Rise&fall by Quick Commerce - Is every trend good to follow?

FOMO: Fear of Missing Out

Or how humans sometimes make irrational choices, in reaction to the outbursts of others, for fear of missing an opportunity.

How do you distinguish an ephemeral FOMO from a real pocket of value to be seized?
Could we predict that the rise of Quick Commerce in France would be as steep and rapid as its fall?

Analysis and learnings by the team at Venture Design @321founded.

Billions... for nothing?

Looking back on 4 immoderate years

2020: green signals

• The share of e-commerce in retail Grow 4X faster that in previous years, a profound change in purchasing behavior is expected with the pandemic
• We believe in the development of a”Economy of laziness“Like meal delivery, when the majority of Deliveroo or UberEATS orders are in fact delivered less than 400m from the restaurant.
• In the racing segment, foreign players seem to validate the Quick Commerce model (Getir in Turkey, Gopuff in the USA) with a hole in the French market
• The development of “dark stores” Makes rapid scaling possible of the ultra-fast delivery model (vs the existing Frichti)
  

2021: Gold Rush

• Multiplication of actors in France: 10 startups are competing for the market through aggressive promotional acquisition strategies
• ~80" dark stores” based in Paris
• VC and corporate finance their growth with big investments ($950M for the 3rd Gorillas' round, $750M raised for Flink less than 7 months after its creation, Carrefour invests in Cajoo)

2022: rationalization

• The Market is not growing as expected
• The first to fall: KOL in liquidation, Yango Deli and Zapp close France
• For the others, M&A saga to buy back customer bases: Getir absorbs Gorillas and Frichti, Flink buys Cajoo
• The model Struggling to be profitable : Getir (+ Gorillas + Frichti) recorded around €190 million in losses in 2022 for a turnover of around €125 million (source LSA)

2023: Swan song

• Decree limiting the installation “dark stores”, war and inflation, tension on investment funds
• The French subsidiaries of the last 2 players still in place, Getir and Flink, are placed in receivership
• Frichti bought in extremis by La Belle Vie

Learnings

How can we better assess the viability of an emerging trend?

Learning 1‍‍

Always come back to customer needs. Is it strong enough to create a market and withstand the economic situation?

• The price and depth of range remained the main drivers of purchase, but
• Have your groceries delivered in less than Xmin was not a need for which consumers were ready to pay (even less during times of inflation)
• Who says limited storage space means fewer products available, thus limiting the size of the baskets and holding back actors in their ambition to be more than just an auxiliary solution

Learning 2

‍The analysis of tangible indicators (real market size, viable business model) must take precedence over FOMO.

• Looking back, the addressable market has been vastly oversized and this new mode of consumption “did not take place” as expected. The different actors exchanged the same customers for a discount voucher
• Ultra-competition: the presence of a dozen players, who were competing in a market that was not growing, caused the CAC to explode and weakened the model
• Leaking faucet: there was a Investment outbidding to continue to post growing numbers, which infused risky and unproven models

Learning 3

It is complicated to win in a red ocean without strong innovation and without barriers to entry.

• The players of Quick Commerce finally fought with the same value proposition, the same offer and without creating any particular attachment to their brand or asset tech, logistics, product...
• Perhaps other grocery delivery players will win by offering real product and/or service innovation?
• La Belle Vie which differentiates itself with a very wide range in the organic segment, while maintaining a delivery service similar to large-scale retailers?‍
• Picnic Who offers same-day delivery at €0, thanks to ultra-optimized logistics with pre-traced delivery routes?‍
• Jow which is revolutionizing the consumer experience from idea to plate, with a system for recommending recipes and generating a shopping list? And a connection to retailer APIs that constitutes a real barrier to entry and keeps the competition at bay?

Any other learnings to tell us? Do not hesitate to share your point of view with us.

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