Platforms have pledged to provide food delivery riders with social insurance, but many of them appear not to want it.
As e-commerce giant JD.com looks to disrupt China’s food delivery sector, a war of words erupted on April 21, when the newcomer accused one of its rivals of basically telling millions of takeout couriers: You’re either with us, or against us.
In an open letter, the company alluded that either Meituan or Ele.me, the market’s two biggest players, had threatened to block riders from using its platform if they also deliver orders for JD’s new takeout app. At the same time, JD announced plans to recruit 100,000 full-time couriers and provide them with social insurance, a potentially major shift in an industry that currently relies on a freelance, uninsured workforce.
Meituan was quick to counterthe suggestion that it had given its gig workers any such warning. However, coverage of the spat has led to discussions online over whether JD’s bold entry into the market could herald better working conditions for takeout couriers.
Market tussle
An analysis by Kaiyuan Securities shows that Meituan and Ele.me together dominate roughly 98% of China’s food delivery market. Meituan’s share surged from 30% to 64.6% between 2014 and 2023, while Ele.me — part of the Alibaba Group — has enjoyed more modest growth, going from 27.6% to 33.9% in that same time.
The size of the market has swelled, too, with its value reaching 1.64 trillion yuan ($23 billion) last year, up from 30.13 billion yuan in 2017, according to data from iiMedia Research.
Over the years, the booming industry has attracted many top corporations, with tech giant Baidu, ride-hailing platform Didi, and short-video platform Douyin — the Chinese version of TikTok — all vying at some point for a piece of the pie. However, none have ever proved a real threat to the two leading players.
JD’s decision to enter the market early this year was telegraphed in 2022, when Xin Lijun, then head of its retail division, revealed in an interview that the e-commerce giant was considering the move. It finally launched its own takeout app on Feb. 11.
Business magazine Forbes China suggestedthat, with the golden age of traditional e-commerce firmly in the rearview mirror, JD will be hoping the move helps diversify its interests, reach new customers, and improve “user stickiness,” making them more likely to use JD’s other on-demand products and services.
Yet, what came out of the blue was JD’s announcement that it plans to directly employ an army of full-time couriers and provide them with social insurance, which in China covers a range of benefits including health insurance, pension, unemployment insurance, maternity pay, and occupational injury protection.
Details on exactly how this will work and who would be eligible have yet to be released. However, the move would be unprecedented.
Since the industry emerged around 2013, food delivery riders in China have predominantly worked on a freelance basis, entering only into service agreements with the takeout platforms, not labor contracts. Today, the vast majority are recruited and managed by temp agencies or contracted third-party enterprises.
Data recently released to themediaby Dada Nexus, the company handling JD’s on-demand deliveries business, shows that the JD takeout app already has about 1.3 million active couriers, although only 30,000 to 40,000 of them “work all day.”
Not to be left behind, Meituan announced on Feb. 19 that it was also developing an information system with a view to providing some of its 7.45 million couriers — according to estimates by Kaiyuan Securities — with social insurance by the end of June. However, only 11% of its delivery riders were “active” in 2023, meaning they clocked in on more than 260 days, while almost half spent fewer than 30 days in the saddle.
The work of takeout couriers has steadily intensified as the industry has expanded, yet salaries have not kept pace. According to Bridge HR Tech Group, which recruits and manages workers for Meituan, Ele.me, and other platforms, the number of standard deliveries increased from 89.4 million in 2021 to 92.5 million in 2023, yet the riders’ commission per order dropped on average from 7.24 yuan to 6.95 yuan over the same period.
A freelance takeout courier recently told Caijing magazine that he earns 5 to 6 yuan for each delivery through the JD app, rising to 10 yuan in the peak hours around lunch and dinner, about double what he makes from Meituan deliveries. However, JD’s guarantee of “delivery within 20 minutes or it’s free” has resulted in increased stress levels, with a higher risk of late fines.
How much the platforms take as their cut has always been controversial. In December, Meituan released a statement to quash rumors that it charges merchants a 30% commission, insisting that the rate is capped at 8%. On April 15, Liu Qiangdong, the founder and chairman of JD.com, added fuel to the fire with a viral video in which he criticized the commissions charged by his company’s rivals as “too high.” He pledged that JD would make no more than a 5% profit from its delivery services.
Raising awareness
Both the announcements by JD and Meituan regarding their social insurance policies, as well as discussions at the highest level of the Chinese government about improving benefits for gig workers, have firmly placed a spotlight on the issue in recent months. However, regardless of the time frame, implementation will pose challenges.
One major obstacle could be the very people these policies aim to help.
In 2022, a team of researchers at the Capital University of Economics and Business, in Beijing, surveyed more than 1,400 food delivery riders and discovered that almost one-third were reluctant to be entered into China’s social insurance system. Reasons included the impact it would have on their salary — both employers and employees need to make monthly contributions, although the former pays more — and a general lack of knowledge about the benefits.
Protecting the rights of those in the industry, such as in the event of a salary dispute or occupational injury, has long been another issue.
Online takeout platforms began outsourcing courier services to third-party enterprises in 2018, slashing the number of workers they hire directly, according to a 2021 report by Zhicheng Public Interest Lawyers, which supports migrant workers in labor disputes. As a result, gig workers can have a hard time in court proving an employment relationship.
For the report, attorneys reviewed 1,907 court verdicts related to such disputes nationwide since 2016 and found that only in 47% of cases involving multi-layered labor relationships was the link between the plaintiff and defendant established — even full-time riders who had signed labor contracts with third parties struggled.
Freelancers without formal employment contracts and self-employed people can sign up for social insurance themselves, although the cost formulas and benefits change across cities and provinces, and the threshold can be prohibitively high.
In February, Liu Yuanju, a researcher at Shanghai’s SIFL Institute, a nonprofit institution specializing in economy and law research, wrote a columnthat urged authorities to lower the threshold and provide subsidies to bring more gig workers into the social insurance system, rather than relying on public opinion to pressure food delivery and other tech platforms into changing their behavior.
Reported by Chen Zhifang and Wang Xi.
A version of this article originally appeared in The Paper. It has been translated and edited for brevity and clarity, and is republished here with permission.
Graphic designers: Wang Yasai, Fu Xiaofan, and Ding Yining; editors: Wang Juyi and Hao Qibao.