Rapid delivery, third-party grocery apps, and FMCG
In recent years there’s been an explosion of third-party rapid grocery delivery services. They’re backed by heavy investment, they put a lot of time and money into customer acquisition, and they’re branded heavily and boldly. Also, none of them make a profit yet, and the market is very fluid. New entrants join and existing players get acquired, and it’s a tough proposition to make a profit from.
Rapid delivery is a young, relatively unproven, and fluid landscape. For an FMCG business, it’s a very difficult question of how (or whether) to enter a commercial relationship with these third parties. Here’s what to consider and how to make sure you find the right answers.
The economics of rapid delivery
The margins on rapid deliveries are razor-thin. Each order is limited in how large it can be, you need to pay drivers and riders, and shoppers have a limited tolerance for delivery charges. The energy crisis and the cost of petrol are undoubtedly hurting the bottom line even more.
The model requires a geographical density of orders, as well as large customer numbers in order to be sustainable. There’s also a limited number of towns and cities that it can work in. It would almost take a monopoly to make the proposition viable, but currently, there are a lot of competitors.
Of course, some of those competitors are supermarkets that have added rapid delivery to their offerings. For example, Tesco has Whoosh (in partnership with Uber Eats), and Sainsbury’s has Chop Chop. Already there’s a seemingly constant string of acquisitions, with brands absorbing competitors, so we might continue to see the number of players decrease and the market settle.
For now, the conditions of the rapid delivery market present some challenges for FMCG brands.
Rapid delivery companies need to add extra markup to some or all of the products they offer. Brands will have to decide whether they’re willing to permit that, and it may be a deal breaker. After all, the cost of the products is a vital element of many brands’ identities, and the higher costs of the rapid delivery products may affect the wider relationship that shoppers have with them.
That’s exacerbated by the cost-of-living crisis. People will be naturally more price-sensitive, and as well as avoiding more expensive brands, they might even resent them.
Since you and your team work so hard to manage your brand, it takes serious consideration which other brands you associate your products with. Rapid delivery apps tend to have bold and garish personalities, and you may want to balance whether
- They will overshadow your brand and your product too much
- They’re complementary to your brand, or at least compatible
It’s not an easy question to answer and might stir some debate internally. Meanwhile, the sector is shifting so fluidly that the quick delivery partner you’re assessing might not even exist for long. That would make the time spent considering it something of a waste.
More and more consumers are becoming conscious of the environmental and social impacts of their buying habits, and they’re voting with their wallets. As well as assessing quick delivery providers and their values, brands will need to pay close attention to the business practices of these third parties, as well as their investors.
Again, that’s a lot of work, for a business that might easily fold, or present yet another due diligence marathon by merging with another brand, being acquired, or bringing on additional investors.
How (or how not) to engage with FMCG rapid delivery
It might seem that all of the above suggests that rapid delivery isn’t worth getting involved with. Of course, the picture is much more complex than that. Perhaps on balance you can’t afford to take part, or perhaps you can’t afford not to. There are many elements at play, and you need some astute commercial minds on the case.
Securing those people is hard to do without expert help. Lime Talent has been filling FMCG businesses with rare and exceptional talent since 2013, and it offers over 60 years of sector experience, among its founders alone. Call 020 7042 3800 and start your search today.