely on gig workers like Uber and DoorDash, and unions and advocates representing workers. Much of the debate centers on the legal distinction between a freelancer and an employee, and to what extent companies are responsible for the care and benefits of their workers.
Such a distinction is big business: Uber, Lyft and other companies spent more than $200 million collectively to push Prop 22 to victory last year. California voters passed the proposition roughy 59% to 41% in what was widely perceived as a major victory for gig worker platforms.
Such fights are not limited to merely Silicon Valley’s home state, however. Earlier this year in the United Kingdom, Uber lost a legal battle over its employment classification decisions and ultimately reclassified tens of thousands of its drivers as workers, a decision which offered them a range of benefits not previously guaranteed.
Home-stay giant Airbnb and on-demand delivery concern DoorDash reported their quarterly results today after the bell.
Both companies were heavily impacted by the onset of COVID-19. Airbnb saw its revenues collapse in 2020 during early lockdowns, leading the company to raise expensive capital and batten its hatches. The company recovered as the year continued, leading to its eventual IPO.
DoorDash, in contrast, managed a simply incredible 2020 as folks stayed home and ordered in. Given that we got both reports on the same day, let’s digest ’em and see how COVID has — and may — impact their results.
In the second quarter, Airbnb reported revenues of $1.3 billion, which compares favorably with its Q2 2020 result of $335 million and its 2019 Q2 revenue total of $1.21 billion. In percentage terms, Airbnb’s revenue grew 299% from its Q2 2020 level and 10% from what the company managed during the same period of 2019.
Analysts had expected $1.23 billion in revenue for the period.
Airbnb lost $68 million in the quarter when counting all costs. The company’s adjusted EBITDA, a heavily modified profit metric, came to $217 million in the quarter. Cash from operations in Q2 2021 was $791 million. Looking ahead, here’s what Airbnb had to say regarding its revenue outlook:
[We] expect Q3 2021 revenue to be our strongest quarterly revenue on record and to deliver the highest Adjusted EBITDA dollars and margin ever.
How did the market digest Airbnb’s better-than-expected growth, rising adjusted profit, falling net losses, massive cash generation and expectations of record Q3 revenue? By bidding its shares lower. Airbnb is off around 4.5% in after-hours trading.
Confused? Investors may be worried about the following note from the company, also from the guidance section of its earnings letter:
In the near term, we anticipate that the impact of COVID-19 and the introduction and spread of new variants of the virus, including the Delta variant, will continue to affect overall travel behavior, including how often and when guests book and cancel. As a result, year-over-year comparisons for Nights and Experiences Booked and GBV will continue to be more volatile and non-linear.
While Q3 2021 is looking great for Airbnb, it appears that its future growth could be lumpy or delayed thanks to the ongoing pandemic. There are public indicators pointing to travel rates declining, which could impact Airbnb.
The company’s Q2 results and Q3 anticipations are impressive when compared to where Airbnb was a year ago. But that doesn’t mean that it is entirely out of the COVID woods.
Despite generally lower COVID friction in its market during Q2 2021, DoorDash managed to set records for orders and the value of those orders. In the three-month period concluding June 30, 2021, the on-demand food delivery company turned $10.46 billion in order value (marketplace GOV) into $1.24 billion in total revenue. The marketplace GOV number was 70% greater than the Q2 2020 result, while DoorDash’s revenues expanded by 83%.
Investors had expected the company to post $1.08 billion in total revenues, so DoorDash handily bested expectations.
How profitable was DoorDash during the quarter? DoorDash was unprofitable overall, with a net loss of $102 million. In adjusted EBITDA terms, DoorDash saw $113 million in profit during Q2 2021. That’s not too bad, given that Uber cannot manage the same feat with its own food delivery business. DoorDash’s net income was worse than what it managed in Q2 2020, while its adjusted EBITDA improved.
Shares of DoorDash are off around 3.5% in after-hours trading.
Why? It’s not entirely clear. DoorDash said that it expects “Q3 Marketplace GOV to be in a range of $9.3 billion to $9.8 billion, with Q3 Adjusted EBITDA in a range of $0 million to $100 million.” Sure, that’s down a smidgen from its Q2 GOV number, but investors were anticipating DoorDash to post less revenue in Q3 than Q2, so you would think that GOV expectations were also more modest.
Is COVID the answer? Mentions of COVID-19 in the company’s earnings document tend to deal with trailing results and historical efforts to provide relief to restaurants that use DoorDash for orders or delivery. So, there’s not a lot of juice to squeeze there. However, the company did say the following toward the end of its report:
We believe the broad secular shift toward omni-channel local commerce remains nascent. However, the scale and fragmentation of local commerce suggests the problems to be solved will get more difficult, coordination between internal and external stakeholders will become more complex, and vectors for competitive threats will increase. At the same time, we expect the pace of consumer behavioral shifts to slow compared to the extraordinary pace of change in recent quarters.
Simplifying that for us: DoorDash expects slower growth in the future, a more complex business climate and rising competition as it enters new markets. That’s not a mix that would make any investor more excited, we don’t think.
Catch is working to make sure that every gig worker has the health and retirement benefits they need.
The company, which is in the midst of moving its headquarters to New York, sells health insurance, retirement savings plans and tax withholding directly to freelancers, contractors or anyone uncovered.
It is now armed with a fresh round of $12 million in Series A funding, led by Crosslink, with participation from earlier investors Khosla Ventures, NYCA Partners, Kindred Ventures and Urban Innovation Fund, to support more distribution partnerships and its relocation from Boston.
