Deliveroo has planted a flag in the rapid grocery delivery space with ‘Hop’, a collaboration with Morrisons, the supermarket, that will roll out 10-15 minute deliveries amid competition from a venture-capital-fuelled crop of delivery startups.
Why it matters
Deliveroo, now a publicly traded company, already delivers groceries – it’s a small though fast-growing part of its business. However, doing it rapidly requires quite different infrastructure, somewhere between the dark kitchens – Deliveroo Editions – it already operates, and a dedicated warehouse where both Deliveroo and Morrisons will be able to keep a close eye on stock levels.
This test will show whether Deliveroo can make the journey, as Edge by Ascential senior analyst Florence Wright puts it, “from delivery intermediary to retailer” as the latest development follows on from its launch of on-demand Boots deliveries last month.
What’s in it for Deliveroo
Better accuracy means fewer item substitutions
Large product range, including Morrisons’ premium range comprising fresh meat and fish
Competing against well-funded opposition requires scale, product, and existing habits. It is also directly copying the dark store model behind Getir and Gorillas, poster children of the Q-Commerce (quick commerce) trend.
Morrisons is a key player in this
Morrisons is partnering its way to rapid growth with existing deals to deliver from Ocado, Amazon (which owns an 11.5% stake in Deliveroo), and now a major extension with Deliveroo.
“Society is moving in many ways to instant gratification,” James Badger, online and wholesale director for Morrisons told the FT. “We want to make our Morrisons product available to as many customers as possible.”
The problem of profit
Like the cutthroat taxi business that VC inflated to provide a service beyond any sustainable reality, delivery is in a moment of frothy growth as new entrants race against the clock for dominance or bust.
Deliveroo is in a slightly different position now that it’s a publicly traded stock and has taken on Amazon backing, which brought in new capital to fund services like Hop. Yet it is at a stage in which it is sharply growing marketing spend – H1 2021 was up 62% on the same period in 2020 – in order to build future growth.