Food delivery platform Deliveroo, which operated in Hong Kong for 9 years and once held the top spot in the market, has announced its withdrawal through liquidation. Facing increasing competition from rivals, the company revealed yesterday (March 10) that it will cease all operations by April 7, laying off around 200 employees. Some of its assets will be sold to another delivery platform, foodpanda. Customers have been advised to use up their gift cards and account balances before the deadline.

With Deliveroo's exit, the previously divided food delivery market among three major platforms will now be shared between foodpanda and Keeta. Consumers and restaurant owners are concerned that reduced platform options may lead to fewer promotions and higher service fees. However, experts note that the high delivery costs in HK, coupled with the city's dense restaurant distribution, mean that price hikes may encourage customers to dine out or pick up takeaways themselves, further challenging platform profitability.

Deliveroo stated yesterday that HK accounted for 5% of the group's global transaction value. Despite adjustments, last year's profitability remained negative. After evaluating several strategic options, the company concluded it could no longer provide optimal services or meet shareholder interests, leading to its decision to exit. Liquidators have already been appointed to handle the remaining assets.

Grocery delivery service shuts down immediately

Deliveroo's "Deliveroo Hop" displayed a liquidation notice yesterday. All six grocery delivery stores and two "Deliveroo Editions" under the group ceased operations immediately. The primary restaurant delivery service will continue until April 7.

Deliveroo has signed an agreement to sell some of its assets to foodpanda, transferring existing customers and delivery riders to the rival platform. Customers will receive exclusive offers when placing orders on foodpanda via a provided link, while riders will receive bonuses. Some of Deliveroo's partner restaurants and merchants will also join foodpanda. Deliveroo emphasized that its more than 12,000 delivery riders operate under self-employment contracts, meaning no redundancy payments are involved.

Many customers and restaurant owners were unsurprised by the news. One customer remarked, "Keeta's entry into the market made it hard for Deliveroo to compete. Keeta offered cash vouchers and various promotions that attracted many users." Some customers expressed concerns that fewer platforms might reduce discounts and raise service fees.

Increased commission rates deter some businesses

Some restaurant owners revealed that Deliveroo initially offered generous incentives but later increased commission rates, which deterred some businesses. A café owner, who collaborated with the platform for three to four years, shared, "When they first entered the market, they waived delivery fees. Later, they started charging commissions on every order. We now pay about HK$1,000 in monthly fees to the platform." The owner fears that with only two platforms remaining, higher delivery fees may be passed on to customers through price increases.

Deliveroo, once the leader among HK's food delivery platforms, faced escalating competition from rivals like foodpanda. In May 2023, mainland giant Meituan introduced its Keeta platform to HK, intensifying market competition. A survey conducted last year indicated that as of March 2024, Keeta accounted for about 44% of HK's food delivery market, becoming the market leader. Foodpanda's share dropped from 60% to 41.6%, while Deliveroo ranked last, with less than 25% market share.

Academic perspective: Post-pandemic changes in consumer habits

Professor Terence Chong, Executive Director of the Lau Chor Tak Institute of Global Economics and Finance and Associate Professor of Economics at The Chinese University of Hong Kong, told Wen Wei Po that Deliveroo's departure was due to market competition. "HK's food delivery market is relatively small and shrinking, unable to sustain too many platforms. With Keeta's entry, Deliveroo couldn't survive and had to exit."

He added that high operational costs, coupled with the city's dense restaurant distribution, limit profits. "Minimum wage in HK has risen to over HK$40 per hour. Delivering a single meal costs HK$70-80 for a round trip. Although the market boomed during the pandemic when people had no other options, consumer habits have since shifted. More people are dining out, reducing reliance on food delivery services."

Chong estimates that the remaining platforms will also struggle to operate profitably, with significant price increases unlikely. "Customers have alternative options, such as dining out or cooking at home. If delivery costs become too high, consumers will opt out, leading to declining revenue for the platforms."

Riders' perspective: "Closure is inevitable"

Some delivery riders described Deliveroo's closure as inevitable, citing declining orders. "Keeta riders earn HK$10,000 to HK$20,000 per month, foodpanda riders make around HK$10,000, while Deliveroo orders only bring in about HK$1,000 per month," one rider explained.

Since Keeta's entry into HK after the pandemic, Deliveroo's orders have declined significantly. Riders reported receiving just one or two orders per hour during off-peak times, earning around HK$30-40 per order.

Labor concerns: Lack of severance pay for riders

During the pandemic, the food delivery industry thrived, but the employment relationship between platforms and delivery riders remained ambiguous. Even as Deliveroo exits, the company maintains that its 12,000+ riders are self-employed contractors, exempting it from redundancy obligations.

Ms. Wong, chairman of the freelancers' division at the Service Industry General Union, noted concerns about long-term service payments. "Although no complaints of unpaid wages or work-related injuries have been received, several riders have inquired about long-term service payments."

Tribunal: Riders are employees

In previous platform closures, such as Uber Eats and Zeek, labor issues emerged, with riders claiming unpaid wages and severance. In 2023, HK's Labour Tribunal ruled that Zeek's delivery drivers were employees, ordering the company to compensate for unpaid wages and severance pay.

Wong stated that Deliveroo's liquidation complicates efforts to recover long-term service payments. "Platforms sign self-employment contracts with riders to evade statutory insurance and employee benefits. However, riders clearly operate as employees and have an employment relationship with the platform. Our union has raised this issue with the government, which has begun considering legislative changes."

Legislator proposes to define delivery riders as independent workers

The Federation of Hong Kong and Kowloon Labour Union is reaching out to affected frontline workers to assess their situations. Lam Chun-sing, chairman of the Unions and a Legislative Council member, suggested that the government follow international practices by defining delivery riders as independent workers, granting them basic protections such as work injury insurance and retirement fund contributions.

Lam described this incident as a specific industry issue caused by shifts in consumer habits and market models, rather than an indicator of HK's overall economic environment. "Post-pandemic, more consumers are traveling to the mainland or encouraged to go out and spend. As a result, fewer people are ordering delivery, affecting some operators' businesses," he said.

(Source: Wen Wei Po)

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