GROCERY DELIVERY APPS ATTRACT INVESTMENT AS CUSTOM MOVES ONLINE

The recent move by Justin King, a former chief executive of Sainsbury’s, to invest in a grocery delivery app company has shone a light on the rapid growth in the sector.

Multiple apps are now offering grocery deliveries in as little as 10 minutes in major cities across Europe and North America.

King, who ran Sainsbury’s, one of the UK’s top three supermarket chains, from 2004 to 2014, has invested in Snappy Group, which owns the Snappy Shopper app.

Operating in an increasingly crowded field, Snappy Shopper offers deliveries from local convenience stores in 30 minutes.

Snappy Shopper works with small local stores such as Costcutter and Spar, using these outlets for the supplies that it takes directly to customers.

In comments made to the BBC, King said small local stores such as these were “great distribution assets” that resembled “mini warehouses with customers in”.

“To give those shop owners, because the majority of them are owner-managed, the opportunity of a professional home delivery service in these challenging times was an opportunity too good to miss,” he told the broadcaster.

King is set to become a non-executive director of the Snappy Group once it has completed its latest round of fundraising, according to reports.

Meanwhile, in the UK, Deliveroo has teamed up with large supermarket groups, including Sainsbury’s, using their stores to fulfil the orders that it delivers.

Separately, multiple apps are now operating their own fulfilment centres and delivering goods within strict time limits.

In the UK, players include Weezy, Dija and Gorillas, with these typically employing their own delivery staff who may use motorbikes to take goods to customers.

The market in the US is highly active too thanks to the likes of Instacart, Postmates and Shipt. Major names such as Amazon Fresh are also keen for a slice of the market.

The opportunities for successful operators are immense: in data published last year, Valuates Reports forecast that the global online grocery market would be worth $129.54 billion (€107.77bn) by 2025, compared to $27.5 billion in 2018, which represents a compound annual growth rate of 24.8%.

When it released its figures in September, Valuates Reports said the coronavirus pandemic had prompted an increase in online shopping, as customers were more reluctant to visit physical stores.

However, the grocery delivery sector was growing in any case and some of the changes brought about by Covid-19 are likely to have lasting effects.

“It is expected to change consumers’ purchasing behaviour and have a significant long-term impact on the industry,” the company said.

According to data published by eMarketer last month [April], grocery apps saw faster growth than any other app category in 2020, with a 40.9% increase in the number of users.

Growth in 2021 is expected to be more modest, at 5.8%, as it will be building on last year’s figures, which were inflated by the pandemic.

Analysts have noted that the apps’ business model, where delivery is carried out rapidly and may cost only a few dollars or its equivalent in other countries, is suited only to major cities.

In the UK, some apps are focused on London, although services are increasingly being offered in other cities including Manchester, Bristol and Brighton.

Some apps, supported in their early stages by venture-capital funding, have indicated to media that they are not currently profitable.

Instead, their focus is on expansion in their early stages, with some advertising heavily, such as on the side of buses, as they look to secure market share.

With the market in a state of flux, it is likely that certain apps will fall by the wayside despite the rapid growth of the market as a whole, while yet more new operators are likely to emerge.

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