Europe Fancies itself some Convenience

It’s 9:15 pm on a Thursday. You are slowly careening towards the end of your workweek. Tired from a day of Zoom calls and email, you pair dinner with a Netflix show. Your pantry and fridge are empty: You’re also out of toilet paper. 

Do you run out to your corner store, catching them before they close? Do you order a meal from Doordash, Deliveroo, Wolt, etc? No, you need an immediate fix.

This conundrum led us to invest in Gopuff in 2016 (what’s with the name? The founders' very first idea was to be an on-demand delivery service for hookah and smoking products!). Through their mobile app, customers can order traditional convenience store products like ice cream, baby food, or over-the-counter medicine. After placing an order, a Gopuff driver brings the items directly to the customer’s door within 30-minutes or less. Since our initial investment, Gopuff has become the leading millennial brand for convenience store delivery in the US. It is currently valued at $8.9 Billion, having raised $2.4 Billion in funding.

New generations of consumers have been accustomed to on demand media and services and expect immediate access to experiences and goods. You can call it the “Amazon Prime Effect” and we believe more people will expect the same from the top-tier brands in their life.

Speaking of which: close to a century of limited retail business models and technology innovation has left most traditional retailers and convenience brands severely disconnected from millennials and younger consumers. As traditional grocery and convenience shopping took place in a limited distance radius, shop location was often enough to own the local market.

Essentially, all these companies operate with variations of this model:

• Instead of picking up items from existing stores, they operate their own “dark stores”. These are mini-warehouses outfitted with their own stock, bought wholesale and quickly adapting to the most recent consumer trends. Margins are higher on wholesale-to-retail pricing spreads as compared to independent convenience and grocery stores. 
• Their own employees staff the dark store. Deliveries are conducted by their own delivery teams. Backend routing and logistics software allow drivers to optimize. 
• The dark stores’ layout and position allow picking, packing, and delivering in a highly efficient manner. 

To reflect the dynamics of dense metropolitan cities and local consumer delivery expectations, European companies have chosen to:

• Focus on rapid delivery services (delivering in 15 minutes or less)
• Rely on bike delivery fleets as opposed to cars and trucks
• In some cases, provide fresh food and groceries instead of convenience store essentials

These European convenience first delivery providers can be categorized as:

• Convenience Only Offerings - These include UK-based Fancy (acquired by GoPuff) and Zapp, most similar to goPuff in structure and offer.
• Rapid Fresh Food and Grocery Delivery Platforms - These include Turkey-based Getir, which has expanded its operations to London, and Berlin-based Gorillas, which has raised a whopping $335 Million. Other local players include London-based Dija and Weezy, Paris-based Cajoo, our portfolio company Jow, and Berlin-based Flink.
• Food Delivery Incumbents - Much like Doordash is attempting to enter the convenience first delivery space in the US, European food delivery businesses like Deliveroo, DeliveryHero (through their FoodPanda brand), Glovo, and Wolt have developed their own on-demand convenience focused grocery delivery platforms. Some, such as Glovo and Wolt, have raised new significant rounds of funding to do so.

Before the pandemic, services like Gopuff were initially marketed towards the college junior looking for ice cream to be delivered to their dorm at 11:00pm. The pandemic and the effect of keeping everyone at home during lockdown has accelerated demand to all demographics.

It’s still a nascent field (online grocery roughly accounts for only 1-5% of grocery sales in most countries), but we believe the demand for convenience first delivery platforms will continue to grow. As these platforms continue to mature, they will be able to develop more personal instant delivery experiences for customers, further driving up their usage.

For now, the next time you run out of toilet paper at 9:15 pm on a Thursday night, all you have to do to have it by 9:30 pm is find your phone and place an order.