It's not easy being a grocery delivery startup! Just ask Webvan, the dot-bomb-era delivery service that flamed out so spectacularly in 2001 that its name is synonymous with early 00s startup excess. Is SF-based Instacart preparing to join Webvan in the Bay Area grocery startup hall of fail fame? If the company's recent scramble to make money by slashing worker pay and raising user rates is any indication, we soon might be snickering at Instacart the way we once did at Kozmo or Pets.com.
According to emails acquired by the Wall Street Journal, "Contract drivers in the company’s hometown of San Francisco who collect prepacked bags from grocery stores will earn $1.50 a drop-off, a cut of 63% from the previous guarantee of $4."
The company is also cutting commission fees for drivers, "slashing by 50% to 25 cents the commission it pays for each item in an order drivers collect when shopping in stores."
The WSJ reports that drivers are still told that they can earn “$18 or even $20 or more per hour” if customers generously tip.
Delivery drivers for Instacart are contractors, and must pay for their own gas, insurance and related fees, with those costs presumably eating into that tip-contingent income.
It was about three months ago that Instacart raised fees for users, in December upping annual rates for unlimited deliveries from $99 to $149 and one-time delivery fees from $3.99 to $5.99.
The company also generates revenue by "charging more than retail prices for items at some stores and pocketing the difference or through commissions paid by the grocer."
But marking up groceries for delivery customers has apparently failed to net the company enough cash to continue business as usual, as the company also canned its entire recruiting staff right before Christmas last year.
And with this new change in driver payment, they can likely expect to lose more workers, as some say that the now-lower rates aren't worth continuing with the company.
“It’ll be a lot harder to make what I earn now,” one driver told the WSJ, which explained that to make what they're making before the cuts, drivers will now have to "nearly triple their deliveries."
“It was a good gig to earn some extra money, but I don’t think it makes much sense anymore."