Is the rapid delivery boom a bubble waiting to burst?
RTIH Editor, Scott Thompson, takes a look at the rapid delivery space and asks: is it the next big thing in retail, all hype and very little substance, or somewhere in between?
Last week, Tesco launched a pilot with rapid grocery delivery venture Gorillas.
The retailer’s customers will be able to order Tesco products to their doors, within 10 minutes, via the Gorillas app.
The latter will set up micro-fulfilment sites at five large Tesco stores to handle the deliveries.
The first store to be involved in the partnership is in Thornton Heath, London.
“The idea that we can reach our customers in just 10 minutes is really exciting,” enthused Tesco CEO Jason Tarry.
Tarry isn’t the only one getting excited by the booming rapid delivery sector.
Not a week passes by at the moment without a startup closing a mega funding round, or a major retailer looking to tap into this space.
But at some point soon, common sense surely needs to prevail.
As former Amazon executive and supply chain consultant, Brittain Ladd, recently commented: “The valuations being assigned to Gorillas and Flink, defy the laws of finance, mathematics, and logic. In my opinion, there is an ‘invisible hand of collusion’ artificially inflating their valuations.”
Although there are many rapid grocery delivery companies, only a few will survive, Ladd argues. Several have already been acquired and there will be more acquisitions in the future.
“I believe that rapid grocery delivery is a viable business model, but only a few companies will succeed. I anticipate that there will be many changes,” he says.
Yango Deli UK
RTIH recently interviewed Evgeny Chernikov, General Manager at Yango Deli UK, the rapid grocery delivery arm of Russian tech giant Yandex.
“The Covid pandemic has helped to accelerate the formulation of new consumer habits, including greater need for on-demand services like rapid grocery delivery,” he told us.
“Of course, there was already demand for these types of services, but the pandemic has sped up the pace of digital adoption and expanded this market.”
He added: “I believe that online grocery shopping, and an expectation of ultrafast delivery, is going to become the new normal very soon.”
“In the fast growing UK market, there is still enough room for multiple participants of different shapes and sizes. It is a dynamic space with many moving pieces.”
At the same time, however, even Chernikov admits that we might see some market consolidation with a few companies establishing a dominant position.
“What I am certain about is that it will remain an exciting sector and the place to be going forward.”
Buyk
The supermarkets have done great work during the coronavirus outbreak, keeping people fed in immensely challenging circumstances. There are, however, those who argue that grocery retail is in desperate need of a revamp.
As Slava Bocharov, Co-Founder and CEO at Buyk, a new service promising grocery delivery from dark store to doorstep within 15 minutes, recently put it: “The garbage collectors come each week. Public buses, trains and metro services transport you from destination to destination – it all works like clockwork.”
“But somehow, grocery shopping still runs on an outdated model, where we are expected to take an hour or two long break from our lives to trudge out to an over-sized supermarket once or twice a week. It’s a chore, placing an unnecessary burden on consumers.”
Traditional online grocery delivery doesn’t solve this issue, according to Bocharov. Next day delivery options still require planning and don't deliver the instant results people need.
“Imagine if you tried to pour yourself a glass of tap water, but the water didn’t start flowing until the next day. No one would accept this, so why should we be forced to for groceries?”
“This is why we consider Buyk to be more than a company. We are infrastructure, providing what is now an essential service in our busy lives.”
In conclusion
There is some substance to the rapid grocery delivery movement, but the current state of play is not sustainable.
Expect more innovation, more ambitious delivery times and more mega funding rounds. But also expect companies to fall by the wayside or be snapped up by rivals, with only a few players succeeding.
It also remains to be seen if this is a mass market, cross country thing, or more niche and city-based.
Also, in the week that COP26 takes place, are Gorillas et al at the extreme end of irresponsible consumerism, and will that cause them problems down the line?
File under ‘to be continued’.
