Michael Oliver
Michael researches and writes Mintel's UK Retail Reports.

What are the prospects for rapid grocery delivery in Europe?

The pandemic accelerated the development of rapid grocery delivery services throughout Europe, with consumers staying home and major grocers being unable to meet demand for home deliveries with their existing online capacity. Even pre-pandemic, on-demand grocery deliveries were already expanding, and this trend looks set to continue in the next few years. Here, we explore the prospects for this increasingly important sector.

Rapid expansion for European retailers

Mintel research found that over half of online grocery shoppers in Italy, over a third in France, three in 10 in Germany and two in ten in the UK had groceries delivered by courier in 2020. The higher rates in mainland Europe relative to the UK reflect the fact that the UK online grocery market is more developed, whereas courier services became a quick way for European retailers caught out by the scale of demand for online grocery deliveries (most notably in Italy) to rapidly expand their home delivery capacity.

Grocery retailers launch their own in-house express delivery services

In the UK, where there has probably been the most innovation in this space, we have seen Sainsbury’s launching its ChopChop app-based service in 20 cities, offering deliveries within 60 minutes of up to 20 items for a flat fee of £4.99 and a minimum spend of £15.

The ChopChop app doesn’t require a booked time slot for deliveries

Source: Sainsbury’s

Similarly, UK market leader Tesco began trials of its Whoosh rapid delivery service in May 2021, initially from one Tesco Express convenience store offering delivery within the hour, with a flat £5 delivery fee and orders placed via its app or tesco.com.

Partnering with third party rapid delivery companies

In France, we’ve seen Casino partner with Uber Eats in March 2021 to launch a rapid grocery delivery service in less than 30 minutes, initially in around 30 cities. In the same month, French retailer Carrefour teamed-up with Deliveroo to also offer a sub-30-minute service in Paris, with plans to roll out to 10 other French cities as well as expand the service into three towns in neighbouring Belgium. 

Specialist  rapid grocery delivery operators are the biggest threat to store-based retailers

Specialist operators offering a rapid grocery delivery service (usually within 10 minutes) from warehouses/dark stores (eg. Getir, Gorillas, Dija and Flink) are a threat to traditional store-based retailers. They have the same business model of buying goods wholesale and operating their own premises. They therefore have complete control over their businesses, in contrast to retailers who partner with third party delivery companies that shop from existing store inventory. 

Players with this model are different in that they usually only operate via an app and their whole business is technology and data-driven. The app allows them to collect tremendous amounts of data showing which areas order which products and how often, allowing them to refine their inventory to match the needs of specific areas. They also use machine learning to predict demand and inform stocking decisions, as well as where to rent new premises if demand is too high for the existing network to sustain.

Getir can deliver “thousands of everyday items like baby diapers, chocolate, chips, beverages, shaving cream, detergent, deodorant, cat & dog food, batteries, and light bulbs”

Source: Getir

A clear hierarchy is emerging in terms of delivery times

Getir built a big following in Turkey by promising its customers delivery in around 10 minutes, faster than customers could walk to and from a shop themselves. We are seeing a number of other similar players offering this kind of proposition in the 10-15 minute range, which is possible because they own their dark stores/warehouses and employ couriers directly. Operators partnering with third party delivery companies cannot compete with that proposition because couriers have to travel to the store, collect the required items and deliver them, so promised delivery times are usually within 30 minutes. By contrast the mainstream grocers are promising to deliver only within 60 minutes, not really a competitive proposition.

Gorillas claims to be “faster than you” and deliver within 10 minutes 

Source: Gorillas

The main barriers to further expansion are likely to be the cost of these rapid deliveries, the coverage of operators and whether they require a minimum order amount. We have seen some operators such as Gorillas offering no minimum order as a point of differentiation in Germany, but this is usually offset by a flat fee for delivery.

The environmental factor

In the next few years, we expect to see a growing focus on the way in which products are rapidly delivered – with a trend towards electric vehicles, e-bikes and e-scooters. Additionally, there will be more focus on the packaging used to deliver the goods. Gorillas, for example, does not use plastic bags, delivers its orders in sturdy paper bags and only uses e-bikes and e-scooters for deliveries. In the US, Gorillas has also partnered with a non-profit which will collect all potential food waste from its warehouse and transform it into meals for distribution via other community-based groups.

What we think

Although no clear business model has emerged as an outright winner yet, the model combining an app with dark stores/warehouses has the edge on partnerships with third party delivery providers, certainly in terms of speed of delivery. However, high levels of funding will be needed to create networks of dark stores/warehouses and run loss leading customer recruitment campaigns. So those with the deepest pockets will be most able to sustain initial losses and weaker players will be swallowed up as operators look for quick ways to increase scale.

The growth of sector is most likely to impact convenience store shopping rather than full basket shops done at supermarkets, but with such a dense network of existing convenience store sites – store-based grocery retailers are ideally placed to fight back with their own services.