How S’pore Benefits From The Hidden Delivery Rider Micro-Economy
Singapore food couriers are creating their own micro-economy.
The food delivery market is expected to reach US $ 464 million by 2020 in Singapore and experts estimate that it will contribute 40% of total restaurant sales by 2025.
Given the high demand for food delivery, it is no surprise that the number of delivery people in Singapore has also increased significantly.
Food delivery giants Deliveroo and Foodpanda have reported an increase in runner registrations during the breaker.
At the last count in April, the two had a total of more than 15,000 runners. Grab, the food delivery giant, declined to comment on the numbers.
With the growing number of layoffs in Singapore, many people are turning to the odd job economy and getting on the food delivery train.
However, being a delivery driver is not free – there are many expenses that this group of people must spend.
But as the number of cyclists grows, so many businesses are growing to support their careers. Here is an overview of what some of these companies are.
Growing demand for bicycles
Cyclists mainly fall into two camps: those who ride a bicycle and those who ride a motorcycle. The people delivering on foot are just a small group.
Joel Chong, for his part, is a part-time delivery man who has worked for the ‘Big Three’ – Deliveroo, Grab and foodpanda – since 2018.
In the past two years he has already ridden two bikes.
The first is a high-end bike sold by local brand Ascent Bikes. The second is an electric bicycle (e-bike) sold by another local brand, Punggol Lew. The two bikes cost at least S $ 1,000, or half of his monthly income.
Bikes over S $ 1000 are popular among cyclists who are willing to pay for comfort, safety and a better experience. However, cheaper bikes are just as popular among cyclists, Joel observes.
The Decathlon brand, in particular, is praised for its line of “decently priced” bikes, ranging between S $ 200 and S $ 400 for a set of wheels.
Whatever bikes they choose, most riders need to bring their bikes for periodic maintenance, which can cost up to $ 100.
Those who use high-end bikes must change their equipment every two thousand kilometers.
On the other hand, cheaper bikes require more frequent maintenance, which can lead to higher costs of around S $ 300 per year.
Switching from electric scooters to electric bikes
After e-scooters were banned from the trails and roads, most drivers turned to e-bikes as the new vehicle of choice, Joel observes.
Based on a quick online search, the typical price of an electric bike ranges between $ 390 and $ 1,400. Joel’s JI Move electric bike, in particular, costs around S $ 1,200.
Electric cyclists also need to buy spare batteries, says Joel, who uses two batteries per shift.
A battery costs up to S $ 300. While the bigger ones store more power, they cost S $ 800 – and they’re also rarely used due to their heavier weight.
“(Due to weight and price) there is a dark market for rechargeable batteries,” reveals Joel.
Some cyclists are asking underground manufacturers for repackaging so that the batteries can withstand a higher load, he says, adding that e-bike batteries also require approval from the Land Transport Authority (LTA).
A single rider’s bicycle and e-bike expenses cost a minimum of around S $ 1,400 on average per initial purchase. This equates to about S $ 14 million generated for bicycles for 10,000 cyclists alone.
Invest in small motorcycles
The motorcycle industry is also benefiting from the growth of delivery people.
The number of motorcycles in Singapore has declined since 2011, but the number has increased from 137,000 to 140,000 between 2018 and 2019, according to a Statista report.
Notably, the increase in the number of motorcycles coincides with the timing of the launch of Grab’s food delivery service in Southeast Asia.
Vicknash Muthaiah (Vicky), a full-time food panda and grab man, says delivery people have seen their numbers increase during this time.
Vicky, who has been delivering for two to three years, spent S $ 1,800 on a used small motorcycle for her delivery job.
The delivery man already owns a personal motorbike, but it was too big and “awkward” for delivery. Reasoning about his second purchase, he says that small, cheap bikes can be abused and use less gas.
It’s common for delivery people to trade in their existing motorcycles for a cheaper, smaller bike, he adds. Smaller bikes are faster and maintenance costs are also lower despite the higher frequency of repairs.
Typically, a cheap second-hand Class 2B motorcycle costs between S $ 3,000 and S $ 10,000, according to SG Bike Mart.
Sharing a breakdown of typical cycling expenses, Vicky says miscellaneous costs can run up to S $ 300 per month and a rider typically spends S $ 40 on maintenance every two weeks.
In addition, gasoline can cost over S $ 268 for a frequent cyclist.
Helmets, which cost around S $ 50, are also a mandatory purchase for motorcyclists under LTA regulations.
In total, a new rider who decides to buy a second-hand motorcycle would have to invest an average of S $ 6,000 per year in motorcycle and maintenance.
Using offhand calculations, this means that an influx of 10,000 new passengers would result in net purchases amounting to around S $ 60 million.
Donning the delivery uniform
Cyclists like Joel and Vicky also make other small purchases in addition to their major investments in vehicles.
The two estimate that the price paid for the clothes is around S $ 200 per rider.
Mandatory purchase for delivery people includes the Food Delivery Companies Welcome Pack, which includes rider’s clothing, a food delivery bag, and an optional raincoat.
The average cost of a welcome pack to the “Big Three” is around S $ 100.
In addition to the basics, delivery people also buy arm socks, sportswear and covered shoes from brands like Decathlon.
Together, this amounts to approximately S $ 2 million spent on clothing for 10,000 cyclists.
Insure against the worst case scenario
Delivery people do not have to provide part of their income to the Central Provident Fund (CPF), but their propensity for road accidents means that insurance purchases are crucial in the worst-case scenario.
“Normally runners have an accident at least once,” admits Vicky.
Delivery guys who rush for deadlines tend to make reckless decisions, especially for young riders, he explains.
A trip to the A&E already costs around S $ 90, says Vicky. People with serious injuries, such as broken bones, are unable to work and should seek insurance to cover their health and living costs.
To date, Grab, foodpanda and Deliveroo have said liability insurance has been taken out for their passengers. Deliveroo said its runners have been covered for up to S $ 1.5 million since 2019.
The purchase of commercial insurance is not always mandatory but for platforms like Grab and Deliveroo, runners must take out their own commercial insurance to cover accidents occurring during deliveries.
The popularity of delivery insurance is such that companies like NTUC Income and AXA offer commercial insurance specifically designed for delivery people.
For a typical 18-year-old rider with no experience, the cheapest insurance plan costs around S $ 700, with full plans going up to S $ 1,100, according to Seedly.
This means that insurance costs can reach over S $ 10 million per 10,000 delivery people.
Total expenditure of S $ 86 million
One of the few bright spots in the 2020 economy, the food delivery industry is generating its own businesses – in the bicycle, motorcycle, clothing and even insurance industries.
Based on the end of the envelope calculations, delivery people may have already returned around S $ 86 million to the economy.
Although the delivery guy has his own hidden costs, he gets it all back, Joel says.
He adds that delivery people earn a living wage. He would earn about S $ 2,400 per month, based on a four-day, 12-hour shift.
Reports have also said that top performing runners can earn up to S $ 7,000 a month – although netizens have responded to this statistic with skepticism.
In addition to their major initial investments, the daily purchases of delivery men, such as the hawkers they frequent, also benefit from their patronage.
Currently, there is little or no research on the microeconomics of delivery people. It is also difficult to assess the extent of expenditure made by delivery people on the basis of interviews in the field.
However, according to our preliminary surveys, it appears that Singapore has found ways to generate its own healthy business ecosystem.
Featured Image Credit: Time Out
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