Getir revealed plans to leave three additional markets as July concluded. The Turkish startup for quick grocery delivery withdrew from Spain, Portugal, and Italy, reducing its presence in Europe to just four nations.
It’s the most recent episode in a series of challenging experiences for the business, European Q-commerce, or the fast grocery delivery market in general. The market is going through a difficult transition as venture capital funding decreases and consumer cost-of-living issues multiply.
The reason Getir decided to scale back its operations was, according to a spokeswoman, “withdrawal from these three markets will allow it to focus its financial resources on existing markets where the opportunities for operational profitability and sustainable growth are stronger.”
The industry has often emphasised refocusing.
Getir acquired Berlin’s Gorillas at a discounted valuation of $1.2 billion (€1.1bn) before it went out of business, acting as a lifesaver for quick grocery delivery in Europe. Similar to this, Getir bought UK rival Weezy in 2021.
Rumors that the Turkish business was in talks to acquire Flink, another German rival, circulated just a few months ago. But today, Getir is dealing with its challenges.
The speedy grocery delivery market will be around, according to PitchBook analyst Alex Frederick, but it is facing increasing difficulties. Frederick believes that executing is more challenging than regular deliveries.
The pandemic’s surge in quick delivery
During the pandemic in 2020, some firms emerged and offered grocery and convenience products delivered in 15, 20, or 30 minutes via networks of fulfillment centers in urban areas. VCs invested staggering amounts of money in the firms while critics bemoaned the overall economics of the situation.
However, when the pandemic subsided, and lockdowns faded into history, the market and customer base altered as rising food prices and greater living costs eroded consumer purchasing power.
“In general, it’s a low-margin industry that needs a lot of orders. To enter new markets and establish themselves as the top providers in those sectors to make a profit there, these organizations seek to raise enormous sums of money, but that was dependent on a sizable amount of venture capital funding, according to Frederick.
In contrast to the scattershot, grow-at-all-expenses strategy that defined 2020 and 2021, several VCs have urged their portfolio businesses to slash costs, concentrate on top-performing markets and verticals, and develop a clear path to profitability.
Thriving Markets
To strengthen its business and finance its increased focus on its best-performing regions, including the UK, Germany, the Netherlands, Turkey, and the US, which the company stated generate 96% of its revenues, Getir is allegedly close to reaching an agreement with Abu Dhabi’s sovereign wealth fund Mubadala. Determining which European markets are the most profitable or viable for Q-commerce businesses might take time and effort.
However, analyzing the markets businesses have left in recent months reveals potential problem areas. For instance, Getir, Flink, and GoPuff left France because of the nation’s regulatory restrictions.
London is the only significant market that is still operational for many. This is the case for the British player Zapp, who, after pulling out of markets like the Netherlands and other British cities like Manchester, has reallocated all of its resources completely to the UK capital.
SVP of strategy Steve O’Hear stated, “Zapp has always been focused on winning London as the leading premium convenience store delivering 24/7, and this method has proven to be highly successful.”
According to him, the sector still has much to offer because internet penetration in convenience retail is “still significantly behind most retail categories,” and Zapp’s London company has tripled in the last year.
“Therefore, there is plenty of opportunity for further growth in the capital city alone,” he stated.
While European grocery delivery is currently in a “tumultuous” condition, according to Sammie Ellard-King, financial advisor and host of the Up The Gains podcast, there is still promise for the industry once client retention is prioritized above premature development.
“Like Zapp is doing in London, they need to focus on honing their operations where they have a significant presence. He said they must simplify their offers and ensure they match regional demand well.
Contrary to its smaller competitors, the world’s largest food delivery company, Delivery Hero, continues its q-commerce initiatives through its Dmarts business.
According to a Delivery Hero spokeswoman, the German business has Dmarts in “almost every market” where it operates. Delivery Hero has dozens of locations across Asia and Europe under its numerous identities.
“Quick commerce is a strong addition to our core platform business, allowing us to build upon our existing tech and logistics capabilities to provide greater value for our customers,” she claimed.
Luring back investors with quick Grocery delivery
A more narrow focus will be essential for the companies that raised significant sums of money during the epidemic to obtain capital once again, particularly in a world where AI is grabbing the interest of investors.
The director of retail and execution at RSA America, a company that researches the grocery market, Mark Osborne, has been keeping track of developments in Europe.
In terms of attracting investors, the success of grocery delivery businesses will depend on their capacity to show continued development and financial success. He said that with an anticipated yearly rise of 1 to 3%, the market is still promising, even though the recovery rate may be slower than investors would want.
Moreover, he added, “The demand for grocery delivery will grow and become more lucrative as the millennial and Gen-Z populations continue to settle down.” When viewed in the long term, these businesses may benefit from a shift in client generation.
According to Frederick of PitchBook, customer shifts and changes in how people purchase food will be the main factors driving the development of q-commerce and rapid grocery delivery. This transition will take time, though.
He claimed that these businesses rely on consumers making the long-term switch from making weekly supermarket buys to making more impulsive orders. There are concerns raised about whether it is possible to change customer purchasing behaviours because it requires a significant behavioral shift and education that takes time.
He continued by saying that businesses may use further “levers” to automate processes, streamline operations, and cut expenses. He cited businesses like Israel’s 1MRobotics, which last year received $25 million (€22.7 million), is constructing automated “nano fulfilment centers,” as an example.
He added that it needs to be apparent whether the efforts to make this model viable are too little, too late.
The future of the formerly successful grocery delivery businesses is still being determined, but there will be fewer participants than before as the market exits and consolidation continues.