We have updated our Terms of Use.
Please read our new Privacy Statement before continuing.

Urge to surge

30 Apr 2021 By Karen Kwok

Until recently, the idea of ordering a carton of oat milk on your phone and having it delivered to your home within 10 minutes was unimaginable. The notion of a company making a profit doing so was even more outlandish. But some of the world’s biggest tech investors, including SoftBank Group, Tencent and Prosus, are betting heavily on the “ultra-fast delivery” business. The stage is set for a frantic and expensive fight.

Delivering groceries is hardly new. Britain’s Ocado has been refining its robot-enabled warehouses for over a decade. Online orders accounted for almost a fifth of UK supermarket J Sainsbury’s grocery sales in the three months to Jan. 2. But the newcomers offer something different from weekly or next-day deliveries. They aim to drop off smaller orders within 20 or even 10 minutes.

Companies like Turkey’s Getir and SoftBank-backed U.S. rival GoPuff fulfil these spur-of-the-moment orders for ice-cold beer, ice cream and even condoms from nearby mini-warehouses. These and other startups, many of which didn’t exist before the pandemic, have raised over $8 billion so far this year, according to PitchBook. GoPuff was most recently valued at $8.9 billion; Getir has a $2.6 billion price tag.

The business model is similar to local convenience stores like 7-Eleven. Companies buy products directly from suppliers such as Procter & Gamble and sell them on with a hefty markup. By limiting choice to up to 3,000 items – a fraction of the range typically stocked by supermarkets – they can deliver swiftly to drunk college students or frazzled parents. GoPuff offers 24-hour delivery in some U.S. cities.

The startups don’t have the market to themselves, though. Food delivery companies like DoorDash, Delivery Hero and Uber Technologies are also dropping off groceries. Delivery Hero says it processed 400,000 “quick commerce” orders per day in April. The $41 billion German group claims it can earn a gross margin of more than 27% on a 10 euro order. Uber is taking a different tack, delivering items from supermarkets like Sainsbury’s and 7-Eleven.

Though the startups have plenty of cash, their approach looks unsustainable. Extravagant promises, such as delivering within 10 minutes, require them to keep extra warehouse staff and drivers on standby. The newcomers also face heavy marketing costs and special offers to lure customers. There are at least five startups operating in London alone. They could become targets for companies like DoorDash, which Bloomberg reports is exploring European acquisitions. As with ride-hailing services and takeout apps, investors are preparing to finance a costly land grab in the hope of outlasting rivals. The grocery splurge will end with a purge.


Email a friend

Please complete the form below.

Required fields *


(Separate multiple email addresses with commas)