Crescent Kashmir

Covid-19 update: Turmoil caused by coronavirus likely to hit gig economy

Decrease Font Size Increase Font Size Text Size Print This Page

The turmoil caused by the outbreak of Covid-19 is expected to derail India’s gig economy, which was projected to touch gross sales 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, 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 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 take-away joints, yet orders for Zomato and Swiggy have been hit. “It’s difficult to put a number to it but 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 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 sanitisation 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.

While hotels are already being impacted, home sharing platforms such as Airbnb may face bigger challenges even when business resumes and normalcy returns, said experts.

“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,” said internet business expert Sreedhar Prasad.

Leave a Reply

Your email address will not be published. Required fields are marked *