In 2021, whilst we were still – somewhat unknowingly – in the thick of the Covid-19 pandemic, we wrote a column looking at the potential future of rapid grocery delivery services. It detailed an industry that looked set to grow and keep growing, and was a certain goldmine for investors that was shaking up the market and introducing convenience to a level previously unseen.
As is now clear, Covid-19 altered the reliance on technology and delivery services in a way we haven’t seen before or since, as customers were physically not allowed to leave the house and the idea of ‘nipping to the shops’ was no longer the norm. In this climate, the inception of these start-ups filled a gap in the market, as, in the same way as Uber Eats or Deliveroo, the likes of Getir, Gorillas and Zapp were able to drop off a pint of milk or household essentials in less than 30 minutes. The buzz around where these services could go, led to the industry being valued at around $20.4 billion in 2021. But four years later, has this revolution come to pass?
“In early 2022, the company was valued at $12 billion, which was more than M&S and Morrisons combined.”
In short, not at all in the way that investors expected back in 2021. Demand for rapid delivery has significantly declined since 2021 for a myriad of reasons, but the cost-of-living crisis has been key, as it has meant customers are less likely to as readily pay for the premium of convenience, especially when shopping habits have gradually returned to those that are more similar to those pre-pandemic. Inflation has also meant that products which already cost significantly more from a rapid delivery provider, are even more expensive, making the service inaccessible to a large chunk of the population. As Tim Steiner, CEO of Ocado told The Times last year: “I just don’t think the immediacy premium market will ever be as large as the big basket market.”
The big-name start-ups from 2021 have almost all either scaled back or disappeared completely. Take Getir as an example. A Turkish start-up that was founded in 2015, it rapidly expanded during 2020 and 2021, moving into multiple European markets – including the UK – and the US. Business was booming, and in early 2022, the company was valued at $12 billion which was more than M&S and Morrisons combined. Things were going so well, that it bought up rival rapid delivery service, Gorillas for $1.2 billion setting up Europe’s biggest store network for rapid grocery deliveries across the UK, Germany and the Netherlands. However, its ‘expand now, profit later’ model didn’t pay off and a business model that was reliant on a consistent fulfilment of low value orders proved too risky as volumes weren’t great enough to offset low margins in grocery.
Exits followed, from the US initially (although FreshDirect, which Getir still owns has remained) and then, by this time last year, from Europe, including the UK, Spain and Italy. Now, it is purely focused on the Turkish market, after it reported only 7% of its revenues were coming from non-Turkish business.
Now, it is supermarkets that are dominating the sector. As Matt Hood, Managing Director of Co-op’s food business explained to The Times: “If we don’t do it, someone else will, but we do it better.”
Rapid delivery concepts are still being launched but with a reverse focus to the start-ups. Rather than serving supermarket produce, the supermarkets are making independent shops more accessible. For example, in February of this year, Co-op launched Peckish, a £1 million rapid delivery grocery app which offers its service to thousands of independent retailers. Its aim is to enable small, often family-owned, independent grocery businesses, shops and other co-operative retail societies to provide online grocery shopping and delivery services to their local customers.
The same month, it also offered in-app member pricing on Deliveroo to continue to support the growth of its online business which it said was ‘growing at pace’ and aims to have signed up eight million customers by 2030.
The partnerships that are emerging between established delivery and supermarkets appears to be the strongest future trajectory of rapid delivery. Waitrose and Morrisons both partnered with Just Eat towards the end of last year and Sainsbury’s and Iceland did the same with Uber Eats. Rather than supermarkets investing a lot of time and money into their own services – like Tesco’s Whoosh and Sainsbury’s Chop Chop which do still exist – they are able to outsource the costs of technology and couriers to the delivery services. In return, Uber Eats, Deliveroo and Just Eat, which are already established in the hospitality sector, are able to access a huge network of powerful partners and an established customer base without the cost of food storage and warehouse operations. It’s a win-win solution, that solves some of the issues the likes of Getir and Zapp faced post-pandemic.
“Post-pandemic, a cost-of-living crisis and inflation has led to a return to a slower, more considered and more affordable way of convenient shopping, and it is company’s like Ocado that are seeing the results.”
Generally, though, demand seems to be trending towards more traditional online grocery shopping. In its full year 2024 results, Ocado Retail increased revenue by 13.9% to £2.69 billion while orders from Ocado.com rose by 12.5%. As demand for rapid delivery services went down, Ocado’s active customer growth grew 12.1%. Tesco has also seen success in its online operations, serving 1.2 million digital customers weekly and it has also recently expanded its same-day delivery and collection service to over 400 stores. Post-pandemic, a cost-of-living crisis and inflation has led to a return to a slower, more considered and more affordable way of convenient shopping, and it is companies like Ocado that are seeing the results.
As the world continues to return to the way it was before 2020, so is customer demand. Now, these services feel like they are only serving the select few who can afford to pay a hefty premium on the delivery of toilet roll or washing up liquid, and so it makes sense that it is well established supermarkets that are offering them. Going forward, the rapid delivery market looks as though it will become a small extension of supermarkets in the same way that local stores and outlets on forecourts are, and a far cry away from the $14bn of investment that were pumped into the industry just four years ago. But what form will these rapid delivery services take in the future? Are they a cautionary tale? And is there any way back, or were they just a flash in the pan to solve an unprecedented need, during an unprecedented time? I’d love to hear your thoughts.
