Supermarkets made hay from restrictions, now they need to consolidate to keep going
THE rapid grocery delivery sector has grown at a staggering pace across Europe and the US. Two years on from when we first saw Getir, Weezy, Zapp and Gorillas advertised on buses and hoardings across London, data from the ONS revealed the average weekly sales of online groceries in December 2021 were £372m – more than double the sales achieved pre-pandemic. The online food sector has consistently gained market share and now accounts for 11 per cent of all food retail.
The rapidly maturing sector also started to consolidate towards the end of 2021: Getir acquired UK rival, Weezy and Gopuff acquired UK competitor, Dija. Gorillas and Tesco have co-located warehouses, granting customers access to Tesco’s products via the Gorillas “delivery in minutes” model. Co-op announced its partnership with Amazon, allowing Prime customers same-day delivery on a minimum order of £15.
The larger operators have now established themselves in most inner-London locations. Some occupiers are adopting a Venn-diagram approach, with the delivery reach of each store overlapping, in an attempt to crowd-out competition. Meanwhile, big-name occupiers have also acquired space at speed: Ocado plans to open in Canning Town and has secured several new sites across other core locations.
Targets in the sector are now likely to be outer-London regions, with expansion into other major UK cities. In time, the growth of the rapid grocery market will be just as prevalent in other major UK cities as it has been in London. But this growth will be limited to high-density urban cities, such as Manchester, Liverpool and Cardiff, rather than suburban locations.
The UK’s well-documented supply chain issues have led to a significant shift in the rapid grocery market. Getir acquired circa 110,000 sq ft in Waltham Cross – a huge amount of space for a sector typically interested in smaller warehouses. The store focusses on large-scale storage to protect the ongoing pressure on Getir’s supply chain. Zapp also acquired 25,000 sq ft in Park Royal; though not on the same scale, the move is indicative of the expansive strategies of rapid grocery businesses.
Further mergers and acquisitions are inevitable, though it is hard to predict what shape these will take. We may see more mergers of existing businesses; or businesses like Amazon or Uber may already have their eye on the real estate platforms established by smaller rapid grocery companies, removing competition from the market and providing more space for their existing models.
The rapid grocery sector will need to continue to evolve its product offering to keep consumers engaged. So far, they’ve had a first mover advantage, taking on a market full of distressed purchasers during the pandemic. With the continued growth of Ocado Zoom and Amazon Fresh, combined with rising living costs, consumers may start to favour models that offer a greater range of products with competitive delivery and product pricing.
Automation is also part of the picture. Co-op is adopting a robotic delivery system in Northampton, allowing automated delivery within a three-mile radius of a store. Likewise, Domino’s has partnered with Nuro to bring automated delivery to Houston.
The cost of living crisis will put pressure on the sector to adapt and may hasten a consolidation of the market, but traditional supermarkets will also be under a spotlight to adapt to a faster delivery model.