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SECTOR FOCUS – Can rapid delivery go the distance?

Joshua Lawrence on Unsplash |Joshua Lawrence on Unsplash

Earlier this month Gopuff’s co-founder Rafael Ilishayev stressed that, while no-one needs ice cream in 15 minutes, the trend of rapid delivery is serving the culture of “when I want it.” He compared the need for quick grocery delivery to the ability to book a car ride within minutes, and stream TV shows or films immediately rather than sticking to a broadcasting schedule.

Ilishayev argued that rapid delivery was not simply a reaction to the pandemic but part of “the tides of commerce changing”. And that this business model would continue to be profitable.

Is he optimistic? Or does he have a point? At the end of last year, the rapid delivery annual revenue had reached US$4.7 billion, with major supermarkets, and high street staples, continuing to expand partnerships with the likes of Deliveroo and Uber Eats.

In the UK, Deliveroo has nearly 6,000 grocery sites live across major partners as well as smaller independents. That number is an increase of more than two-thirds compared to the end of 2020. Coverage has reached 76% of the UK population with major grocery partners including Waitrose, Co-op, Morrisons and Sainsbury’s.

The Body Shop, Iceland and Asda have all put their trust in Uber to get products to consumers fast. Uber Eats is also helping Tesco with its own Whoosh service.

The grocery giant launched Whoosh, which allows deliveries of groceries in 60 minutes, in May 2021. The partnership with Uber Eats will cover 20 Express stores including Edinburgh, Bradford, Portsmouth, Norwich, St Albans and Letchworth.

When the partnership was announced in May, Alex Troughton, head of new verticals and grocery at Uber Eats UK, explained: “It’s clear that the needs of businesses and consumers have been rapidly evolving in recent years and that trend is accelerating.”

It is not only the retailers that are intrigued by the rapid delivery offering, it is clear consumers want groceries brought to them at speed. As the DeliveryX Europe Top500 2022 report found 77% of online grocery shoppers across Europe had already used, or would use, rapid delivery for groceries.

If the demand is there from customers, why are there questions over quick commerce success? Is it the initial rush of start-ups (Getir, Gopuff, Gorillas, Zapp and Jiffy) and competition in the market place that is causing concerns over the rapid delivery model longevity?

With news of recent acquisitions, mergers and exits from unsuccessful markets, it is clear that the rapid delivery sector is one that is still evolving and settling. The established players like Deliveroo and Uber have other income to support this fledgling delivery business, for the newcomers they need to know what they are doing.

“The reason the instant commerce category has been questioned is because no other player has figured this out yet,” Ilishayev claimed.

“The category is being judged by newcomers who didn’t nail their business model before scaling, leading to high burn businesses that are now in trouble.”

He concluded: “Gopuff continues to be in a category of one. And with that, we plan to continue to revolutionise commerce…..far beyond 15 minute ice cream.”

Read more in the DeliveryX Europe Top500 2022 report, which you can download here.

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