Your GrabFood order is delayed

On Nov 4, Singapore’s Senior Minister of State for Transport Lam Pin Min announced a ban on e-scooters, or personal mobility devices (PMDs), from footpaths across the country. Combined with PMD prohibition from roads, offenders will face up to 3 months in jail and/or $2000 in fines starting Jan 1, 2020. The ban comes on the back of The Straits Times reporting nearly 300 accidents attributable to PMDs in 2018. Earlier this year, the National University of Singapore (NUS) also halted provisions of GrabWheels. Originally intended for student transport, GrabWheels eventually led to late night races and accidents across campus. From a safety perspective the decision is clearly long overdue. But from an economic perspective, does it create more problems than it resolves? 

Key parties affected by the decision would be Singaporean retailers of PMDs, who now lose out from falling revenue owing to reduced demand for the transport method. Secondary producers contributing to PMD production could also be affected, but obviously to a smaller degree. As of February 2019, 14 retailers had applied for the LTA’s ride sharing license; over the year, some changes included US player, Lime, dropping its Singaporean share due to changed growth plans. As it now seems, this was a good idea as firms with higher market shares in Singapore’s PMD industry now have to diversify production to alternate sources of revenue. 

Unexpectedly, however, the ban faced more opposition from a different stakeholder altogether: food delivery companies and riders. At its worst, the ban would increase customer wait time, lower the number of willing riders, reduce customer scope and revenue for restaurants and potentially cancellations in periods of bad weather. Aside from the qualitative losses in efficiency and timing, this would represent a significant financial loss to the $223M industry and its 1M users. From the 3 key players in Singapore’s online food delivery market (Deliveroo, Foodpanda and Grab), Deliveroo claims to use e-scooters for less than 5% of its deliveries and Foodpanda uses them for less than 1/3 deliveries. Thus, both could afford to divert the majority of their business to other modes of transportation while retaining their current profit margins. 

Grab, however, faces more struggles as it dominates the majority of Singapore’s food delivery industry and more than 1 out 3 of its deliveries use e-scooters. The obvious options for them are then a) convincing all their e-scooter riders to shift to alternative methods of delivery or b) firing them all in the hopes of a massive hiring spree. Since neither of the extremes are possible, it is more likely that the company will attempt to achieve a sort of middle road between the two or opt for an entirely new method of service delivery. Either way, it won’t be an easy transition. 

Harder yet is the micro level of the problem: the riders themselves. All 3 companies give riders between $6-10 per delivery. Assuming an average of 7000 riders and even 10 deliveries a day, this would mean a loss of between $140,000-$230,000 across the country daily. Moreover, many riders are not willing to use methods other than e-scooters are forced into unemployment owing to the ban. Combined with the effects on PMD retailers, the ban is an additional source for unemployment to the existing 3.3% in Singapore. 

Despite these stakeholder impacts, the key argument for the ban remains that it saves lives. Loss of revenue and unemployment can in no way be compared to the increasing number of PMD accidents documented in recent years. But what this evaluation of impacts can do is point out the need to reduce losses faced by third parties affected by the ban. Potential ideas could be distinguishing between skilled and unskilled riders. Regulatory methods could include setting up training centres for e-scooters alongside existing programs for cars and motorbikes at Comfort, only allowing licensed drivers to use bikes or even specific arrangements with the three food delivery companies. Regardless, it makes sense that if the majority of the accidents are caused by amateur riders racing through NUS’s streets at night, the burden should not be faced by skilled riders using e-scooters to earn a decent wage.