Re/code has a story about how grocery delivery service Instacart is looking to improve its profitability by cutting the pay of its employees.
Here's how Re/code frames the story about how Instacart is targeting "some of its best-performing front-line workers" in the cost-cutting strategy:
"Over the last few weeks, the startup has notified thousands of contractors and employees who shop for, and deliver, groceries to Instacart customers that their pay is significantly changing, sources told Re/code.
"In some cases, the changes amounted to huge pay cuts for the company’s lowest rung of workers, resulting in hourly rate decreases of 40 percent or more, according to six current Instacart employees and contractors. A high-performing Instacart worker in one major city once made more than $25 an hour thanks to their speed; that person will now make $15 for the same work.
"Several of these people say the cuts are emblematic of a wider divide at the company, where the people doing the grunt work are often treated like second-class citizens. Instacart customers order same-day delivery of groceries from local stores, which are then picked off shelves and delivered to people’s doors by a network of thousands of workers."
Instacart has responded to the critical stories with a statement:
“Attracting and retaining shoppers is vital to running our business. We have made some recent rate changes to reduce variability in how much shoppers earn, and we are constantly innovating to help shoppers get more orders. After these changes our shoppers will earn, on average, an effective rate of $15-$20/hour, which is both in line with historical levels and strongly competitive within our markets.”
It shouldn't surprise anyone that workers and management see these moves from different perspectives, but I do think that the story raises specific issues about Instacart's business model.
It always has concerned me that some retailers were outsourcing the fulfillment aspect of e-commerce to Instacart, which was doing the same thing for numerous retailers in the same markets. Delivery people don't care about who whey are delivering for, because that isn't their job. And now, by changing the economics for those delivery people, Instacart may have created an us vs. them relationship with the very people who are representing all these retailers when they make deliveries.
I've argued here for a long time that I thought the Instacart model was unsustainable, that the goal always was to generate enough revenue to make some larger company want to spend an enormous sum to buy Instacart. I've always argued that it was a race to see if the company could be sold before the model went off the rails.
I'm not sure that this story proves me right. But it doesn't prove me wrong.