The story of Uber is one of convenience.

It's about how a simple piece of tech has been at the forefront of the way people call a ride or have food delivered.

This level of convenience is worth a lot of money, with a new report by Uber estimating the company has delivered a gross impact of $930 million to Aotearoa's economy as a whole, including $88m in additional value for restaurants in New Zealand.

Overall, Uber reckons it has contributed a value of $1.3 billion to the New Zealand economy in 2021.

The report comes off the back of the pandemic, which has not only dramatically shifted consumer habits but also the way Uber generates revenue.

Before the impact of Covid-19, Uber's ride-sharing service provided the lion's share of its revenue whereas Uber Eats was the little brother. The introduction of pandemic restrictions flipped that on its head.

And the company's managing director for Uber Eats across New Zealand and Australia, Bec Nyst, tells the Front Page podcast that the arm of the company under her remit now contributes 52 per cent of Uber's revenue across this market.

"What we saw in the pandemic was the acceleration of consumer adoption of online food delivery," says Nyst.

"We saw very strong growth in the delivery business and restaurants getting excited about growing their delivery business as well."

Uber Eats managing director for Australia and New Zealand Bec Nyst. Photo / Supplied

In many instances, delivery apps like Uber Eats were the only way restaurants could still get food to consumers during the pandemic without going through the logistical challenge of setting up their own delivery networks.

Even though restrictions have now been lifted, Uber Eats remains popular among New Zealanders who don't want to go out for dinner or go through the hack of picking up their food.

The accelerated uptake of Uber has given consumers, restaurant owners and drivers a fast-forwarded view of the broader impact the company has on the market.

What we are starting to see is that there's also a cost that comes with all that convenience.

Restaurant Association managing director Nicola Waldren says Uber's high commission rates have left the restaurants she works with struggling to make a viable profit from using the service.

"Feedback from our members has been that typical commission rates for Uber have historically been about 35 per cent," says Waldren.

"When you consider that the typical profit margin for a restaurant or café is between 3 to 5 per cent, it's pretty crippling for a lot of businesses."

Nicola Waldren, general manager of the Restaurant Association. Photo / Supplied

Uber did drop its commission rate by about 5 per cent during Covid – and while this change was made permanent, Waldren is still concerned about how hard this is hitting local businesses.

"Even at 30 per cent, the commission is still too high for a lot of businesses," she says.

"Over the last 12 months, we've seen some really significant cost increases across our businesses, with food increases being among those. Those rising costs are putting even more pressure on those really fine profit margins. That's something that really needs to be addressed."

Waldren's comments serve as a strong reminder that dipping into Uber Eats for a weekly treat doesn't mean we're supporting local businesses as much as we think we are.

In addition, Uber has also faced some criticism for offering lower commissions to larger businesses while charging small businesses the full rate.

"We represent 2500 businesses around New Zealand and up until now, Uber Eats has not been that open to collective bargaining through us," says Waldren.

"We've been in touch with them since they entered the market in New Zealand, but we would very much welcome the opportunity to reopen those discussions."

Asked about the high commission rates charged to restaurants, Nyst says she often tries to explain to businesses what that commission charge goes toward.

"It can be perceived as a lot, it goes toward things like marketing and promotion to grow demand, the cost of delivery, the cost of support and the cost of the technology – quite a lot is actually covered by that," says Nyst.

In response to feedback, Nyst says the company has looked into ways to make its service more flexible to give restaurant owners' options in terms of how they use the service.

Uber now offers options that allow businesses to use their own delivery service (bearing 16 per cent commission) or to use a pick-up service (6 per cent commission).

"These all come at different price points and allow a restaurant to create their own strategy that works for their economics and, their business strategy," argues Nyst.

These are all valid points, but they won't help assuage the frustrations of smaller businesses who are often left to pay higher commissions than much larger companies.

"Like all businesses, we have to negotiate and we have to make our economics work when we're working with very large enterprises. When there's a certain scale, there are economies of scale that come with that."

