It is no surprise that the fastest growing retail trend of the last few years has been rapid delivery and on-demand grocery services. Our appetite for these direct-to-door services grew hugely during the COVID-19 pandemic when access to physical retail stores was either severely restricted or completely off limits.
The pandemic created inflated demand for rapid delivery services, driven by limited alternatives and the growing importance of convenience to consumers – certainly in larger cities such as London where the time taken from the point of order to the point of delivery can be just minutes. Companies like Deliveroo, Uber Eats, Just Eat, Gorillas, Getir, and Zapp have all thrived.
Along with a marked increase in consumer demand the pandemic also turned rapid delivery services into the hottest partnership targets for major supermarkets, that lacked their own delivery infrastructure. Tie-ups between Amazon and Morrisons, Uber Eats and Asda, and Deliveroo and Sainsbury’s are just a few to have been announced during lockdown. These partnerships only further accelerated the growth and success of rapid delivery services.
But that was then. Today the market has a different look to it. Fierce competition for both scale and customers has kicked-off consolidation across the sector and, in some instances, a step change in corporate strategy. Towards the end of 2021, Getir acquired UK rival Weezy and its 700-strong workforce, whilst this month rapid grocer Jiffy announced that it would stop all consumer-facing operations and shift to becoming a dedicated rapid delivery software company. It clearly thinks it can make more money from byte deliver than bike delivery.
The driving forces behind these new routes is clear. An oversupply of rapid delivery services and a decline in customer demand, post-pandemic, has left companies scrapping in a much more competitive market. The latest data from analytics firm Kantar revealed a 15% decline in the proportion of grocery sales accounted for by online. Moreover, rising costs, including fuel and potentially pay – as recent strikes by couriers would suggest – has put increased pressure on businesses while consumers are also counting their pennies. Deliveroo noted in its most recent trading update that the uncertainties of “inflationary pressures, post-COVID consumer behaviour, and the broader geopolitical and economic impacts of the conflict in Ukraine” continued to impact management expectations.
Retail Week’s George MacDonald argues the sector is “subscale and overserved” and he casts major doubt on whether on-demand grocery can maintain the momentum created by the pandemic.
Ultimately, the survival of rapid delivery services may not be a matter of urgency, but currency. Cash is king, and in an oversupplied market during a period of extortionate inflation companies just need capital to outlast their competition. At a time when the financial markets do not favour public flotations, the one thing that is likely to be rapid is an increase in private equity and M&A activity across the sector.