No Tax on Tips Will Drive Surge in Delivery Traffic
NYC closes "Instacart Loophole," Jahez buys Snoonu, egrocery sales spike
Two major policy changes are rolling out — one in NYC and one nationwide — which will dramatically affect the food delivery landscape. Add in new egrocery sales stats and an interesting (and gamified) merger in the Middle East, and we’ve got plenty to sink our teeth into!
This week we’ll have extra industry coverage, thanks to our partners at Everee.
Today:
Axing Taxes Means Surging Delivery Traffic
NYC Closes Instacart Loophole
Chart Time | eGrocery Sales Near $10B
Jahez-Snoonu Form Middle Eastern Delivery Giant
POLICY | OBBBA Tax Changes Incentivize Delivery Work
The One Big Beautiful Bill Act (OBBBA) is now the law of the land, and while the new legislation is full of problematic policy changes, one update should be of particular interest to the delivery sector: no taxes on tips. While earlier versions looked to exclude independent contractors and gig workers, the law that passed means all the tip money a courier makes delivering groceries or meals is untaxed at a federal level. Per Gridwise data, tips make up an astounding 53.4% of pay for restaurant delivery workers, and 45.7% of pay for those delivering groceries.
The Big Picture: Expect this to instantly drive more volume to the platforms with the highest tip pay percentage — like Instacart, Favor and DoorDash — and away from platforms more reliant on base pay. In the medium term, we expect this to draw even more workers into gig delivery work, as they do some tax arbitrage and realize that no other major industry has such a high tipped pay percentage. The trick is that consumers getting delivery usually set their tips based on the total value of the (generally large) basket, but very little of those basket dollars go to the courier, with most $$ sent to the merchant. Say you order $100 of food and tip 15%, that’s $15 for the courier, likely more than the 3PD was giving him or her for that half hour of time. Do note the provision expires in 2028 and phases out at $150k.
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POLICY | NYC to Close “Instacart Loophole”
Two bills — Intro 1133 and Intro 1135 — are expected to pass the NYC City Council today, bringing pay for grocery couriers in line with the pay received by those delivering restaurant meals. Another bill — Intro 0738, — would require apps to show tip options before or at checkout, looking to undo a change many 3PDs made in response to earlier NYC regulations. Also on the docket are bills to show pay breakdowns, make sure workers are paid within seven days and to ensure workers take safety training courses.
The Big Picture: Currently about 20,000 gig workers handle grocery deliveries, for platforms like Instacart and Shipt, but their pay had not been affected by the city’s landmark 2021 bills. Per the new laws, all gig delivery workers in New York City will now earn $21.44 per hour, with annual inflation adjustments. Expect to see the grocery apps add new consumer-facing service fees in response, similar to new charges some have just implemented in Seattle.
CHART TIME | Grocery Deliveries Surge in June
Well, grocery couriers may be getting a pay bump in the Big Apple, but it certainly looks like the 3PDs can afford it, at least based on their continued nationwide growth. New Brick Meets Click data shows egrocery sales up 28% YoY, and rising from $8.7B a month prior. An increase in monthly active users (MAU) was the primary driver of June’s big gains.
ACQUISITIONS | Jahez Buys 76.56% in Snoonu for $245M
Is this the new Saudi super app? The Middle Eastern mega app? The Qatari… quantum app? Saudi Arabia’s Jahez is gobbling up a 76.56% stake in Qatari on-demand delivery company Snoonu for $245 million. The deal values Snoonu at QR1.165 billion ($320M), making it Qatar’s first unicorn (at least when using a local denomination.) Started in 2016, Jahez offers food delivery, ridehailing and cloud kitchens in Saudi Arabia, Bahrain and Kuwait.
The Big Picture: Snoonu isn’t your average delivery or shopping app. It’s leaned into gamifying its platform, encouraging users to “win” orders based on cascading incentives, tiered rewards and other dopamine-boosting levers. Since Snoonu’s founding in 2019, it’s added in ever more gamification, which has boosted revenue 40%, upped orders per user by 30% and lifted AOV by 10%. While q-commerce might not work well in the U.S. due to different density and income distribution patterns, 3PDs the world over can certainly learn from Snoonu gamifying the delivery experience…
A Few Good Links
U.K delivery apps enhance identity verification. Deliverect hits one billion orders, names Justin Falciola as President of the Americas. Wendy’s CEO steps down. Shein files for HK IPO. Amazon Prime first days sales fall 41%, but expanded four-day format leads to highest revenue ever. Kroger launches Boost Bonus Days. Kroger and Albertsons unions reach agreement in SoCal. RSE Ventures launches investment round in Brooklyn Dumpling Shop. MTY Food Group net income soars 110%. JET adopts all Prosus-related offering recommendations. Grocer Morrisons brings rewards card program to Deliveroo. Delivery Hero shares q-commerce operations. Gopuff launches “6 7 Water.” (Must be some weird Zoomer thing…) Dana Rasmussen joins Lyft as Chief People Officer. Augmentus raises $11M for no-code robot programming. FedEx shuttering many sites east of Continental Divide. Uber pulls in $150M from Australian ad biz. Jetpak and Grasshopper to trial cargo drones. Sweetgreen Vs. Cava. Meituan’s hits record 150 million daily orders.
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