The future of online groceries - ultra fast convenience 2020

The Future Of Online Groceries - Ultra Fast Convenience 2020


Release date: October 11th, 2020 (94 pages)
PDF/Powerpoint format. Price: GBP1,074.00

Abstract



- As online penetration rates remain high and are increasing especially in the areas which suffer new national or regional lockdowns, as we enter the second and third Covid waves in the West, online grocery is being transformed.

- The big multichannel grocers have or are working on their big basket solutions, be they home delivery or click & collect. But there is another basket size that is not yet served well, which is the convenience shop type - often distressed shopping late at night (OTC medicines for example) or ingredient substitution, etc. This is the new growth frontier in online grocery - ultra fast convenience deliveries. This report analyses the grocery offerings, rather than restaurant takeaway deliveries, as the restaurant delivery app players with their logistics networks are all muscling in on this space now.

- If one dares to look at a future beyond Covid-19, there should be a big future opportunity for small baskets, according to Tesco a £10bn opportunity in UK, or in other words about 4/5 of the entire online grocery sector as it stands. And in any other markets the opportunity will be as promising.

- But as Amazon have demonstrated over the years with their relatively small average basket sizes in online grocery, this is really hard to make work financially. The commissioning and delivery cost will eat up all the available margin, especially as food transaction baskets are not that high value. But at least Amazon changes a Prime fee for rapid deliveries (PrimeNow and now AmazonFresh free on regular Prime membership in the US and the UK) and has a minimum basket (otherwise extra fees apply). As an aside, Amazon also manages to mix food and higher non food margins much better in these baskets due to it being the everything store.

- Then again, there seems to be a sector that manages two make these ultra fast deliveries work up to a point. Restaurants can do it apparently, serving food baskets rapidly (to keep the meals hot) and are being convenient and have trained customers to be willing to pay fees (service/ delivery fee for rapid delivery). The point that most of the aggregator services (Deliveroo, Uber Eats etc) are still loss making is a different matter.

- There is an opportunity to exploit for grocers they should be able to raise network synergy effects, if they combine all food requirements and offers on one app and on one delivery vehicle (at the moment this is still a future opportunity, even though some Chinese companies are on their way to achieving this). Naturally besides attracting new shoppers and shopping missions adding a point to point delivery system where this makes sense will also alleviate the operative burden on grocers’ online grocery operations.

- One can ask the question whether companies can make money with network effects on a point to point delivery run (restaurant to household) especially with such small time windows. A related question is how many orders can operators reasonably expect to batch within the tight time frame for hot meal deliveries. The UK’s Deliveroo works with 3 drops an hour which is very good, but probably at the maximum end of efficiency for a point to point system.

- So where is ultra fast online grocery going in future? We believe that there will be a demand created by online grocers, logistics marketplaces and the takeaway apps due to their current offers. Arguably due to the Covid pandemic many retailers panicked into delivery partnerships to reach shoppers unable to get to their stores. But we believe that these services can not easily be withdrawn, as shoppers have transferred expectations about delivery times and capabilities from hot takeaway deals to their groceries.

- Currently online grocery retailers are not set up to meet this demand on their own, as their logistics network is optimised for next day (or later) deliveries. That said, once shoppers have been trained to have higher expectations, the retailers able to meet them in conjunction with a service provider or through their own (future) proprietary set up will emerge as the winners.

- This means that the pressure on being ultra fast will only increase for retailers going forward. Online grocers working with next day delivery could soon become laggards, even though same day capabilities are quite cutting edge still as we are writing this.

- Tapping into new delivery and logistics models, such as the takeaway apps, seems to be an enticing option for grocers. Not for nothing have Amazon invested in Deliveroo after all. The company is building out its amazing logistics footprint even more, becoming increasingly more the pipe through which everything flows.

- Other outside developments such as the upgrading of the infrastructure (5G) will also mean that everything is becoming faster and faster, and faster online grocery fits in with this trend. But where there are winners there are also losers. Gig economy employment is unstable and the environmental impact could also become a huge topic, if cites are swamped with delivery drivers at all times of the day and night.