Co-founders Kristen Anderson and Andrew Ambrosino started Catch in 2019 and raised $6.1 million previously, giving it a total of $18.1 million in funding.
It took the Catch team of 15 nearly two years to get approvals to sell its platform in 38 states on the federal marketplace. Anderson boasts that only eight companies have been able to do this, and three of them — Catch included — are approved to sell benefits to consumers. The other side of the business is payroll, and the company has gathered thousands of sources based on biller.
“More companies are not offering healthcare, while more people are joining the creator and gig economies, which means more people are not following an employer-led model,” Anderson told TechCrunch.
The age of an average Catch customer is 32 years old, and in addition to current offerings, were asking the company to help them set up income sources, like setting aside money for taxes, retirement, as well as medical leave without having to actively save.
When the global pandemic hit, many of Catch’s customers saw their income collapse, 40% overall across industries, as workers like hairstylists and cooks had income go down to zero in some cases.
It was then that Anderson and Ambrosino began looking at partnership distribution and developed a network of platforms, business facilitation tools, gig marketplaces and payroll companies that were interested in offering Catch. The company intends to use some of the funding to increase its headcount to service those partnerships and go after more, Anderson said.
Catch is one startup providing insurance products, and many of the competitors either do a single offering and do it well, like Starship does with health savings accounts, Anderson said. Catch is taking a different approach by offering a platform experience, but going deep on the process, she added. She likens it to Gusto, which provides cloud-based payroll, benefits and human resource management for businesses, in that Catch is an end-to-end experience, but with a focus on an individual person.
Over the past year, the company’s user base tripled, driven by people taking on second jobs and through a partnership with DoorDash. Platform users are also holding onto 5 times their usual balances, a result of setting more goals and needing to save more, Anderson said. Retirement investments and health insurance have grown similarly.
Going forward, Anderson is already thinking about a Series B, but that won’t come for another couple of years, she said. The company is looking into its own HSA product as well as disability insurance and other products to further differentiate itself from other startups, for example, Spot, Super.mx and Even that all raised venture capital this month to provide benefits.
Catch would also like to serve a broader audience than just those on the federal marketplace. The co-founders are working on how to do this — Anderson mentioned there are some “nefarious companies out there” offering medical benefits at rates that can seem too good to be true, but when the customer reads the fine print, finds out that certain medical conditions are not covered.
“We are looking at how to put the right thing in there because it does get confusing,” Anderson added. “Young people have cheaper options, which means they need to make sure they know what they are getting.”
In the United States, same-day and next-day Amazon Prime deliveries have become the de facto standard in e-commerce. People want convenience and instant gratification, evidenced by the fact that an astonishing ~45% of U.S. consumers are Amazon Prime members.
Most major retailers are scrambling to catch up to Amazon by partnering with last-mile delivery startups. Walmart has become a major investor in Cruise for autonomous-vehicle deliveries, and Target acquired Shipt and Deliv last-mile delivery startups to increase its delivery speed. Costco partnered with Instacart for same-day deliveries, and even Domino’s Pizza has jumped in by partnering with Nuro for last-mile delivery using autonomous vehicles.
E-commerce in LatAm has taken off at a compound annual industry growth rate of 16% over the past five years.
Venture capitalists have been investing heavily in last-mile delivery over the past five years on a global scale, but Latin America (LatAm) has lagged behind. Over $11 billion has been invested globally in last-mile logistics over the past decade, but Latin America only saw about $1 billion over the same period (Source: PitchBook and WIND Ventures research).
Within this, only about $300 million was in Spanish-speaking Latin America — a surprisingly small amount for a region that has 110 million more consumers than in the U.S.
Brazil-based Loggi accounts for about 60% of last-mile VC investment in Latin America, but it only operates in Brazil. That leaves major Spanish countries like Mexico, Colombia, Chile and Argentina without a leading independent last-mile logistics company.
In these countries, about 60% of the last-mile delivery market is dominated by small, informal companies or independent drivers using their own trucks. This results in inefficiencies due to a lack of technologies such as route optimization as well as a lack of operating scale. These issues are quickly becoming more pronounced as e-commerce in LatAm has taken off at a compound annual industry growth rate of 16% over the past five years.
Retailers are missing an opportunity to give customers what they want. Customers today expect free, reliable same- or next-day delivery — on-time, all the time, and without damage or theft. All of these are challenging in LatAm. Theft, in particular, is a significant problem, because unprofessional drivers often steal products out for delivery and then sell them for a profit. Cost is a problem, too, because free same- and next-day deliveries are simply not available in many places.
Why does Latin America lag when it comes to the last mile? First, traditional LatAm e-commerce delivery involves multiple time-consuming steps: Products are picked up from the retailer, delivered to a cross-dock, distributed to a warehouse, delivered to a second cross-dock, and then finally delivered to the customer.
By comparison, modern delivery operations are much simpler. Products are picked up from the retailer, delivered to a cross-dock, and then delivered directly to the customer. There’s no need for warehousing and an extra pre-warehouse cross-dock.
And those are just the operational challenges. Lack of technology also plays a significant role. Most delivery coordination and routing in LatAm are still done via a spreadsheet or pen and paper.
Dispatchers have to manually pick up a phone to call drivers and dispatch them. In the U.S., computerized optimization algorithms dramatically cut both delivery cost and time by automatically finding the most efficient route (e.g., packing the most deliveries possible on a truck along the route) and automatically dispatching the driver that can most efficiently complete the route based on current location, capacity and experience with the route. These algorithms are almost unheard of in the Latin America retail logistics sector.