A Getir delivery scooter that was seen parked along the street in central London.
Petra Figueroa | SOPA pictures | LightRocket via Getty Images
LONDON – A new group of startups in Europe are offering to deliver people’s groceries in just 10 minutes, powered by venture capitalists and an acceleration in online commerce amid the coronavirus pandemic.
The Turkish Getir, the German Gorillas and the British Dija are just a few of the apps that promise users 10-minute food deliveries. It is an increasingly crowded market with many new entrants trying to break into the local markets.
“The acceleration in the food sector has been tremendous and accompanied the events of the pandemic,” Alberto Menolascina, co-founder and CEO of Dija, told CNBC in an interview.
Dija, who operates in London, Paris and Madrid, raised $ 20 million in seed capital in December. Menolascina, a former Deliveroo employee, founded the company with colleague Yusuf Saban. Both Getir and gorillas entered the UK capital earlier this year.
These companies operate so-called “dark stores”, fulfillment centers that are supposed to carry out online orders instead of serving customers personally. Dija and Gorillas are hiring their couriers instead of relying on contractors like Deliveroo and other gig economy players.
Venture capital investors rave about fast startups. According to PitchBook, venture-backed food delivery companies in Europe have raised around $ 1.56 billion so far this year, slightly surpassing the $ 687 million that went into the sector in 2020.
And the deals are getting more and more competitive. According to Bloomberg, both Getir and Gorillas are targeting investment rounds of at least $ 500 million, which is worth $ 7 billion and $ 6 billion, respectively.
Gorillas declined to comment on the Bloomberg report. Getir was not immediately available at the time of publication.
It’s not hard to see why investors are flocking to the glowing grocery delivery market. Grocery delivery apps like Uber Eats, DoorDash, and Deliveroo are making great use of online grocery shopping. Your businesses have done well as people have been spending more time at home due to coronavirus restrictions.
In the UK, traditional supermarkets continue to be the dominant players in online grocery delivery. A significant number of users are coming into the pandemic, according to App Radar, an app analytics company. Tesco was the most downloaded grocery app on the Google Play Store. It added 1.2 million users since March 2020, while Asda, which Walmart sold for $ 8.8 billion last year, was just behind at 964,000.
The upstart, however, are starting to catch up. According to App Radar, Gorillas has collected 112,000 downloads on Google Play since it was launched last March.
“If you just look at the numbers, these startups are obviously way behind established players like Amazon and the major grocery retailers,” Thomas Kriebernegg, CEO and co-founder of App Radar, told CNBC. “However, the things to be done change quickly.”
Kriebernegg said food delivery is a “hyperlocal problem” that requires investment in certain regions. He added that the room could be ripe for consolidation as some of the startups grow in size, with big tech names like Amazon and retail giants among the potential buyers. Amazon is already an active player in this space and launched its own online grocery brand called Amazon Fresh in 2017.
Another US company, SoftBank-backed start-up Gopuff, was valued at $ 8.9 billion earlier this year under a $ 1.15 billion financing agreement, giving it enough financial firepower for one potential acquisition while Instacart raised $ 265 million on a valuation of a whopping $ 39 billion.
Investors believe these startups will thrive long after the pandemic. However, some retail executives and experts are skeptical about the emergence of apps for quick grocery delivery.
Alex Harvey, chief of advanced technology at UK online food pioneer Ocado, told Insider last month he doesn’t think startups pose long-term competitive risk to his company.
Jat Sahi, head of retail advisory at Fujitsu, told CNBC that the grocer’s positions were “not very defensible”.
“It’s a useful service and it’s growing rapidly,” Sahi said via email. “But how do you differ from each other? If you can’t tell, you will never make much profit or gain.”
“Price is really important and it will be a long time before these people get the scales to get prices for Tesco, Sainsbury, Asda etc, especially if they cut the market between them,” he added. “Tech and consumer trends make this easy, but it’s difficult to make it differentiated and highly profitable.”
Sahi added that dark shops “probably won’t work as well as dark kitchens for these startups,” restaurant furnishings that target online customers directly, “because in-store products are comparable while restaurant meals don’t.”
The imminent reopening of the national economies after lengthy lockdowns also threatens to slow the growth of fast-growing delivery platforms. In its first quarter trading update, Deliveroo recently warned that “the rate of growth will slow as lockdowns abate”. Deliveroo’s share price has fallen 36% since its disappointing IPO in March.