Will Rapid-Grocery Delivery Succeed?

Quick last-mile services started in Berlin, and their rise is threatening the German convenience store.

February 14, 2022

Delivery Person on a Bike

ALEXANDRIA, Va.—Fast delivery services, like Gorillas, are growing their presence in large U.S. cities like New York, promising to deliver orders in as little as 10 minutes after customers purchase the products. These companies are differentiating themselves not only with their extra speedy delivery but also with who delivers the products. Instead of using independent contractors, or gig workers, these companies hire employees.

However, the New York Times poses the question: Will grocery services like Gorillas push out small businesses, then raise prices and lower wages? Looking to Berlin, where rapid delivery started much earlier than in New York, may be the answer.

“Berlin is a very thriving market, it is a very entrepreneurial market,” said Mark Wohltmann, director of NACS global. Berlin is home to a full spectrum of convenience stores, with single stores that are entrepreneurial and innovative mixing in with the big companies who like to use the Berlin market for their trial stores when they have new concepts, Wohltmann said.

NACS Convenience Summit Europe will be in Berlin May 31 to June 2, and summit goers will get to see firsthand the city’s convenience stores and new format shops.

Delivery service exploded during the pandemic in Berlin, greater Europe and the U.S. Gorillas started making deliveries in Berlin in May 2020, and many rapid-fast delivery services have popped up in the city since then, and these companies are “delivering a blow to Berlin’s infrastructure, street life, labor front and social landscape,” says the Times.

A common problem in both Berlin and New York is that the rapid grocery delivery services are not serving the city neighborhoods that would benefit from it the most. The Times reports that the greatest need for food is in Jamaica, Queens, and in the South Bronx. In Berlin, rapid grocery services mostly end at the ringbahn, the border between the city center and the less wealthy outer city.

One Berlin resident interviewed by the Times is concerned that rapid grocery delivery firms will weaken the city’s spätkaufs, Berlin’s equivalent to bodegas, since they sell items stocked in their own warehouses, unlike regular grocery services.

“If you stay in and order from Gorillas, you won’t participate in your neighborhood,” the resident told the Times.

Market saturation could prompt wage cuts, with instances already happening in New York City. Once DoorDash started its Manhattan rapid-grocery pilot, it cut driver pay, and after GoPuff introduced 30-minute deliveries, it also cut driver pay. DoorDash told the Times that it has increased drivers’ average earnings per “active” hour, meaning workers don’t get paid for time spent waiting for orders to come in, by over 30%, and GoPuff has partnerships for workers to receive discounts on gas and vehicle maintenance, since they are responsible for their own upkeep.

In Berlin, the Times reports that Gorillas workers feel they are not being treated fairly and are organizing to receive better treatment. One worker lost his job after arriving 45 minutes late to a shift, despite alerting his manager, and another worker threatened to file a lawsuit to receive pay the company owed them. The workers often carry bags on their backs that weigh more than 22 pounds, which is over the legal weight limit, leaving the bikes that workers ride unstable.

Gorillas defended the hiccups in its labor force, saying that challenges happen when a company disrupts an established market. “Our current economy requires a certain amount of flexibility to allow for innovations to develop,” Adam Wacenske, Gorillas’ U.S. head of operations, told the Times.

Although New York City passed a series of bills to protect gig-delivery workers, Gorillas and other rapid delivery companies don’t technically hire gig workers. They classify their workers as hourly or full-time employees, which means more rights, money and stability, with JOKR, DoorDash and Gorillas paying at least $15 an hour, and Gorillas and DoorDash offering health-care benefits. However, employees are not protected under the new gig worker protection laws.

In Berlin, the noise from the Gorillas warehouses are prompting some residents to call the police, and one warehouse owner says that she understands why they are upset, as the shop is open from 6:30 a.m. to midnight. The bikes parked outside the warehouse are seen as a nuisance on Berlin’s streets, and the same is happening in New York.

Dr. Moritz Altenried, a sociologist at Humboldt University in Berlin, says this is an urban planning problem, telling the Times, “These services need space for operations and delivery, and the infrastructure is not there for them to roll out so quickly.”

Tune in to the Convenience Matters episode “Berlin’s Thriving Convenience Retail Future” to hear more about what is happening in the Berlin market, including technology innovations surrounding tobacco products and shrinkage, how Germany is dealing with its own labor shortage issue and hydroponic farming inside stores.

Learn more about NACS Convenience Summit Europe, taking place May 31 through June 2 in Berlin.