Good morning [%first_name |Dear Reader%],

Before we get to today’s edition, a little introduction. I’m Aayush Agarwal and I write on foodtech and e-commerce for The Ken. Seetharaman is taking a well-deserved break this week, so I’ll be helming this issue of Trade Tricks. Hi!

If you live in Bengaluru like I do, I’m sure you have seen those vivid sky-blue Yulu e-bikes (or e-cycles) out on the streets. If you haven’t, maybe you can remember the iconic Kinetic Luna from the 1970s. These look basically the same, just smaller and painted blue.

Anyhow, they’re everywhere. And their riders are almost all delivery personnel, many of whom are from India’s largest on-demand delivery platform—Shadowfax Technology.

The company claims to have 100,000 rider-partners across more than 700 cities, delivering over a million orders daily for 170+ enterprise clients. And while its riders may choose to undertake deliveries across industries, Shadowfax keeps their earnings per hour similar (minus incentives).

Hardly surprising, then, that food tech giants Swiggy and Zomato account for nearly a third of Shadow’s revenue.

But recently, these two clients have (to borrow some cricketing parlance) bowled a googly at Shadowfax. Which brings us to our headline today.

Shadowfax is ending its love affair with e-bikes 

But forget that for a moment.

First, we need to understand how the rider-Shadowfax-Swiggy/Zomato relationship works.

Both Swiggy and Zomato fulfil a certain percentage of their ~1.5 million daily deliveries via third-party (3P) players like Shadowfax or Grab, albeit at a slightly higher cost. In exchange, these 3P operators help scale up deliveries when there is high demand—like during lunch or dinner times, weekends, festivals, poor weather, etc.

So once an order comes in, Swiggy or Zomato route it to the likes of Shadowfax. The foodtech platforms ping(!) the 3P’s servers with details such as distance, estimated delivery time, and mode of payment.

If there are partners available at the location, Shadowfax pushes the details to their apps. The partner may choose to accept, or pass. If the latter happens, the order is rerouted to the foodtech player’s own delivery agents.

This flexibility to reject orders means that Swiggy or Zomato have to route a meaningful portion (say half) of their overall orders to the 3Ps first. But, unless there is a demand surge like we discussed earlier, there is a cap on the number of orders that each 3P player can accept during a day. This keeps the balance, reducing dependency and standardising business.

And until recently, Shadowfax would peek into the distance column once the order came in. If the distance was relatively short, it would pass on the order to its riders. If it was too long, the order would be rejected.

Shadowfax’s riders were happy; many took up e-bikes for the better economics, which had only worsened with the soaring fuel prices.