LONDON—A new brand of delivery companies are cropping up in large metro areas with promises of delivering basic groceries to a customer’s door in 10 minutes, Bloomberg reports. The services, including those such as Gopuff, Getir and Gorrillas, have attracted investors eager to jump on the delivery bandwagon.
But how likely is it that these young startups will reliably bring in a profit? Unlike other delivery services like Instacart or UberEats, which send workers to other retail locations to shop, these businesses run dark stores in typically small warehouses outside of high rent areas. Because of the lower rent and wider delivery area than a typical food retail store, these delivery startups could become even more profitable.
Giles Thorne, an equity analyst at Jefferies Financial Group, estimated each such location could bring in $3.6 million to $6 million in yearly sales, with a profit margin between 5% and 10%. Thorne’s estimates are predicated on continuous growth for these delivery services though. As people return to offices and schools, online ordering might level off. Additionally, a competitive marketplace may not prove to be sustainable.
Larger supermarkets and convenience stores are also making moves to offer similar products and delivery times. Wawa, 7-Eleven and Casey’s are just a few of the many c-stores that offer delivery.
To learn more about why so many retailers are jumping onto the delivery train, read “Labor & Delivery” in NACS Magazine.