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Boxed, Inc. (Boxed) operates an e-commerce grocery platform which sells bulk consumables and licenses its e-commerce software to enterprise retailers. Boxed operates an e-commerce retail service that provides bulk pantry consumables to businesses and household customers, without the requirement of a big-box store membership. Boxed further enables e-commerce through its Software & Services business, which offers customers in need of an enterprise-level e-commerce platform access to its end-to-end technology.

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Uber, Lyft and Instacart drivers fear losing out if a recession fuels influx of new gig workers

12:00 pm ET January 7, 2023 (MarketWatch)

By Levi Sumagaysay

Some existing ride-hailing drivers and delivery workers worry that a worsening economy and new gig workers will mean less work for them

If a possible recession and higher unemployment this year lead to an influx of new gig workers, as some analysts are predicting, existing ride-hailing drivers and delivery workers worry that will mean less work for them.

More competition from other workers will exacerbate the less-than-ideal working conditions and low wages that app-based gig workers already face, some workers told MarketWatch this week.

"Of course, that means fewer orders and batches available for everybody," said Melissa, a gig worker who shops for Shipt and Instacart in Charleston, S.C., and asked that her last name not be used. But she added that she "completely understands" people wanting to make up for any lost income.

"I don't blame them personally, because they're just trying to pay their bills," Melissa said. "But they probably won't make much money, and the people who are already doing it will make less money."

In a note published this week, Bank of America analysts estimated that as many as 450,000 new drivers could flock to Uber Technologies Inc. (UBER) and Lyft Inc. (LYFT) this year, and that 600,000 new couriers could give DoorDash Inc. and Uber Eats a try. The analysts said an increase in labor supply could offset possible declines in the companies' ride-hailing and delivery businesses because of a worsening economy.

That could all mean a silver lining for the companies that won't have to spend money to try to attract gig workers to their platforms, a setback for existing gig workers, and a possibly uneven experience for customers.

On the one hand, if more Shipt and Instacart shoppers are available, customers' orders are likely to get taken care of more quickly, Melissa said.

On the other hand, the quality of the service could suffer. New shoppers typically don't do as good a job as the ones who have been doing it longer, she said. She gave an example: "More experienced shoppers will know to use insulated bags and to pick up the frozen stuff later," Melissa said, so customers wouldn't have to complain about frozen items being delivered melted. That also means Instacart or Shipt wouldn't have to issue refunds, she said.

She also said newer shoppers will be willing to take lower-paying gigs, while shoppers who have been doing it longer may just move on. The companies are counting on that, Melissa said: "The churn is intentional and beneficial for the companies."

Shelly Steward, director of the Future of Work Initiative at the Aspen Institute, told MarketWatch she has seen this cycle before.

"App-based work was introduced during the Great Recession, when it provided a source of quick income in a difficult economy," she said, adding that the turnover in gig work is high. "More people working on the apps translates into lower wages, though, which is likely to increase turnover even more."

The companies have said a majority of their workers are using gig work for supplemental income, and that most of them do the work part time. They tout gig work as a flexible way to make money quickly.

Food delivery, whose business skyrocketed at the beginning of the pandemic, is starting to see a slowdown in growth. A possible consequence of this is too many couriers and not enough deliveries to go around.

But some analysts remain optimistic about the delivery business: "The habit is getting more ingrained with people," said Justin Post, the Bank of America Securities analyst who wrote the note about the expected flood of new gig workers.

On the ride-hailing side, Cleveland-based driver Rob, who also asked that MarketWatch not use his last name, echoed some of Melissa's thoughts. He predicted that a bunch of newer drivers could push longtime drivers aside because, he said, some longtime drivers are no longer willing to take lower pay from Uber and Lyft.

"The more drivers they bring on board, they're just replacing the ones who are dropping off," said Rob, who drives for both ride-hailing companies. "New drivers don't know any different," he said, adding that he thinks new drivers will quit when they realize they aren't making as much as the companies have advertised -- especially, as he said, as driver earnings have declined recently.

As an example, he shared a screenshot of a recent gig in which he grossed $27 for a 46-mile trip that took two hours of his time because he had no passenger on the way back. Another screenshot he shared showed a 12-mile trip over the summer, which took 20 minutes and grossed him $37.

"It's gotten to the point that it's ridiculous," he said. Taking into account expenses such as gas and mileage, "realistically, you're lucky to be making $15 an hour," Rob added.

Rhe, an Uber driver in Houston who asked that her last name not be used, has had a similar experience. She has been doing ride-hailing for two years and said her earnings have also declined. Also, she said her market already is saturated.

"Last Thanksgiving, it was very lucrative," she said. "This Thanksgiving, they sent us [drivers] all to the airport. We were sitting there three or four hours just to get a $20 fare."

If the pay continues to be this low and she sees even more competition for trips, Rhe said she might stop driving, citing the higher insurance costs and also the wear and tear on her car. She has other jobs, but is driving to make extra money.

"It's barely worth it now," she said. "So if more drivers come in, it's definitely not going to be worth it."

During their third-quarter earnings calls with analysts in November, Uber and Lyft executives said drivers on their platforms were making an average of $36 an hour and $35 an hour, respectively.

See: Grubhub co-founder: 'When you care about delivering a better product,' don't rely solely on the gig-work model

MarketWatch contacted Uber, Lyft, DoorDash, Instacart and Shipt to ask whether they limit onboarding new workers when a market has enough workers.

An Instacart spokeswoman said the company's population of 600,000 shoppers remains steady, and that it does have wait lists in places where its number of shoppers matches the demand.

A DoorDash spokesman said the company does implement a wait list for its workers in certain locations, and notifies them when spots become available.

The other companies have not provided responses.

The wait list also helps with what the DoorDash spokesman called churn degradation: "We are grateful for the high-quality service [Dashers] provide our communities every day," he said.

Besides DoorDash, the other companies did not return requests for comment about the effects a rush of new workers could have on customer service.

-Levi Sumagaysay


(END) Dow Jones Newswires

January 07, 2023 12:00 ET (17:00 GMT)

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