During the past couple of years as we found ourselves homebound due to various Covid lockdowns and restrictions, we took to online shopping like never before. Indeed, according to a report by McKinsey, within the £2 trillion European grocery market, online grocery shopping grew 55 per cent from 2020.
Despite hopes of returning to some semblance of normality, it’s a trend that is continuing. E-grocery is the new imperative. But beyond the weekly shop delivery, consumers also want their grocery items delivered on-demand. That can, for instance, be a smaller amount of items instantly delivered for that mid-week top-up.
So from e-commerce, we move into next generation Q-commerce, or quick commerce. This has resulted in a new crop of European start-ups springing up that aim to deliver grocery items from check-out on an app to delivery on your doorstep in just 10 minutes.
More than 10 companies, half of which were established in 2020, currently compete across Europe with this business delivery model. Operating what’s known as “dark stores”, these local fulfilment centres process online orders that are then picked up by couriers for delivery via e-bike, bicycle or scooter to customers in superfast time.
Venture capitalists clearly think they’re on to a promising thing here as many have backed these speedy delivery start-ups. According to PitchBook, venture-backed grocery delivery firms raised around $1.56 billion in Europe just within the first half of 2021.
Startups like Weezy, Getir and Gorillas are leading the way. The latter, which was founded in Berlin in June 2020 became one of the fastest European startups to reach a billion-dollar valuation. This enabled it to scale out of Germany into a further eight countries where over 10,000 employees now work in more than 180 dark stores.
Q-commerce is not a new phenomenon. In 1998, Kozmo raised $400 million in its mission to deliver groceries to consumers in less than an hour. Like others at the time, it struggled to make the business model work at scale and went out of business three years later. Likewise, US-based Gopuff struggled to secure investment when it launched in 2013 and it’s only since the pandemic that it saw a rapid acceleration in fundraising and now has an estimated value of $15 billion.
While many Grocery 1.0 attempts failed, the difference now with Grocery 2.0 is that it’s come at just the right time. Not only are there a lot more people using the internet (from below 500 million to over 4 billion) but the demand for online groceries skyrocketed during the pandemic. Customers appreciated the convenience and speed this service offered. Also, whereas during 1.0, customers might have baulked at the cost of delivery, paying a nominal delivery fee has now become the norm.
But, as with any service, customers are key and these customers expect to be able to contact the firm directly if something goes wrong with their delivery. Quick reaction and resolution times is what makes this model so interesting. Getir, for example, has deployed Zendesk Chat directly into its app to instantly answer questions from users about the status of their order. This makes the act of reaching out far faster and simpler for customers.
As the demand for Q-commerce grows so the market heats up. Competition has become cut-throat as these start-ups look to win market share and y scale internationally out of their home markets. But rapid expansion brings challenges around stock control, employee working conditions, data security for their customers and not to mention environmental concerns.
Of course, competition does not only come from fellow start-ups as traditional grocery retailers have seen the threat and so have also joined the Q-commerce fray. In the UK Waitrose, Aldi, Co-op and Morrisons have all signed up with the likes of Deliveroo and UberEats to get groceries to their customers fast. Meanwhile others have launched their own one-hour delivery platforms, such as Ocado with Zoom and Sainsbury’s with Chop Chop. Most recently, Tesco announced the launch of a pilot scheme with Gorillas at five of its large Tesco stores to enable it to get groceries to customers within 10 minutes.
Then there are also the tech giants such as Amazon, which have also tentatively put a toe in this market with its two-hour food delivery service. With all the competition around and, of course, being an online delivery stalwart it will be interesting to see what move it makes.
While all these new and established firms scramble over each other for a slice of the $2 trillion cake, it will be fascinating to watch as this market develops. It is a market notorious for thin margins and so reaching profitability will be a challenge. Is it a challenge that these start-ups can overcome with their VC backing and rapid delivery model that promises ‘to fulfil wishes instantly’? Or will the dominant retailers give enough of a fight leading to cannibalisation before a phase of market concentration? Either way, the era of e-commerce is now making way for the rapid rise of Q-commerce and its promise of superlocal, superfast grocery delivery to your doorstep.
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