Because reaching scale is ultrafast grocers’ only hope of making the model work, the number of players currently making moves in the space around the world is unsustainable, and already there has been a significant amount of consolidation in this young category.
This week, for instance, media reports revealed that German quick-commerce startup Gorillas finalized the closing of its first acquisition deal for the French delivery startup Frichti for undisclosed terms.
More details: Gorillas Finalizes M&A Deal for French Start-Up Frichti
“We only want to do something where we can also draw out know-how for ourselves — not just a few warehouses with additional cash burn,” Gorillas Chief Financial Officer Elmar Broscheit said of the company’s M&A strategy in an interview with Germany’s Boersen-Zeitung, Bloomberg reported.
In 2021, on-demand essentials and food delivery service Gopuff acquired United Kingdom-based on-demand delivery startups Dija and Fancy. Also, Turkish 10-minute grocery delivery startup Getir agreed to acquire British rival Weezy, and on New Year’s Eve, German food delivery giant Delivery Hero announced an acquisition agreement to become the majority shareholder of Barcelona-based quick-commerce startup Glovo.
Also: European Giants Consolidate in Competitive Ultrafast Delivery Space
A January report found that on-demand delivery services’ losses can amount to as much as $20 per order on average.
Related: Ultrafast Grocers’ Losses Mount in the Face of an Uncertain Future
What Insiders Are Saying
Ultrafast grocers expect to see more consolidation going forward.
“I think as ultrafast grocery begins to mature, we’ll see some shakeout,” James Walker, CEO of ultrafast delivery service Buyk (currently furloughed as the company faces fallout from the sanctions on Russia) told PYMNTS in a January interview. “Players that are very focused on the business model as well as the customer experience ultimately will be successful, and those that are not spending the requisite amount of time will not be as successful.”
Read more: Ultrafast Grocery Delivery Moves to the Midwest as Competition Heats Up
Those in other eGrocery categories cast doubt on the long-term feasibility of the ultrafast model.
“It’s definitely structurally better if your item arrives in an hour than if it arrives in a week or longer because you don’t need to plan that far ahead,” Alex Weinstein, chief digital officer at online grocer Hungryroot told PYMNTS in January. “However, at a certain point, there’s just diminishing marginal returns.”
See also: eGrocery Customers Expect More Than Digital Shelves; They Expect Personal Relationships
By the Numbers
Research from PYMNTS’ The 2022 Global Digital Shopping Index: The Digital Transformation of Retail and the Consumer Shopping Experience, created in collaboration Cybersource, which surveyed 13,000 consumers and 3,100 merchants in six countries, revealed that consumers’ usage of mobile native shopping channels across these countries increased 21% between 2020 and 2021.
For more: Six Country Study Confirms Mobile Phone Is Modern Shopping’s Must-Have
However, adoption of grocery delivery channels can vary dramatically across international markets. For instance, findings from the study What U.K. Consumers Expect From Their Grocery Shopping Experiences, a PYMNTS and ACI Worldwide collaboration, which surveyed more than 2,500 U.K. consumers about their grocery shopping habits in September of 2021, reveal that United Kingdom shoppers are more than three times as likely as their U.S. counterparts to favor buying online and having the products delivered to a house. Specifically, 26% of U.K. grocery shoppers rank the channel as their most preferred, compared to just 8% of U.S. shoppers.
Related news: 52% of UK Consumers Shop for Groceries Online More Than They Did in 2020
