In the dynamic world of retail, two seasoned experts, Glynn Davis and Matthew Valentine, go head-to-head each month. This month, they spar over grocery delivery services!
New Mobility
Quick-commerce involving groceries was all the rage during Covid-19 when players with silly names such as Getir, Gorillas, Asap, Dija, Zapp, Jiffy and Weezy along with myriad other start-ups proliferated. Enforced lockdowns, increased customer impatience, and a torrent of private equity money helped fuel their growth.
But they have almost all since succumbed to harsh reality and shut up shop as their business models have proved to be unsustainable. Profits were an impossibility and once that was universally understood then the funding ceased. But this has not been the end of quick-commerce because into the breach have come the food delivery firms including Uber, Deliveroo and Just Eat Takeaway.com.
Whereas a standalone model for quick-commerce businesses was unworkable, these existing players are able to leverage their existing infrastructures to service grocery and other products alongside their existing activity of delivering on-demand fast food orders from foodservice businesses.
The reality is that there is consumer demand for the rapid delivery of groceries and other goods. Just Eat Takeaway.com recently forecast that the market in Europe for quick-commerce will be worth $16.5 billion by 2029. This is based on the belief that it has become a firm feature of the retail landscape. The research undertaken by the delivery firm found that 75% of people who had ordered on-demand groceries in the past believe it will become part of daily lives in the future.
Demand is being buoyed by a dissatisfaction with shopping in-store, with as many as 25% of people admitting to struggling to find the items they want when in-store and 50% find the all too common long checkout queues frustrate their experience. There is also the expectation by younger shoppers of maximum convenience in all areas of their lives.
I’m far from being a youngster but I’m with them on this. I’m increasingly tired of the queues in supermarkets that ultimately lead you to a self-checkout terminal that adds to the tiresome experience that is in-store grocery shopping today. No wonder Uber reckons 75% of customers now expect express delivery as an option when they are shopping for groceries.
No surprise then that the major grocers have sought to address this problem by tying up with the delivery firms and adding rapid delivery to their service options. One of the more gung-ho players in this market is the Co-operative, which is now finding that at some of its more remote stores as much as 40% of sales go through quick-commerce. Uber confirmed that last quarter as many as 14% of the total orders it handled were for grocery and that an impressive 90% of these are incremental for the food stores.
There is some expectation that these trends could ultimately result in the diminishing of the traditional ‘big shop’ that involved the tiresome ritual of the weekly trip by families who all piled into their cars and headed off to the nearest superstore for the purchase of a mountain of goods that filled their store cupboards and fridges. Today lifestyles increasingly feature more small baskets and top-up shopping throughout the week, which includes delivery.
Against this backdrop we will undoubtedly see the flourishing of quick-commerce fulfilled by the established foods delivery firms that have a sustainable model unlike their predecessors in on-demand grocery – that wacky-named cohort that have largely disappeared from the shopping landscape.
Picture the scene: You are incredibly important and your time is incalculably valuable. It is imperative that you obtain a jar of black olives, a lemon and some cornflakes before 7pm. What are you to do?
Thankfully, this hard-pressed urban demographic can now choose between any number of app-based services that will meet their every whim. If you’re lucky you might receive your order in just minutes, but certainly within the hour.
Of course, if the store is close enough to your home that you can submit an online order, have it picked, packed and delivered via a moped, in minutes, you could simply have walked to the shop yourself.
If you are incredibly busy at work, you could stop at a store on the way home. You could even – radical thinking here – just plan ahead slightly and have some food in your kitchen. Technology could surely provide some kind of refrigerated cabinet to keep it chilled until it was required.
In other words, the delivery riders who drone around our cities – with what seems like scant regard for traffic or parking rules – are a pointless but noisy development designed to make a profit, one day, for their operators. The real trick has been marketing which convinces us saps that we need them.
We don’t. We aren’t so busy that we can’t go to the shop. More of us than ever work from home, and we need an excuse to get out of the house. If we were really important, we would have somebody else to go to the shop for us while we were whisked off to Davos.
What about that emergency purchase, that forgotten dinner party ingredient? A good point, but not frequent enough to justify a business model. For these services to work, they rely on regular users.
If you are incredibly lazy, or just keen to be parted from your money, then becoming a regular user of fast delivery grocery services may appeal to you. You pay a fee, and probably higher prices, for the perceived benefit of feeling important and having a few extra minutes to watch television.
However, there are so many alternatives to fast delivery – including the now ‘traditional’ notion of just having your weekly shop delivered – that the downsides feel hard to justify. Poor pay and conditions for the cyclists/moped riders/car drivers that deliver the orders, the pollution of their constant trips, and the thorny question of profitability feel like one hurdle too many.
Ah yes, profitability. Like many new age services, most fast delivery grocery brands are having trouble with the profit part of running a business. Deliveroo recently reduced its overall losses to £32m, but various rivals have burned through all of the cash from successive rounds of fundraising, and are restructuring.
Amazon knows a thing to two about delivery and profit. Former Amazon executive and now supply chain consultant Brittain Ladd was interviewed least year and was admirably clear when he said: “I’ve stated from the beginning that rapid delivery is the worst business model ever created.”
Now, where are those olives?
