23.8 C
New York
Thursday, September 23, 2021

Groceries in 10 Minutes: Delivery Start-Ups Crowd City Streets Across Globe

IDBS ART GALLERY

LONDON: A new entrant promising almost instantaneous satisfaction for your craving for a bar of chocolate or pint of ice cream is zipping around central London, among the bikes and scooters of Uber Eats, Just Eat, and Deliveroo: Getir, a Turkish company that claims to deliver your groceries in 10 minutes.

Getir’s deliveries, which are made possible by a network of local warehouses, are as quick as the company’s recent growth. After five and a half years of pioneering the model in Turkey, it unexpectedly opened in six European countries this year, bought a competitor, and expects to be in at least three American cities by the end of 2021, including New York. Getir raised nearly $1 billion in just six months to fuel this outburst.

“We accelerated our plans to go to more countries because if we don’t, others will,” said Nazim Salur, a Getir (Turkish for “bring”) founder. “It’s a race against the clock.”

Mr. Salur is correct to look behind him. In the last year or so, five new rapid grocery delivery companies have hit the streets in London alone. Glovo, a six-year-old Spanish company that delivers restaurant meals as well as groceries, raised more than $500 million in April, just a month after Gopuff, a Philadelphia-based startup, raised $1.5 billion from investors including SoftBank’s Vision Fund.

Millions of people began using online grocery delivery after being trapped at home for months on end due to the pandemic. Subscriptions for a variety of items, including wine, coffee, flowers, and pasta, have skyrocketed. Investors have seized the opportunity and are supporting companies that will deliver whatever you want, not just soon, but within minutes, whether it’s baby diapers, frozen pizza, or a chilled bottle of champagne.

Rapid grocery delivery is the next step in a wave of venture capital-subsidized luxury catering to a generation accustomed to ordering taxis in minutes, vacationing in cheap villas via Airbnb, and having an increasing amount of entertainment available on demand.

“This isn’t just for the rich and affluent who have money to throw away,” Mr. Salur explained. “It’s a reasonable premium,” he adds. “It’s a very inexpensive way to treat yourself.”

In the food delivery industry, the path to profitability has been difficult to find. However, according to PitchBook data, venture capitalists have invested approximately $14 billion in online delivery grocery businesses since the beginning of 2020. Getir has completed three funding rounds this year alone.

Is Getir a profitable business? Mr. Salur replied, “Yes and no.” A neighbourhood can be profitable after a year or two, he said, noting that the company as a whole has yet to be profitable.

According to Alex Frederick, a PitchBook analyst who studies the food technology sector, this industry appeared to be undergoing a period of blitzscaling, a term coined by Reid Hoffman, who helped build PayPal and founded LinkedIn, to describe a company racing to serve a global customer base before any of its competitors. And, at the moment, there is a lot of competition with little variation among companies, Mr. Frederick added.

“It’s a race for market share at the expense of profitability,” he explained.

Michael Moritz, the billionaire venture capitalist and Sequoia Capital partner known for his early bets on Google, PayPal, and Zappos, was one of Getir’s first major investors. “Getir piqued my interest because I have yet to hear a customer complain about receiving their order too quickly,” he explained.

“Ten-minute delivery appears deceptively simple, but newcomers will discover that raising money is the most difficult part of the business,” he said. Getir claims he has spent six years — “an eternity in our world” — resolving the company’s operational issues.

Even so, city streets around the world are clogged with new grocery delivery services. As competition heats up, London’s rapid delivery companies — with names like Gorillas, Weezy, Dija, and Zapp — have been offering shockingly low prices. Getir once offered 15 pounds (approximately $20.50) of food for just 10 pence (about 15 cents).

This does not include the takeout delivery services that have expanded into the grocery market (like Deliveroo). Then there are the supermarkets and corner stores that now deliver, as well as Amazon’s supermarket service, which move at a slower pace.

Will users develop a strong enough habit or brand loyalty once the promotions expire? Because of the eventual profit pressure, not all of these businesses will survive.

