An Instagrammer posts a photo of their latest #shoppinghaul for their followers to ogle over. Rather than the usual fashion splurge, though, this #spree is made up of four packets of crisps, a bar of chocolate, and a week’s supply of fruit. Its snapper is gasping that it was all delivered to their door in just ten minutes — and for just £1.10.
It arrives thanks to “Q (for quick) Commerce”: a new market where shoppers buy food and everyday essentials on an app only to have them delivered to their door within 10 minutes. Think Deliveroo meets Ocado but twice as fast.
Venture capital (VCs) investors are ploughing huge sums into startups in the space and apps are burning through millions as they battle for supremacy.
Who wins? At the moment, its customers.
Turkish giant Getir is offering £15 off a basket of food worth £16, whilst German rival Gorillas — one of the fastest European startups to reach a billion-dollar valuation — is offering £10 off everything.
“The market has exploded,” says Andrew Gwynn, an analyst at Exane BNP Paribas. “It’s a race to recruit consumers, so marketing spend is very high.”
Much like Uber pushed cheap rides a decade ago to get people used to the idea of taking cabs everywhere, Q Commerce apps want to get us all use to the idea of doing small, regular shops on our smartphones. They are doing it by subsidising the costs. The aim is to win as many customers as possible before gently withdrawing the freebies.
Walk down a London high street and you’ll likely pass billboards and buses splashed with Q Commerce ads. Turn on the TV and you’re serenaded by Getir’s earworm-like ads. And, if you look closely, you may spot one of the rapid grocery firm’s “dark stores” on a street near you.
It is these “dark stores” — dotted inconspicuously in urban locations — that allow Q Commerce to get goods to you in such a short time. By opening multiple, small locations near where people live, drivers can get people their shopping much more quickly than an Ocado driver that stocks up their truck at an out-of-town warehouse.
Some “dark stores” look like a messy corner shop. Goods are stacked in big plastic buckets rather than on display. Instead of tills or customers, smartphone-fixated pickers walk around filling up bags for waiting bikes as fast as they can. They are not open to the public.
Setting them up costs money, which is partly why these businesses are burning through so much cash. Profit is still a long, long way down the road — more than 10 minutes that’s for sure.
“Even when consolidation occurs and the deals calm down, it’s difficult to understand how the individual basket economics work [for speedy grocery delivery platforms],” Gwynn says.
“Take a look at someone like Ocado, for example: it’s usually selling a very big basket at a high gross margin, which is why its core retail is possible. Here, though, baskets worth £20 or £30 are delivered. The cost of delivery alone is probably about £4 or £5 per order, then there’s the rent [on dark stores], the picking expense, the riders — it’s extremely challenging to make money.”
Businesses will need the ‘right kind’ of customers to make the business work: shoppers putting enough in their basket for the apps to comfortably absorb the delivery cost. That’s not guaranteed.
“If everyone’s spending a tenner, we’re never going to make money,” one insider admits.
You wouldn’t guess at the challenging economics if you looked at the market: around 13 speedy food delivery rivals are currently battling it out in London — and that’s with some providers already gobbled up.
Getir, valued at almost $8 billion, bought UK rival Weezy last month. Two other British firms, Fancy and Dija, were swallowed up by US giant GoPuff (backed by SoftBank) earlier this year.
“Consolidation is a given, it’s a question of pace,” says Gwynne. “For some of these operators their primary purpose is to get bought out.”
Other big players include: Germany’s Flink, which just raised $750 million and has reportedly attracted interest from Amazon; Gorillas, which has done a deal to deliver Tesco food; and London-based Zapp.
Takeaway apps like Deliveroo are tinkering with grocery too — it has announced a tie up with Waitrose — whilst supermarkets are testing out their own in-house speed: Sainsburys’ Chop Chop service and Tesco’s Whoosh both promise delivery within an hour.
Why are VCs throwing money at the market if the economics are so challenging? The UK grocery market is worth around £160 billion. Even if Q commerce only takes 0.5% of it, it’s still almost a billion pound industry.
The fast-delivery food apps were mostly born during the pandemic but growth wasn’t fuelled by lockdown, when cherished supermarket slots were almost being sold on eBay. London-firm Zapp saw orders increase after restrictions were eased, according to Steve O’Hear, its head of strategy.
“When people are socialising or living more spontaneously, they order from us more,” he says. “Convenience comes into its own.”
The supermarkets and firms like Gorillas stress their ability to deliver basic groceries, fast — pitching themselves as alternative to a big, planned weekly shop. Others like Getir and Zapp focus more on convenience: a spontaneous snack or a pack of nappies delivered without having to move.
Getir’s ads include: “Ice cream in minutes — no melting about.” Zapp is all over Tube carriages screaming, “Want it. Need it. Zapp it.” Best sellers include Ben & Jerry’s, Red Bull, Moet champagne and loo roll.
“We think convenience is the one that gets it right, because people are less price sensitive,” O’Hear says. “But we don’t think it’s a ‘winner takes all’ market. If you look at grocery, there’s always been room for lots of different kinds of players.”
Still, there’s only so many bottles of Moet or tubs of chocolate chip cookie dough that London (or the world) can want within 10 minutes.
“There’s just too many [rapid grocery providers],” says Gwynn. “It’s common for an industry to start with a very big number and for that to shrink down quite sharply. What’s unusual here is the amount of money that’s been deployed so fast.”
The nine biggest operators have raised $7 billion so far this year. Gwynn expects just three of the 13 firms selling “ultrafast” food in London to survive long term. Some will buckle under the cost of infrastructure and marketing, while others will be bought out.
“Fast grocery ordering is a niche,” he says. “There will be a group of people out there prepared to pay that premium, but that niche is not big enough to support the number of companies going around.”