Tough political decisions or not, the steep upwards adjustment in fuel prices over the last few months has made life difficult for everyone, as the hike has further passed on to other goods and services and made everything more expensive. But it has especially hit gig workers whose entire livelihoods revolve around it.

Over the past few years, a flurry of transport and logistics startups — from mobility to delivery — have sprung up in Pakistan. Including the now-shut Airlift’s and currently operational Krave Mart’s investments, these players have raised a cumulative $208.5 million since 2019. Usually, the model is to leverage a fleet of ‘independent contractors’ who help move goods and people.

In mobility, the companies take a certain commission of around 20 per cent while delivery players often pay their riders on a per-order basis, which depends on a host of factors. Whatever it is, the recent fuel hikes have made it difficult for gig workers to get by.

“I need to fill the tank with petrol plus basic maintenance costs. Meanwhile, the company is giving me a fuel allowance of just Rs4,700 for the whole month after a recent revision. That not only fails to cover my petrol costs but also ignores the overall increase in inflation of other items that we have to bear now,” says a Foodpanda rider. “My income, all included, is about Rs16,000 weekly if I work 12 hours a day on average,” he adds.

Recurring fuel rate shocks not only disproportionately burden riders but also put in question the future of companies operating in the logistics space

This is despite the fact that the company has consistently raised its delivery charges, which are usually in excess of Rs100 now. While that could be the phasing out of discounted prices and not necessarily fuel cost adjustment, the impact has not entirely passed on to the riders even as customers are paying more.

“In these difficult economic circumstances, we have tried to support our rider communities through increasing payouts and fuel cost pass-through to cover the increase in operational costs. We continue to monitor the situation proactively and regularly engage with our riders to ensure we support them effectively and continue to provide a seamless platform experience to our customers and vendors,” said Farhan Khan, Director of Operations, Foodpanda Pakistan.

Meanwhile, Bykea has revised its pricing upwards in view of the changes in petrol rates. Since the company operates on a commission model, the per-order charges don’t really apply and the higher fares mean its riders’ gross income has been increased at least, in addition to bonuses.

But the startup is faced with its own troubles: higher fares have hit demand. According to a well-placed source, the overall industry volumes for mobility and deliveries are down around 15pc though a more accurate picture will be known from August when the effect of monsoon and Eid is not a factor. This is on top of the underlying shift that’s currently taking place in the mobility market, where incumbents are being given a run for their money by a new entrant, InDriver. Estimates from an industry insider suggest the latter has grabbed up to 70pc of the market share in the car category.

Data from Appfigures also shows a dismal picture for Uber and Careem, whose cumulative downloads across platforms in June were less than 60pc of what InDriver managed. The Russian-born, and now California headquartered, mobility company has been aggressively grabbing the market in Pakistan since March 2021, right after raising its $150m Series C.

For over a year, it charged the supply-side absolutely no commission and deals only in cash, making it a lucrative offer for drivers. Now it has entered the bike category, creating another headache for Bykea.

On the other side of the spectrum, e-commerce fulfilment players are also in a tough spot due to higher fuel prices. They have been able to pass only a fraction of the impact to their customers, meaning the already thin margins are being squeezed further. Reports of a slowdown in online shopping have been doing the rounds and it’s not just anecdotal.

In fact, data shows a slowdown even before the spike in petrol price. As per State Bank’s Payments Systems Review, the total e-commerce transactions fell to 9.1 million in Q3FY22, down 33pc compared to 13.1m in Q2FY22 — making it the first time in six quarters that volumes declined. These are just the card-based numbers and the impact could be even higher for cash orders.

All of this brings us back to how fundamental macro problems can spoil the party for everyone. Recurring fuel rate shocks have not only disproportionately burdened the gig workers who struggle to make ends meet with the compensation paid out to them, but also put in question the future of companies operating in the space as the economics of logistics continuously worsens. Someone has to pay the price from the pocket, whether it’s a customer, rider, investor or taxpayer.

Published in Dawn, The Business and Finance Weekly, July 25th, 2022

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