Mr. Salur says he isn’t concerned about competition for quick grocery delivery, predicting that there will be several businesses in each country, just as there are competing supermarket chains. Gopuff, which is already in 43 states and is reportedly seeking a $15 billion valuation, is waiting in America.

Mr. Salur, 59, is a late-career entrepreneur who has spent years selling closed industrial plants. Since then, he has concentrated on speed and urban logistics. He co-founded Getir with two other investors in Istanbul in 2015, three years after developing a taxi-hailing app that delivered cars to people in three minutes. When Getir raised $300 million in March, the company was valued at $2.6 billion, making it Turkey’s second unicorn (a company worth more than $1 billion). The company is now worth $7.5 billion.

Getir experimented with two methods to meet its 10-minute goal in the beginning. Way 1: It loaded the company’s 300 to 400 offerings into constantly moving vans. Customers, however, demanded more products than the vans could accommodate (the company now figures the optimal number is about 1,500 items). The van deliveries were halted.

The company chose Way 2: delivering groceries via electric bicycles or mopeds from a network of so-called dark stores, which are a cross between a warehouse and a small supermarket without customers, with narrow aisles lined with shelves stocked with groceries. Getir has more than 30 dark stores in London, and it has begun delivering in Manchester and Birmingham. It has been opening approximately ten stores per month in the United Kingdom and expects to have 100 by the end of the year. According to Mr. Salur, more customers mean more stores, not larger ones.

The difficulty is in locating the properties — which must be close to people’s homes — and then dealing with various local authorities. London, for example, is divided into 33 such councils, each of which issues licences and makes planning decisions.

Vito Parrinello, a manager of several dark stores who previously managed Italian restaurants in Battersea, southwest London, is determined that the delivery riders do not disturb their new neighbours. The dark store is hidden behind a new apartment development, hidden beneath a railway arch. Signs read “No Smoking, No Shouting, No Loud Music” on either side of the waiting electric scooters.

Inside, you can hear a bell ringing intermittently, alerting the staff to an incoming order. A picker chooses a basket, gathers items, and packs them in bags for the rider. A wall is lined with refrigerators, one of which is solely stocked with champagne. At any given time, two or three pickers are weaving through the aisles, and the atmosphere in Battersea is calm and quiet, despite the fact that their movements are timed to the second. The average time it took to pack an order on a recent day was 103 seconds.

Mr. Parrinello believes that shaving seconds off a delivery requires efficiency in the stores, rather than relying on riders racing to the customer. “I don’t want them to feel compelled to run through the streets,” he added.

Surprisingly, the majority of Getir’s employees are full-time employees with holiday pay and pensions, as the company has avoided the gig economy model that has resulted in lawsuits against companies like Uber and Deliveroo. However, it provides contracts for people who want flexibility or are only looking for short-term work.

“There’s this notion that if this work isn’t contract, it can’t work,” Mr. Salur explained. “I respectfully disagree; it will work.” “When you look at supermarket chains, all these other companies, they employ people and they don’t go bankrupt,” he added.

Hiring employees rather than contractors fosters loyalty, but at a cost. Getir purchases its products from wholesalers and charges 5% to 8% more than the prices of a large supermarket. Importantly, the prices aren’t much higher than those at small local convenience stores.

Mr. Salur stated that in Turkey, 95 percent of the dark stores are independently owned franchises, and that he believes this system produces better managers. It is a model that Getir may apply to its new markets once they have gained traction.

But it’s been a hectic year. Getir had only operated in Turkey until 2021. Getir has expanded to Amsterdam, Paris, and Berlin this year, in addition to the cities in England. Getir made its first acquisition in early July: Blok, a grocery delivery company that operated in Spain and Italy. It had only been in operation for five months.

“It’s growth, growth, growth,” Mr. Salur said. “That’s what we breathe at the moment.”

source

Visit for: Auto  |  Games  |  Health  |  How To  Latest Revies  |  News  |  Sports   |                    |  Tech  |  Outsourcing  |

- Advertisement -

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisement -

Latest article