ALEXANDRIA, Va.—The ultra-fast grocery delivery industry is facing an adjustment period that may see some fold completely or change their business models, reports Reuters.
The pandemic fueled the upstart of many “quick commerce” grocery delivery companies, promising products to consumers in 15 minutes from dark stores or warehouses, and investors backed them heavily. But with inflation hitting consumers hard, the capital from investors is starting to run out, and many of these companies have shifted from expansion to retrenchment.
Getir of Turkey, U.K.-based Zap and German-based Gorillas have all announced staff cuts, and Flink, based in Berlin, is slowing down its hiring. London-based Jiffy announced it was closing down last month.
"The current macroeconomic climate has become incredibly challenging, with very little visibility of when things will improve," Zapp told Reuters in an email.
Despite hardships, some investors and executives are bullish on the fate of speedy grocery delivery, saying there is a solid business case for the concept.
Larry Illg, chief executive of online food businesses at technology investor Prosus, which has a 9.8% stake in Flink, said the current shakeout would ultimately benefit survivors.
"We are seeing slower rollouts of new dark stores, lower levels of marketing investment, and diminished discounting from competition," he told Reuters. "So aggregate growth is slowing down, but economics for the space are healthier."
The lines between restaurant food delivery, grocery delivery and quick commerce are beginning to blur. Uber Eats, Deliveroo and Just Eat Takeaway have entered the grocery space, while Instacart offers 15-minute delivery in select markets. DoorDash just acquired Wolt, a Finnish food delivery company. Spain's Glovo is being taken over by Germany’s Delivery Hero.
If investors are beginning to shy away from these grocery delivery companies and the pandemic demand for groceries ultra-fast is waning, building profit is increasingly important.
Gorillas CEO Kagan Sumer told Reuters the company is prioritizing profitability. Gorillas says it’s focusing on its five core markets that bring in 90% of its revenue: Germany, France, U.K., the Netherlands and the U.S. The company has a presence in Italy, Spain, Denmark and Belgium but said it’s “looking at all possible strategic options for the Gorillas brand” in these markets. The company raised $1 billion at a $2.1 billion valuation in October from investors including Delivery Hero.
Getir is cutting 14% of staff but said it won't exit any of the nine countries where it operates.
Sajal Srivastava, co-founder at TriplePoint Capital, a Silicon Valley firm that provides debt financing to startups including Flink, told Reuters that there is no one business model for food delivery, but some mix of hot meal delivery, convenience delivery and slower grocery delivery companies will succeed in each country over time.
"So every country will have multiple players, but do they need six? Probably not. Do they need two or three? Yes, and I think that's where it will come out."
A recent Wall Street Journal article reported that rapid delivery has faced headwinds due to intense competition in the space and high expenses. Normal speed delivery services use gig workers, but many rapid grocery delivery services, like Gorillas, hire employees to make sure they can quickly source and deliver orders.
According to NACS’ “Last Mile Fulfillment in Convenience Retail” report, 61% of retailers are satisfied with their third-party delivery partners. Concerns include high fees, little access to consumer data, difficulties delivering age-restricted products and service and operational issues. Read more about these challenges and what c-stores are doing to make delivery work for their businesses in “Delivering Convenience” in the December 2021 issue of NACS Magazine.