Table of contents

Executive summary p10
The structure of the market p15
Market structure: traditional online grocery versus ultra fast convenience p16
Market structure: the players p17
Market structure: hot food expectations transferred to grocery p18
Market structure: point to point versus hub and spoke p19
Market structure: the logistic networks of the takeaway apps p20
Market Sizes p21
Market sizes: Online grocery, UK market sizes, data p22
Market sizes: Ultra fast online grocery market sizes UK p23
Market sizes: Food delivery market sizes p24
Market sizes: Takeaway delivery market sizes - Data, EU p25
App usage stats: Takeaway delivery apps, US and UK p26
Takeaway delivery Top 3: UK and US p27
The players p28
Ocado Zoom: stronger than expected p29
Waitrose Rapid: maximum basket size of 25 items p30
Sainsbury’s Chop Chop: 50 stores by 2020 p31
Instacart: on-demand delivery partnership with 7-Eleven p32
Instacart: on the way to super fast deliveries p33
Amazon Prime Now: not fast enough anymore p34
Amazon: the Deliveroo investment p35
Amazon: the new ultra fast fresh service p36
Amazon: fresh becomes a prime benefit p37
The takeaway app models p38
The model: platform versus logistics service model p39
The model: Amazon versus Ebay in foodservice? p40
The model: a convergence of models… at a cost p41
Just Eat Takeaway p42
Just Eat: the decision to offer logistics p43
Just Eat: …and the need to offer logistics solutions p44
Just Eat: groceries offer in trial phase p45
Just Eat: Asda partnership temporarily on hold p46
Just Eat: Just Eat Takeaway combines with Grubhub in $7.3bn deal p47
Just Eat: 44% revenue rise in the midst of the pandemic p48
Deliveroo p49
Deliveroo: the fastest growing company, Unicorn getting into trouble p50
Deliveroo: Revenue, losses, data, the Amazon tie up p51
Deliveroo: Analysis, dark kitchens p52
Deliveroo: adding groceries - Morrisons p53
Deliveroo: adding groceries - Coop p54
Deliveroo: adding groceries - Aldi p55
Deliveroo: adding groceries - Holland & Barrett p56
Deliveroo: adding groceries - Waitrose p57
Deliveroo: adding groceries - losing M&S p58
Uber Eats p59
Uber: Uber strikes deal to buy Postmates for $2.65bn p60
Uber: Uber going for the grocery business p61
Uber: Postmates as a white label solution for grocers p61
Uber: Net revenue ($bn) rides, eats, freight, other p62
Uber: Cornershop, being faster than Amazon p63
Uber Eats: the evolution p64
Uber Eats: moving into grocery, Carrefour, Galp p65
Uber Eats: Costcutter groceries in the UK p66
Uber Eats: adding groceries in Australia, Woolworths p67
Uber Eats: adding groceries in the US p68
Doordash p69
Doordash: SoftBank-backed DoorDash files for IPO p70
Doordash: extending the grocery offer p71
Doordash: launches “convenience store”, backed by MFC p72
Delivery Hero p73
Delivery Hero: Delivery Hero hungry for scale as it shakes up the Dax p74
Delivery Hero: picks up InstaShop in $360M deal to expand in groceries p75
DeliveryHero: plans to open 400 cloud stores p76
Glovo p77
Glovo: a grocery pioneer, plans for 100 dark stores p78
Glovo: Carrefour partnership p79
Glovo: focus on grocery delivery and Superglovo p80
Strategy p81
Strategy: how to bring costs down p81
Self driving cars: not happening? p82
Self driving cars: shifting from robo taxis to trucks p83
Self driving cars: focus on highways p84
Dark Kitchens: the pros, lower costs, flexibility, bigger catchments p85
Dark Kitchens: and cons, control, brand building, bad rep p86
Dark Kitchens: prototypes, shared space vs single user p87
Dark Kitchens: business case to become Grocery MFC? p88
Outlook p89
Outlook: the case for ultra fast online grocery p90
Chart 1: Market sizes: Takeaway delivery market sizes - Data, EU p25
Chart 2: App usage stats: Takeaway delivery apps, US and UK p26
Chart 3: Takeaway delivery Top 3: UK and US p27
Chart 4: Active daily users (Uber Eats, Deliveroo) in EU countries p27
Chart 5: Delivery market shares US p28
Chart 6: Uber: Net revenue ($bn) rides, eats, freight, other Table 1: Deliveroo: Revenue, losses, data, the Amazon tie up p51