[ad_1]
A courier for Czech grocery delivery start-up Rohlik.
Rohlik
LONDON — Start-ups promising groceries delivered to your door in a matter of minutes are the hottest craze for venture capitalists right now.
Investors have poured billions of dollars into on-demand grocery delivery firms — some of which are barely a year old — after the coronavirus pandemic accelerated a shift toward online shopping.
Venture-backed grocery companies have already raised over $10 billion so far in 2021, according to data from Pitchbook, eclipsing the $7 billion raised by such firms last year.
In the U.S., Instacart was valued at $39 billion in a March funding round, while Gopuff raised funds at an $8.9 billion valuation. Meanwhile, in China, Xingsheng Youxuan raised a whopping $3 billion this year, the largest funding round for a grocery start-up to date.
The craze has spread to Europe over the last year, with a host of grocery apps gaining traction by touting deliveries in 10-20 minutes: Getir, Gorillas, Weezy, Flink, Zapp and Dija, to name but a few.
They often rely on so-called “dark stores,” small fulfilment centers where items are picked up and then delivered by couriers.
This week, Czech firm Rohlik — which offers two-hour shopping delivery — raised $120 million at a $1.2 billion market value. Tomáš Čupr, Rohlik’s CEO and co-founder, said the seven-year-old firm is “fully profitable” in its home market
“You saw a lot of players in the U.S. and some players in Europe really struggling pre-pandemic, and then obviously whoever did online grocery during the pandemic was doing well,” Čupr told CNBC.
“Now the question remains: how much of that is going to stick?” he added. “We’re fairly confident because we grew massively pre-pandemic; we think post pandemic we’ll do the same.”
‘Grossly disproportionate’
The digital grocery delivery market is becoming increasingly crowded, and some retail experts say a wave of consolidation is fast approaching.
“The amount of money that’s being put against this opportunity is grossly disproportionate to the size of the opportunity,” Luke Jensen, CEO of Ocado Solutions, a unit of U.K. grocery tech pioneer Ocado, told CNBC.
“I suspect there will inevitably be a lot of consolidation among these players,” he added.
Big tech names such as Amazon and retail giants could be among the potential acquirers, experts have said.
New entrants to the grocery delivery sector offer customers a “trade,” Jensen said: pay a 30-40% premium to supermarket prices for the convenience of fast delivery.
Even during January’s strict Covid lockdown in the U.K., just 16% of the country’s grocery sales were online, according to Nielsen, though this marked a record high. Tech founders and investors say it represents a huge opportunity to increase online penetration.
But Jensen said grocery start-ups were mainly competing with convenience stores rather than big supermarkets, meaning they’re already targeting a small slice of the market.
First mover advantage?
Turkey’s Getir was early to the rapid grocery delivery craze. Founded in 2015, the company recently became profitable in Istanbul, where the firm is based, founder and CEO Nazim Salur told CNBC.
We democratized the right to laziness.
Using the analogy of a video game, Salur said Getir was at “level six” while other upstarts were barely into the first level.
Getir is rapidly expanding in Europe and plans to launch operations in the U.S. this year after raising fresh funds in a round valuing the firm at $7.5 billion.
“People have a right to laziness,” Salur said, describing grocery shopping as “a waste of time for most people.”
“We democratized the right to laziness,” he added.
Despite escalating competition, Salur doesn’t think there will be widespread consolidation in the market. Getir on Thursday acquired a competitor in southern Europe called BLOK.
“I don’t think there will be a lot,” Salur said. “For true consolidation to take place, these players should have some footing in the market.”
“There are some candidates out there presenting themselves to buyers,” he added. “Some of them came to us — I won’t name them — but there isn’t much to buy.”
London-based Dija reportedly held talks about a potential sale to U.S. rival Gopuff, according to Business Insider last week. Dija declined to comment when contacted by CNBC.
Ocado Solutions’ Jensen said he believes that most grocery apps and their investors will end up “very disappointed versus their rather overblown expectations.”
Ocado got its start as an upmarket online supermarket. But the company later pivoted to developing software and robotics for international retailers like Kroger to sell their own products over the internet.
Rohlik’s Čupr said Ocado’s model — which relies on huge automated warehouses — compromises on “last mile” deliveries, or the transportation of goods to their final destination.
“I don’t think we will ever need this massive robotized center,” he said.
Ocado has its own competitor to the instant delivery apps, Ocado Zoom, which ships items in under 60 minutes or on the same day.
[ad_2]
Source link
Disclaimer: For more interesting articles visit Business Times.
