COVID-19 has spurred significant changes in grocery shopping behaviors, the most obvious being increased delivery and fewer in-store purchases. And now, perhaps to take advantage of the increased distribution channels, there is another noticeable change — the boom of ultrafast grocery delivery companies that promise deliveries within 15 to 20 minutes. Ads are appearing on CitiBikes, all around NYC, and the companies providing this service come in all organizational shapes and sizes. Some are newcomers, startups like 1520, Jokr, Gorillas, Buyk and Fridge No More, and allow customers to purchase groceries through an app. Others are large well-known grocers such as Kroger teaming up with delivery companies such as Instacart. And this “ultrafast, instant” grocery “last mile” delivery trend is not just a local phenomenon — it is global.
One factor making these ultra-fast deliveries possible is new technology that facilitates online ordering, inventory control, logistics, and tracking. These new technologies are being used in many other markets — restaurant delivery and car services, for example. But instant grocery delivery differs from other instant services in one key way: To serve the idiosyncratic needs and preferences of a wide variety of demographics, these companies must not only be located close to their customers but maintain a limited number of products targeted to the community they serve. To accommodate the logistics of instant delivery, a new type of store called the Dark Store or hyperlocal warehouse, has emerged. While they may sound ominous, dark stores are really just fulfillment centers.
Using technology to gauge and handle demand and inventory makes meeting the needs of a local community easier. But there is nothing to prevent larger stores from stepping in and providing more variety with equally fast delivery times — as well as reducing prices to customers — once the marketplace demonstrates a permanent demand. Larger grocers may enter and provide more variety at equally fast times increasing competition and perhaps even reducing prices they can charge to their customers.
Potentially as important as technology to sustainability, however, is the role of delivery workers, who are, in effect, at the mercy of apps like DoorDash, Uber Eats and Grubhub-Seamless, that control the marketplace.
Studies are now highlighting just how dangerous the work is.
“New York City’s app-based delivery workers – a lifeline to city residents during the COVID-19 pandemic – regularly face nonpayment or underpayment, unsanitary or unsafe working conditions and the risk of violence” Los Deliveristas / Worker’s Justice Project and the ILR School’s Worker Institute.”
Unregulated platforms lead to abuse and poor working conditions.
“…the city’s 65,000 delivery workers had tolerated so much: the fluctuating pay, the lengthening routes, the relentless time pressure enforced by mercurial software, the deadly carelessness of drivers, the pouring rain and brutal heat, and the indignity of pissing behind a dumpster because the restaurant that depends on you refuses to let you use its restroom. And every day there were the trivially small items people ordered and the paltry tips they gave — all while calling you a hero and avoiding eye contact.” theverge.com
Since workers in the restaurant delivery industry are not employees of restaurants or the apps, they are easy targets for exploitation including, as studies have demonstrated, abuse and poor working conditions. There have been calls to regulate food deliverers, which could lead to higher wages, higher costs to instant grocery providers, thereby reducing the economic viability of this high-end service.
As trends in technology work both for and against the growth of the instant grocery market, COVID-19’s persistence may sustain demand for the model, spurring larger groceries to enter. But with larger grocers entering, the smaller dark market startups might need to grow fast in order to survive. As we/ve seen in other startup markets, killer acquisitions, either to gain the startup’s market share or innovative technology, can make them perfect merger/takeover targets.
Innovations in technology, no matter where they occur–at the small startup or large grocery chain, or in a different industry with applications to grocery delivery–will also play a role. Amazon’s testing drones for last mile package and mail delivery and the use of grocery delivery robots are some examples of technology that may soon become enablers of instant grocery delivery.
Will grocery delivery at the speed of an app take off? Are there clear opportunities for significant growth? Instacart CEO Fidji Simo believes that instant groceries will continue to be in demand. If regulations ultimately increase the wages of delivery couriers, the costs of instant delivery will rise, which will then increase the benefits of new innovations in logistics, such as using robots and driverless delivery.
Once the pandemic abates, will consumers who yearn for a more direct relationship with their food and embrace the benefits of local grocery shopping return to instore shopping? And will others continue to be willing to pay higher prices for the convenience, or will technology ultimately bring lower prices? Joe Skorupa, a consultant and strategic advisor for retailers, asserts that “The keys to success will be execution with a lot of automation and customer analytics to predict buying patterns, specifically at the hyper-local level.”
Instant, Fast Groceries
Couriers / Grocery Delivery Workers
New Tech / Competition
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