Saturday, October 2nd, 2021
Battle of Delivery Services
Stragglers declare war on gorillas
Hannah Schwär
None of the German delivery service pioneers has been profitable so far. Financed by investors’ money, the industry is still booming – and more and more providers are pushing into the competitive market. Do newcomers still have a chance?
Sergey Schetinin wants to roll up the field from behind. The Russian entrepreneur has already set up a delivery service in Moscow, and the jump to Germany should now be successful. “We see great growth opportunities here,” said Schetinin in an interview with Capital. His online supermarket Wuplo brings groceries to your front door within ten minutes or in the desired time slot. A highly competitive segment in which many players are already cavorting. Wuplo started in Berlin in September – and now wants to catch up on the huge lead of the competition.
Wuplo is one of many stragglers. Since the German industry pioneer Gorillas was founded in June 2020, there has been a race to find the fastest route to customers. In the meantime, a handful of other startups with the same concept have entered the German market, including Flink, Grovy, Bring and the delivery hero brand Foodpanda as well as the Turkish provider Getir. A new competitor is added almost every month. According to information from Capital, the US delivery service Gopuff also wants to start soon.
So far, nobody is profitable. The industry is still booming, financed by investor money. Just this week, Gorillas and Flink each raised hundreds of millions of dollars in venture capital. This is one of the reasons why the question arises: How many providers will survive in the long term? And do newcomers like Wuplo still have a chance?
Also deliveries within the booked time slot
Wuplo founder Schetinin is convinced that he has found a promising niche in the market. “We position ourselves in the niche between kiosk-like express delivery services and established supermarket chains,” he says. In concrete terms, this means: On the one hand, Wuplo offers 10-minute delivery based on the model of gorillas. On the other hand, it also offers scheduled deliveries at a time slot booked in advance, just like Rewe does with its in-house delivery service. In this way, Wuplo wants to master the balancing act between speed and a large selection.
Wuplo also wants to position itself as a hybrid when it comes to infrastructure. The ten-minute delivery services usually operate a close-knit network of mini-warehouses that are located in small shops in the neighborhood. The principle: Little space, but close to the customer. Wuplo, on the other hand, plans to operate a mix of small depots and large warehouses in order to be able to offer more products. With around 5,000 items, the Russian company says it has a significantly larger range than Gorillas and Co. And because of the larger delivery areas, the couriers drive not only e-bikes but also e-cars.
In Russia, Wuplo founder Schetinin has been running a delivery service called Family Friend since 2016. There is a good reason why he is now turning to Germany, like many other international players. When it comes to e-food, German consumers have so far been very cautious compared to other European countries. But the pandemic shock broke old shopping habits. Now the task is to open up a gigantic market: According to calculations by the German Retail Association (HDE), German retailers turned over around 204 billion euros in food and beverages last year, but just two percent online.
“The winner takes it all”
Many industry observers, however, expect a bitter marketing battle. “Certain effects on the margin can only be achieved through size,” says Fabian Fischer, head of the E-commerce consultancy Etribes. He therefore expects a consolidation. “In the end, there will probably be two or three providers left over,” says Fischer.
The consultant refers to the logic of the platform economy: The winner takes it all. Only those who reach a relevant mass of customers can use this power to lower supplier prices. Or ask for money for product placement in the app. For everyone else, the business is usually unprofitable.
This dynamic has already become apparent in Germany in the classic restaurant delivery services: After years of fighting between Delivery Hero and the Lieferando parent company Just Eat Takeaway, Lieferando ultimately established itself as a quasi-monopoly, the others sold their business. And here too, new players have tried again and again to gain a foothold alongside the giant.
Gorillas and Swift have the edge
The food service delivery battle could now take a similar direction. If you set the standard in terms of size, the Berlin startups Gorillas and Flink have the edge. Both have a big head start with customers, deep pockets, and strong allies.
Flink secured new funding of several hundred thousand US dollars just this week. According to a report by Bloomberg, the pre-money valuation is expected to rise to $ 2.1 billion. The list of new donors is interesting: The US delivery service Doordash took part as the main investor. Flink now has a powerful partner behind it.
Almost at the same time, Gorillas also received new funding. According to information from Capital, the startup has been negotiating a financing round totaling 1 billion dollars with the Dax group Delivery Hero for weeks. Now the deal seems to be in the dry cloths: The portal The Information reported on Thursday evening on a financing amounting to 950 million dollars, which should drive the enterprise value up to about 3 billion dollars. New investor Delivery Hero is one of the largest delivery groups in the world. So the deal is also of strategic importance.
Is aggressive growth becoming a threat?
New players like Wuplo will have a hard time keeping up with the alliance of giants. However, the delivery battle is not only decided by the largest marketing budget. The providers also have to be operationally convincing, says e-commerce expert Fischer: “The jump from one delivery app to the other is just a click away. Most customers don’t care about the brand.” It is therefore crucial to get the simple things done reliably – for example, punctual deliveries, good service and a full range.
It is precisely in these points that the aggressive growth of nimble and gorillas can be dangerous. This has already become clear with Gorillas in the past few months: At some locations, delivery times are now over 20 minutes because the warehouses cannot keep up with the orders. That can put customers off. Wuplo, on the other hand, wants to take its expansion slowly and first become profitable. Locations in other German cities are to follow next year. The competition should have expanded their lead by then.
This article is at first Capital appeared.