The coronavirus time proved a boon for ecommerce sites and online delivery services. More and more businesses and restaurants had to shift online and have their merchandise and food sent directly to customers’ homes. One of the beneficiaries of this trend was the Finnish delivery company Wolt, whose income grew threefold last year and is extremely popular in Israel.
Wolt is the most prominent player in the field of deliveries in Israel, but its income from local activity is unknown. Wolt has so far based its activity on deliveries from stores that are on its app, but it is about to expand to more stores - with the help of site-building website Wix.
This expansion is part of a collaboration between Wolt and Wix, which announced last week that it is expanding its activity to ecommerce in Israel. Wix, one of the biggest Israeli hi-tech companies, develops a system for building websites that also includes specific solutions for ecommerce. The company allows businesses to manage their activities and sell products either online or physically. According to Wix, the total sales to stores in Israel that use its platform expanded 200 percent in 2020, and 50 percent in the second quarter of 2021.
Now the company has decided to create collaborations that will provide additional delivery and payment solutions for store-owners. The first collaboration is with Bit, an Israeli version of a Venmo-like app. The second is with PDQ, a company that provides logistical solutions for product deliveries, for example, listing a price depending on delivery time or following up numbers of orders. The third collaboration is with Wolt and together these services will soon be available to any ecommerce store that works through Wix’s platform.
Wolt and Bit have faced antitrust criticism for their massive market share. Last month, the Israel Competition Authority released a study on electronic payment apps and warned of Bit’s massive market power. Wolt was also criticized over its control of the market for deliveries from restaurants, and on the high prices it charges restaurants. Nevertheless, Wix says that this is only the first phase of its expansion in Israel and that it does not rule out working with other players, including Wolt and Bit’s competitors.
A customer today who orders products from a certain store can usually choose regular mail, registered mail or messenger service, and the orders arrive within one or two to seven days or more. From now on, online stores can add the possibility of ordering via Wolt, and the order will arrive at the customer’s home in a short time, half an hour to an hour, like any other Wolt delivery. The only problem is that the store and the customer have to both be in areas serviced by Wolt, which operates in 26 cities throughout Israel.
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This is the first time that Wolt has created such a collaboration and if it’s considered a success, it will be expanded to other countries. In fact, from Wolt’s perspective, this is a role reversal: The company is used to being the one that refers customers to other businesses through its app, and provide a service that includes delivery as well as customer support. Now, on the other hand, Wix will be the one to refer customers to Wolt. Wolt will focus only on deliveries and support to the stores themselves.
As a result, Wolt’s controversial business model won’t play a role here. For example, in orders placed through its app Wolt currently charges nearly 30 percent on average of the cost of an order - paid for by the restaurants - and it also charges a delivery fee from the customer. Now the company will only take a delivery fee, determined by the distance of the trip. While it will save on expenses, especially customer support, it may be assumed that this activity will be less profitable for Wolt.
Wolt believes that a good many of the deliveries, certainly at the beginning, will be done by its existing fleet, because they don’t expect there to be an overlap between the peak hours of food orders and peak hours of other deliveries, allowing the current workforce to carry the new workload.
According to the company, it now employs 9,000 delivery people, who are not employees of the company, but considered independent contractors employed as service providers. That means that increasing the number of deliveries per delivery person will not save the company money. However, if its delivery people earn more money, that could help it address the criticism it has faced over its business model, which doesn’t include social benefits and the workers are not protected by employment laws.
Ecommerce has expanded in recent years into strategic activity for Wix. The company offers a free platform for building a website, and users pay if they need more features. Over the years the company has developed many special features for various businesses, but realized that ecommerce requires development of broader solutions for establishing and managing online storeד. These include accepting payments online, managing orders, following up on stock, marketing tools, etc.
Wix has even started selling a physical tool to replace the cash register in a store and help synchronize online sales and sales in the brick-and-mortar premises - although this tool is not yet available in Israel. The company has also developed solutions in the realm of online payments. If a customer chooses to embed them on their websites, Wix takes a commission based on the cost of the transaction.
Arik Peretz, who will be in charge of ecommerce at Wix, says: “As an Israeli company the local market is very important to us, and we are investing major efforts in developing a platform by means of particularly advanced tools for this market, so that business owners will be able to significantly increase their revenues. The ecommerce market has grown a great deal over the past two years and we feel responsible to provide the best solution for online stores.”
Presumably, together with this, Wix has another advantage: its products’ exposure in Israel – the ability to attract more workers to the company just at a time when competition for workers in hi-tech is growing fiercer.