Some early investors are looking for for these fledgling grocery delivery companies to float on the stock market so that they can cash out before it is known whether the model will ever make money as was the case with Uber, Lyft and Deliveroo.Ĭlearly providers are attempting to maximise their customer base and buying power with suppliers to try and build a long-term operation. Will people go back to supermarket shopping in person if delivery prices go up? Photobac/Shutterstock Strategically one problem with the industry is its low-entry barriers which mean it is easy for new competitors to keep down the profits. Takeaway delivery food firms such as Deliveroo and Uber Eats continue to experience similar economics. Ride-hailing firms such as Uber and Lyft have been running for 13 years and are still not even threatening to break even. Like much of the gig economy, the jury is still out. It is also difficult to tell whether such services will generate profits in the long run. The cost-of-living crisis will put more pressure on shoppers than COVID One issue is that an individual customer can probably exist on incentives over many months by rotating between suppliers. This market has already rapidly become crowded and hyper-competitive, with many providers offering highly discounted introductory offers. These are picked up locally and delivered by fleets of cyclists, electric scooters or motorbike riders. The objective is to cater to impulse buyers with small, spur-of-the-moment deliveries such as eggs or beer. They all operate from local “dark” stores (distribution centres for online shopping) with a limited range of groceries, offering delivery times ranging from ten minutes to under an hour.
As well as Gorillas and Getir, other operators include GoPuff, Jiffy, Zapp, Dija and Weezy. Over the last ten years, profits of the big four supermarket chains have more than halved as a consequence of increased low-margin internet sales and the growth of the German stores Aldi and Lidl.įast home grocery delivery firms continued to pop up during the pandemic. They are also working in increasingly competitive markets. This is a more expensive model than in-store sales in which the customer does most of the work, choosing items and taking them to the checkout.Ī consequence of rising internet sales is that the big grocery chains must continue to pay the costs for their shops around the country where dwindling numbers of purchases are being made.
For instance, staff must walk down supermarket aisles and select items for online orders before adding them to crates. Margins are far lower as they have to take in extra elements. Online grocery sales have since reduced to 13% of total grocery sales, although 30% of adults still make some online grocery purchases.īut online delivery services are not all good news for the supermarkets. This drove the big four grocers in the UK – Tesco, Sainsbury, Morrisons and Asda – to invest in internet deliveries simply to retain trade. Online purchases from food stores in the UK reached an all-time high of over 15.4% in February 2021 during the pandemic. With a strong trend towards home delivery this has also created an opportunity for “quick” grocery delivery services via apps such as Gorillas and Getir. COVID rapidly accelerated the overall trend towards internet ordering of all retail sales with UK online purchases approaching 30% in 2021.
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