The underlying point here is that bigger businesses are simply better equipped to go toe to toe with Uber in the negotiating process. And that's ramped up even further with the introduction of competitors (including newcomer to New Zealand DoorDash), which means big chains can offer exclusivity in exchange for better commission rates.

Meanwhile, smaller restaurants don't have any of those bargaining chips – which is part of the reason why the Restaurant Association has been calling for collective bargaining that would enable a large group of small businesses to negotiate together.

Given the lack of movement in this regard, Waldren told the Front Page she is now hoping for regulators to step in and create a legal framework for that to happen.

Legal fight

The rules dictating Uber have been the subject of fierce debate around the world in recent years.

From New Zealand and Australia to Spain, Italy, France, the UK, the Netherlands and India, countries have resorted to their legal systems to question how the company should be allowed to operate.

Locally, First Union and E tū have brought forward legal action on behalf of drivers asking the Employment Court to identify Uber drivers as employees of the company.

There's clear frustration among Uber drivers - and this much is evident in Uber's own research, showing that 21 per cent of local drivers are unsatisfied with the app (64 per cent said they were satisfied.)

First Union strategic co-ordinator Anita Rosentreter tells the Front Page that under the current system, Uber drivers are considered contractors rather than employees.

"If you're not an employee under New Zealand law, you are not entitled to what we call minimum standards," says Rosentreter.

"So you're not entitled to things like minimum wage, guaranteed hours, the right to challenge an unfair dismissal, annual leave, sick leave, public holidays, KiwiSaver contributions, and you don't have the right to unionise and collectively bargain."

First Union strategic coordinator Anita Rosentreter. Photo / Supplied

Rosentreter says that approach is acceptable to genuine contractors and small business owners, who can figure out how to run their own businesses successfully enough to meet their own financial needs. But given that Uber drivers are so dependent on the platform, the union's argument is that these workers have been misclassified.

"The reality of that for Uber drivers is that they actually earn on average less than the minimum wage, they only get paid for about half the hours they work and they're frequently dismissed without fair process," says Rosentreter, speaking about the experiences of the drivers she is working with.

Asked about the progress of the court case, Uber's Nyst wouldn't comment on any specifics but did offer thoughts on Uber's perspective.

"That's a matter before the court, so I won't comment, but what I will say, in terms of our general perspective and the feedback we hear from delivery partners and drivers, one of the main reasons they choose to earn on our platform is because of the flexibility that it allows," says Nyst.

"I was talking to one of our own delivery partners recently. She's a mother with a young family. She's delivering in between her commitments, which include picking up and dropping off her kids. She works when it suits her. She doesn't do it when she's busy. She really values that flexibility."

This argument bears out in Uber's own research, which showed flexibility as the most common reason why drivers and delivery partners use the app.

But Rosentreter has heard this argument before and she isn't convinced by its validity.

"Uber's flexibility argument is definitely a myth, through and through," Rosentreter says.

"First of all, nothing prevents flexibility of hours in an employment relationship. Many employees in New Zealand have flexible hours based on when the work needs to be done and their own personal needs. And the ultimate flexibility is a casual employment relationship, but that doesn't meet many people's needs because we generally have ongoing living expenses to cover."

When it comes to actually doing the work that Uber needs done, Rosentreter also doesn't believe the app provides as much flexibility as people think.

"The way Uber drivers end up working, in reality, is based on where there is work available on the app. That's when Uber needs them to work. This is primarily rush hour and also late on Fridays and Saturday nights. These are not the hours of work that best meet the needs of the drivers themselves. These are the hours that Uber needs drivers for."

This argument will ultimately be settled by New Zealand's Employment Court once it comes to a decision.

The one thing that's clear right now is that Uber – and its slew of competitors – aren't going anywhere, anytime soon.

What we are now seeing is the process of writing the rules after the game has started. The court case involving the unions will play a big role in that, but so will the restaurant owners who also want to run sustainable businesses.

In the future, you'll still be able to hail your rides and have your food delivered. But the money machine behind making your life more convenient could be forced to change the way it does business.

• The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am.
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