Rapid grocery delivery firms struggle as funding stagnates and cost-of-living crisis escalates
NTT DATA has conducted analysis on the rapid grocery delivery space, the long-term financial viability of which has always been in question, the company believes.
Last year, various startups were receiving heavy investment from VCs, and 12 months on, it appears their days are numbers, with consumer use dwindling, according to NTT DATA.
We’re currently seeing market consolidation with Getir’s expected acquisition of Gorillas, and Getir is also planning for survival with its most recent partnership with Just Eat.
NTT DATA surveyed 2,000 grocery shoppers in the UK, focusing on inner city areas where quick commerce is available.
It found that just under a third of inner city dwellers use rapid delivery apps/Q-commerce.
However, more than half using the apps are decreasing their use (59%) as cost over convenience becomes more important.
92% of consumers state cost is one of the biggest decisions for where and when to purchase their groceries. This is followed by quality with 77% confirming this as a key decision point.
Speed is left far behind with only 17% stating this is a deciding factor on where they buy groceries from.
This plays out when analysing web traffic data to the major Q-commerce brands. NTT DATA analysed SimilarWeb data and found there was an average 19% decrease in traffic over the last three months, with Getir taking the biggest hit.
To recruit customers, rapid delivery firms have delivered discounts and big market campaigns, just as Uber did, the costs have been subsidised with returning a profit a secondary consideration.
But the outlook for these apps now looks bleak as the cost-of-living crisis continues to grip the nation, NTT DATA argues.
Geoff Lloyd, Director of Retail at NTT DATA UK&I, comments: “As a result of food inflation and the current cost-of-living crisis, consumers are becoming more cost conscious with their purchases and are prioritising this over convenience.”
“As a result, fewer consumers are now willing to accept the higher cost that comes with the Q-commerce model, whether it is through higher pricing of products, or additional costs they need to pay for delivery to their doorstep.”
“As funding stagnates and introductory offers start to disappear, consumers are likely to decide that the convenience is not worth the cost and will move away from these applications.”
“There is a huge opportunity here for legacy retailers and grocers to gain back market share from the Q-commerce challengers and increase sales during this time, as the current economic climate is altering consumer buying behaviour.”
“By using data to help improve deals and targeted offers as part of loyalty programmes, supermarkets can gain the upper hand and increase margins during this difficult retail period.”
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