The dark underbelly of the world's largest food delivery market

China's food delivery industry, estimated at $200 billion and the world's largest by revenue and order volume, doubled in size during the three years of COVID-19 lockdowns and provided a steady income for seasonal workers across the country. But that is no longer the case.

A food delivery worker waits to pick up an order outside a restaurant in Beijing, China. (Photo: Getty Images)

The Chinese economy is grappling with a series of challenges, from a prolonged real estate crisis to weak consumer spending, which is causing significant losses for delivery drivers as well.

“They have to work long hours and are really being squeezed,” said Jenny Chan, associate professor of sociology at Hong Kong Polytechnic University. “They will continue to face pressure as delivery platforms have to keep costs low.”

According to Ms. Chan, the sluggish economy means people are spending less on meals. This reduces the income of food delivery drivers because a large portion of their earnings are based on the number and value of orders, forcing them to work longer hours to maintain their income.

Furthermore, the dominance of the two major food delivery platforms in mainland China allows the companies to impose contractual terms, leaving workers in the industry with little opportunity to protest the deteriorating working conditions.

Large labor force

Approximately 12 million drivers make up China's vast food delivery network, which began to grow rapidly with the launch of the Ele.me app in 2009, now owned by tech giant Alibaba.

Food delivery workers played a vital role during the COVID-19 pandemic when people were confined to their homes under strict government lockdowns in China. Now, food delivery has become an integral part of the country's culinary culture.

Food delivery drivers are everywhere, navigating busy streets and dark alleyways to deliver food every day, even in heavy rain or storms.

Meituan food delivery staff deliver orders amidst a storm in China. (Photo: Xinhua News Agency)

The Chinese food delivery market reached $214 billion in 2023, 2.3 times larger than in 2020, according to estimates by iiMedia Research, a company specializing in tracking consumer trends. The industry is projected to reach $280 billion by 2030.

However, drivers in the industry today face immense pressure to meet the "delivery on time" requirement for each order, regardless of whether it means driving against traffic, speeding, or running red lights, endangering both themselves and other road users.

However, they also cannot completely control their own income. One delivery driver unexpectedly smashed his cell phone on the sidewalk after receiving a negative review from a customer. He said the customer's complaint was unfounded, but the company still deducted performance points from him, resulting in reduced income.

"Do they want to ruin my livelihood?" , the man asked angrily.

Income decreased

Last year, profits for two of the industry's largest companies, Meituan and Ele.me, both surged. Meituan's revenue reached $10 billion, a 26% increase compared to 2022.

Alibaba reported revenue of $8.3 billion, primarily driven by Ele.me, in the fiscal year ending March 31, a 19% increase year-on-year.

However, the income of food delivery workers has decreased significantly.

According to a report by the New Employment Research Center in China, food delivery workers earn an average of 6,803 yuan (approximately 24.2 million VND) per month. This is nearly 1,000 yuan (approximately 3.5 million VND) less per month than they earned five years ago, even though many report having to drive longer hours.

Lu Sihang, 20, told CNN that he works 10-hour shifts, delivering 30 orders a day, earning around 200-300 yuan (700,000-1 million VND) per shift. Lu has to work almost every day to achieve an average income of 6,803 yuan.

Economist Gary Ng at the French investment bank Natixis points to China's "weak spending" as the cause. As the Chinese economy slows down, consumers spend less.

Gary said that although food is a necessity, the difficult economic situation means consumers are spending less on food delivery services, while restaurants will have to lower prices to attract customers.

This reduces the income of delivery drivers because their earnings are largely based on commissions on the value of orders.

Furthermore, the sluggish economy means fewer jobs, leading to fierce competition. China's youth unemployment rate surged to 18.8% in August, the highest level since the government changed its statistical methodology last year to exclude graduates who continue their studies.

"If the labor supply is large, workers' bargaining power will decrease, while the number of orders is limited," Gary said.

A food delivery worker waits to take orders at a restaurant in Beijing, China. (Photo: Getty Images)

The dominance of platforms

Research by China Labour Bulletin, a Hong Kong-based NGO, indicates that early delivery apps spent heavily to offer higher wages in order to attract enough workers to support their market expansion.

"But as conditions changed, platform companies, after dominating the market, developed algorithms to control the labor process, leaving delivery workers with little protection and a certain degree of freedom," the report stated.

Many restaurants don't charge for delivery. Some even offer deals that are cheaper than dine-in or pick-up.

Expert Jenny Chan explains that platforms invest heavily in the early stages to lower prices and eliminate competitors. But once they achieve dominance, they begin shifting the burden of costs onto drivers by cutting bonuses and salaries.

Earlier this year, the state-run online portal Workers.cn reported receiving numerous complaints from drivers in the industry.

A food delivery driver said he was fined 86 yuan (over 300,000 VND) for refusing a delivery order, even though he had informed the restaurant that he would not accept the order because they were not preparing the food within the stipulated time, Workers.cn reported.

Expert Chan points out the workplace safety issue when food delivery drivers are paid per completed order instead of a monthly salary, which incentivizes them to disregard dangerous road conditions or weather to deliver as many orders as possible.

According to the Global Times , in 2019, a delivery driver died while delivering food when a tree fell on him during a storm in Beijing.

In early October, a video went viral on social media showing a food delivery driver on an electric motorcycle running a red light and crashing into a car at an intersection in Hunan province, southern China.

Yang, a 35-year-old food delivery worker, acknowledges the drawbacks, saying the industry "isn't as good as it used to be." However, he still feels the job suits him after having worked in various jobs before, from selling snacks to office work.

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