The immediate impact of the Covid-19 scare is likely to occur in the gig economy with people remaining apprehensive of any physical contact and thus refraining from availing most services
For online delivery firms, a major constraint has been the curbs imposed on movement of their workers
New Delhi: The turmoil caused by the outbreak of Covid-19 is expected to derail India’s gig economy, which was projected to achieve a market size of $455 billion by 2023 by industry group Assocham.
Led by online food delivery firms Zomato and Swiggy, ride-hailing companies Uber and Ola, online homestay brand Airbnb, hospitality chain Oyo and a host of other shared economy companies, the sector is bracing itself for unforeseen challenges as lives are unlikely to return to normal even after the completion of the 21-day lockdown, which could also be extended.
In the short term, the companies are likely to suffer from weak consumer demand, supply-chain disruptions and shortage of manpower, leading to poor growth rates.
The immediate impact of the Covid-19 scare is likely to happen in the gig economy with people remaining apprehensive of any physical contact and thus refraining from availing most such services such as ordering cabs and food to grooming services at home and staying in shared spaces.
According to Statista, a data portal, revenue in the ride-hailing segment in India was expected to post a compounded annual growth rate of 13.5% from 2020 till 2023, achieving a market volume of $54.09 billion by 2023. With the mobility industry coming to a grinding halt due to the pandemic, it will be a tall task to achieve those numbers.
Both Ola and Uber have suspended operations in most large cities to comply with government restrictions during the lockdown. Japan’s SoftBank-backed Ola, however, said that it may start limited services to support essential services in some cities as part of the national effort to curb the contagion.
“Their business must be down by almost 80%-90% although there are no numbers officially available," said an analyst at a management consultant, declining to be named.
Online food delivery was pegged to grow 9.5% between 2020 and 2024, according to Statista, resulting in a market volume of $13.2 billion. However, the numbers may be revised as consumers remain cautious and refrain from ordering food online. Besides, restaurants and pubs in most large cities have been ordered to shut by the government.
Although they are allowed to operate only as delivery and takeaway joints, yet orders for Zomato and Swiggy have been hit. “It’s difficult to put a number to it but the food ordering business is down significantly. However, some quick-service restaurants continue to deliver," said Rajat Wahi, partner at Deloitte.
For online delivery firms, a major constraint has been the curbs imposed on the movement of their workers and harassment from police. While several cities have stepped up efforts to ease their movement, large food aggregators have been working at a delivery staff strength of between 20% to 30%. Zomato did not comment on the drop in orders but said it was working on initiatives to safeguard its stakeholders. Swiggy declined to comment.
Meanwhile, Abhiraj Bhal, co-founder of home services start-up Urban Co. (formerly Urban Clap), has also seen his business come to a halt. Once the lockdown is lifted, Bhal expects certain categories such as cleaning and sanitization as well as beauty and haircuts to grow. Massage, on the other hand, could be negatively impacted so the company will put tangible relief plans for partners in place, he added.
With a complete lockdown in the country and a temporary suspension of all modes of transport including domestic and international flights, the travel and hospitality sector has been severely hit.
“Airbnb will face trust deficit once we recover from the coronavirus outbreak owing to the fact that the company doesn’t have direct control over the inventory listed on its platform. They have no clue on what the owner has done and who has stayed in the room before. Therefore, it would be a challenge for Airbnb to win consumer trust as compared to big hotels that already have high sanitation standards," said internet business expert Sreedhar Prasad.
“I feel the recovery of shared and rental economy will be slower than established hospitality players," he said.
For now, the biggest challenge the shared economy companies face is of a sharp reduction in manpower. Since India announced a strict lockdown last week, thousands of migrant workers were seen returning home to their villages due to the uncertainty of future employment opportunities.
On 25 March, 25-year-old Prabin Kumar who works as an executive with a large food services company in Gurugram travelled over 400km on his bike to his village in the Kannuaj district of Uttar Pradesh. He said orders had started dwindling post-Holi and he was spending more on fuel and EMI on his bike.
Many delivery executives have not shown up at work, after reports of some of them facing police brutality surfaced.
“We are motivating contract employees to continue to report to work. This is a big challenge. There is fear among delivery executives and warehouse staff to move to/fro from their residences. Leaders at all levels are visiting these supply chain locations and motivating the staff, and leading from the front," said Ashish Jhina,chief operating officer and co-founder, Jumbotail, an online wholesale marketplace for food and groceries.
Madhurima Nandy, Salman S H and Saumya Tewari contributed to this story.
Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Never miss a story! Stay connected and informed with Mint.
our App Now!!