business news in context, analysis with attitude

MNB reader Bill Purcell provides this perspective on the delivery wars:

The rise of sub-1 hour delivery for grocery is less about the fact that Uber and Doordash have delivery capabilities and more about a major shift "back-to-the-future" in what consumers want and coupled with the changes that will be fueled by an explosion of yet-to-come-out-of-stealth-mode technologies and $100b+ in Venture Capital spending.

On the back-to-the-future part -- our great-grandparents never shopped only once a week or so for food to eat at home.  They didn't stock up for a couple of weeks, and then deplete their pantry in the same way we do today, and as most grocers' e-commerce systems are designed to support.   Their practice was to shop almost every day for same-day consumption at local bakers, butchers, green grocers, etc. Large swaths of urban Europe, Latin America, and Asia have at least partially kept this immediate consumption shopping habit.

Supermarkets originally were seen as more convenient -- the daily chore became a weekly one, and with some price advantages.  But if immediate-consumption on-demand grocery e-commerce was available and affordable, what shifts in consumer behavior will occur?

If you look at food consumed at home trends generally, you need to include what has happened to eat-at-home-from-restaurants, not just grocery.  The stats are telling.  About 60% of consumer now get takeout or delivery on average 2.4 times per week.  Ordering apps have grown 300-400% over the last few years.  Restaurant ordering apps exceed $40 billion now and are expected to grow to $365B globally by 2030.

And here's what is super-significant for the Grocery and CPG industry.  Virtually 100% of that consumer shift for restaurant services is accompanied with sub-1 hour delivery services.  This has conditioned a generation of consumers and shaped their wants and expectations.  Virtually none of those billions of restaurant app orders started with the consumer saying --  "On Tuesday morning I want to place an order for Thursday dinner delivery".  Instead, the consumer decides what to eat within an hour of eating.  Yet that multi-day ecommerce order-> delivery -> consumption pattern remains baked-in as the norm in the grocery industry -- the weekly pantry-loading order delivered a day or so after ordering and consumed during the week.

Even if the grocery industry hasn't caught wind of an upcoming surge in demand for sub-1 hour on-demand grocery delivery, the venture capital industry sure has.  By my count, since Covid started, VCs have invested well over $100 billion in the sub-1 hour e-grocery ecosystem -- I'm not referring to companies like Instacart -- a whole new generation of e-grocers and tech providers.  Much of that money has been invested in e-grocery startups like GoPuff and Gorillas, but multiple billions of VC funding have been directed to technology companies who are making the next generation of tools that can enable these sub-1 hour services to operate profitably -- faster plus lower costs.

Aside from the newly funded startups, Uber, Doordash, and others are investigating these same next-generation e-grocery technologies. Most traditional grocers have yet to even see or hear about many of these "Generation 3 e-grocery" tech innovations.  Many of these new next-gen tech providers are staying in stealth mode while they quietly work with the new e-grocery competitors / usurpers.  While eventually these next-gen e-grocery tech "arms merchants" will sell to traditional chains as well, the traditional grocery industry is leaving the door wide open for these competitors to get a foothold, shape consumer behavior, and steal share on what could be a significant and growing segment of consumers.

Some chains have already woken up.  In the UK, where the sub-1 hour phenomenon has already started to take root, Tesco just announced their start of a one-hour delivery service called "Whoosh" and Sainsbury is already rolling out their equivalent called "Chop Chop" to 50 markets this month. 

With hyper-funded Uber, Doordash, and Instacart all jumping into this sub-1 hour grocery market now, plus the impact of over $100 billion of VC money fueling new e-grocery disruptors and technologies, the next few years should be pretty interesting!  

And something else will happen over those same next few years in which sub-1 hour e-grocery evolves.  While generational definitions vary, by some classifications it means that the average first-time mother will be a member of Gen-Z within the next years (and, just to make you feel old, we'll see the first Millennial grandparents!).  Gen Z is consumer cohort who, thanks to the efforts of the restaurant apps, has known nothing but 1 hour, on-demand delivery of food.