The super-fast delivery market is booming

Nearly two years into the COVID-19 pandemic, a new trend has changed the way many people shop for groceries.

In addition to the big weekly errands, a growing group of companies has carved out a new ultra-fast delivery chip. It’s often used for last-minute needs or cravings: popcorn to eat during a movie, an ice pack for an impromptu cocktail hour, or diapers when parents run out and the kids are finally over for a nap.

Instead of waiting a day or two to order online, it can be delivered in less than 10 minutes. It is a booming market all over the world but especially in the UK.

One recent afternoon, GoPuff overtook a coffee shop in London, an 8-year-old company with a firm footing in the US market. While baristas and influencers craft artisanal coffees with exquisite gift bags, the brand’s co-founder and co-CEO explained why he believes his brand can thrive in the highly competitive British market.

“When you look at [city’s] “Population density, we think it’s a great place for us to start,” Yakir Gula said. “When we acquired Fancy and Dija we really like the teams we thought there was a consensus of great values. But it’s the early days of this category. The percentage of online sales for convenience and immediate needs is very small. So I think the opportunity in Europe is big, and the opportunity globally is much greater. The UK is just the beginning, London is just the beginning.”

Gola completed its latest funding round in June, giving it a valuation of $15 billion. Backers include giants such as Blackstone Horizon, Guggenheim, and Softbank’s Vision Fund. It also holds 80% of the market share in the US, but competition is fierce in the UK. Stand on any central London street and you can’t miss two or three big red double-decker buses passing by, each with a wrapped advertisement for a different one of GoPuff’s competitors.

Data from Bain & Company shows that investors have invested more than $14 billion in express grocery delivery apps since the pandemic began. And during the first three months of 2021, more venture capital investments went into those services during the whole of 2020.

“Some of the big players in food delivery are thinking about how they position themselves in that market. It’s the same for grocery store chains. They’re thinking about how they can engage and be partners or acquire partners to do that,” said Ruth Lewis, an analyst at Bain & Company. .

In fact, Carrefour – the world’s eighth largest supermarket operator, based in central France – has several express delivery options for customers who are craving late-night ice cream or need cat food at the last minute.

Elodie Perthuisot said. , director of data and e-commerce for the company: “We launched our express delivery platform.” “And we’re partnering with Uber, and it’s probably the fastest growing service I’ve ever seen in e-commerce.”

She said the partnership generated more than $113 million in express delivery sales last year. She said the fact that customers are sticking with it indicates that it’s not just a shopping solution in the age of the pandemic.

“When you get back to normal life, you’re also in a hurry, you want to be more efficient. You cook your recipe and you need sugar…you know you have that solution in a very fast delivery. What we see is that this is really only the beginning.”

Victory permission for established players. But Bain’s Ruth Lewis said a number of growing pains await the newcomers.

“Currently, the focus of these companies is on attracting new customers to sign up for the service,” she said. “In order to do that, they are offering significant financial incentives to every order. This is something they will have to stay away from in the long run to be profitable.”

She estimates that to break even, these companies would need to complete 1,000 applications each day, at a cost of at least $40 each. This is much higher than deliveries for sundries.

On a visit to a GoPuff distribution center in London, an order for four huge bags of chips, four boxes of pasta and a bundle of small plastic cups totaled about $8. This may not be the average demand, but it begs the question: While consumers may be happy to incorporate another app into their e-commerce inventory, can players in this hot space drive pandemic-driven demand into long-term profits?

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