In early September, my German colleague and I spotted a row of Gorillas-branded bicycles outside a nondescript building next to an Aral (BP Germany) roadside retail site in Hamburg. The Gorillas manager showed us the order fulfilment report and the average time from the order receipt to the customer delivery was eight and a half minutes.
This neighbourhood warehouse stocked around 1,000 lines, including chilled and frozen top sellers, developed using sales algorithms. Tesco has recently announced a four-store trial with Gorillas to deliver convenience orders in 10 minutes or less.
Ultra-convenience – also known as quick commerce, instant grocery delivery, on-demand groceries and last-mile delivery – started in the US in 2013 with GoPuff, and is now the fastest-growing trend in e-commerce in the UK and across much of Europe.
GoPuff acquired the UK start-ups Fancy and Dija this year as part of its push into an increasingly crowded market for on-demand groceries. Groceries and daily essentials are delivered within 10-to-30 minutes, depending on their location.
GoPuff is valued at $15bn and Gorillas at $6.5bn after its latest funding rounds, which makes them (on paper) worth more than Sainsbury’s market capitalisation. These valuations and the growth in services in the UK, across Europe and beyond show ultra-convenience is not a fad.
These tech businesses are well funded, with billions of pounds invested in GoPuff, Gorillas, Getir, Zapp and others that deliver grocery items and alcohol within minutes using couriers from networks of ‘dark stores’ and miniature neighbourhood warehouses.
The rush of new start-ups and moves by established food-delivery companies, such as Deliveroo and DoorDash, to expand into grocery orders has fuelled speculation of further consolidation and more tie-ups with our national grocers.
It’s worth looking at the origins of GoPuff to understand if ultra-convenience is a risk or an opportunity for UK independent retail. Founded in 2013, GoPuff operates more than 400 dark stores and micro-fulfilment centres delivering to customers in more than 650 US and UK cities.
It fulfils customer orders – for food and drinks, cleaning and home products, over-the-counter medications, baby and pet products, and in some markets, alcohol – in minutes. GoPuff is open 24/7 in many markets, and late night everywhere else.
The key consideration is that these well-funded companies are tech businesses and not traditional retailers or wholesalers. Their increasingly sophisticated apps enable consumers to order small convenience shops from a tight range of lines – updated in real-time by algorithms – and to receive the orders ‘in minutes’.
These companies initially sourced products from local retailers. Sourcing is now direct from suppliers for their own app ordering. Where they partner with major retailers, such as Gorillas with Tesco, the service provides a curated assortment from that retailer’s locations.
What does this mean for UK independent retail? One option is to ignore it if it’s not yet in our geography. This can be sensible if we are famous for our proprietary foodservice and great customer service.
The second option is to use our real estate and proximity to do more than service the needs of store visitors.
There is also a third option of working in an ecosystem with other independents. More on this below.
Consumer definitions of ‘convenience’ have changed. Amazon has trained us to increasingly expect to get what we want, when we want it and on our own terms.
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The gap between when a product is purchased online and when it arrives at one’s doorstep has shrunk to the point at which regular orders arrive the same day, and snacks, beverages and essentials are available within 10 minutes.
While companies such as GoPuff manage their real estate and conduct their own deliveries, aggregator platforms such as Deliveroo, DoorDash and Uber Eats rely primarily on restaurant and retailer partners who want access to their driver networks and sticky consumer marketplaces.
The growth of these companies has gained tremendous momentum these past 18 months, with many years’ worth of projected growth in a matter of months. This has driven the formation of new ‘I want it now’ consumer behaviours.
The delivery aggregators shared a growing realisation that a restaurant-only approach limited their potential for profitability and scale. Their and new entrants’ expansion into groceries and small-basket convenience with immediate, rapid delivery was a logical strategy.
This trend poses an opportunity and a threat to independent convenience retailers. The convenience sector as a whole adopted a ‘wait and see’ approach with home delivery as they had never been forced to react in the way that department stores were forced to respond to Amazon.
This changed in 2020. Almost overnight, retailers were compelled to accept partnerships with third-party aggregators, since very few had invested in infrastructure of their own.
Independent retail now faces a fundamental dilemma. If they pursue short-term gains by partnering with third-party aggregators to compete with ultra-convenience providers, they add momentum to the growth and value of these platforms and increase the potential for their own disintermediation.
Independent convenience retailers enjoy advantages of proximity, customer relationships and real estate. Used together, there is an opportunity to create contextually relevant last-mile solutions that speak to the needs of their respective communities in new and exciting ways.
One option is to create an ‘ecosystem app’ with other local, like-minded retailers and offer a range of proprietary foods and drinks – alongside essentials – that are not available through any third-party provider.
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The risk of doing nothing is that retailers may lose access to specific customer segments and purchasing missions, at best.
The worst-case scenario is they become perceived as a dated and inconvenient channel, particularly with younger consumers, that’s only relevant for walk-in customers.
How can betterRetailing help you tackle the rise of instant grocery delivery?
- RN’s publisher, Newtrade Media, runs the Independent Achievers Academy (IAA), a unique club of forward-thinking retailers
- As a member of the Independent Retailer Owners Forum, the IAA has access to research and thinking on ultra-convenience
- The IAA can assist with expert and retailer contacts
Read more of our expert opinion on the independent retail sector