How disruptive is the rapid delivery model to grocery?
According to a recent Pitney Bowes BOXpoll survey, 54 percent of U.S. consumers believe grocery delivery within an hour is important to them, well above other categories. That’s good news for the wide range of “ultra-fast” or “rapid” delivery upstarts entering the marketplace.
The entrants promise delivery within as little as 10 or 15 minutes and their expansion has been fueled by major venture capital funding over the last year. Players include Gopuff, which recently scored a $15 billion valuation in a funding round, as well as Getir, Gorillas, Fridge No More, Buyk and Jokr.
Similar to ghost kitchens in the restaurant space, the rapid-delivery firms operate from dark stores, or micro-warehouses where pickers and packers efficiently prepare orders for delivery. The cost savings from buying direct and avoiding the need for cashiers and spacious aisles helps keep prices competitive with local grocers. The services can also set up the dark stores in lower-rent locations.
On its website, Fridge No More states, “No extra cost for convenience. How are prices so good? Smaller stores = lower rent.”
Gopuff also makes money through advertising and a delivery fee of $1.95 per order with a minimum order of $10.95 while also offering a monthly-subscription for $5.95. Many services, however, don’t charge delivery fees or require order minimums or subscriptions.
Critics see rapid grocery delivery firms facing challenges when it comes to overcoming the scale of large incumbent grocers.
“It’s a useful service and will grow quickly,” Jat Sahi, retail industry consulting lead at Fujitsu, told CNBC. “But how do you differentiate one from the other? If you can’t differentiate, you’ll never make much margin or profit.”
Increasing expectations around fast delivery are expected by others to drive potential acquisitions in the space by the likes of Amazon.com, Instacart and Doordash as well as partnerships, such as Kroger’s recent Instacart deal to offer 30-minute delivery to its customers.
Earlier this week, Uber partnered with a French rapid delivery startup to support 15-minute grocery delivery from Carrefour after partnering with Gopuff earlier this year on quicker delivery of “everyday essentials” in the U.S.
Alina Pedraza, an area manager for Buyk in Manhattan, told CNBC, “The biggest thing we give to people is time.”
- Ultra-fast? Sure. Ultra-loved? TBD – Pitney Bowes
- Ultrafast grocery delivery has exploded in New York City. Your town could be next – CNBC
- Fridge No More
- Watch out Amazon: These startups deliver in a matter of minutes – CNN
- Can the Mad Rush to Deliver Your Groceries in 10 Minutes Be Profitable? – Bloomberg
- The Race To Deliver: Are the new grocery delivery apps worth it for NYC consumers? – AMNY
- Uber jumps into Europe’s rapid grocery delivery market with 15-minute service in Paris – CNBC
- NYC startup promises 15-minute grocery delivery – RetailWire
DISCUSSION QUESTIONS: How disruptive will rapid grocery be to the grocery channel? How should traditional grocers as well as more-established delivery platforms respond?