by The on-demand delivery market is rapidly expanding across major European cities as consumers’ appetite for convenience and immediacy continues to grow. Quick commerce—defined as delivery of goods within one hour—has seen tremendous success since the start of the pandemic and is revolutionizing grocery shopping. Multiple European startups have emerged to capitalize on this emerging trend with favorable conditions for quick commerce to take off on the continent.
Rise of Meal Kit Deliveries Paved the Way
European cities had already witnessed rising popularity of meal kit delivery services like HelloFresh and MarleySpoon in recent years before the pandemic. These services delivered pre-portioned ingredients for home-cooked meals within a day or two of ordering. They demonstrated that busy urban consumers valued the convenience of having groceries hand-picked and delivered to their doors. The pandemic further accelerated this trend as people cooked more meals at home. This established consumer behavior of getting groceries delivered paved the way for next-day or same-day services to emerge and scale up rapidly.
Startup Growth in Major Cities
Numerous quick commerce startups have launched operations in major European metropolitan areas in the last year. In London, Gorillas, Getir and Dija are among the leading players offering 10-minute grocery delivery within defined areas. German startup Flink has a strong presence in Berlin while Gorillas and Getir also operate across multiple German cities. Turkey-based Getir expanded into Amsterdam, Paris and other Western European markets in 2021. Spain saw Nano delivery launched in Madrid and Barcelona. These startups leverage dense urban populations, extensive delivery networks and small local warehouses to promise delivery under an hour.
Business Model Innovation and Localization
Europe Quick E-Commerce (Quick Commerce) startups have brought innovations to the business model. Many focus on hyper-local micro-fulfillment centers located within neighborhoods they operate rather than large centralized warehouses. This allows them to offer a wider assortment tailored to each locale while also reducing delivery distances and times. Assortments feature daily need items along with some local specialties. Delivery partners are employed directly by these startups instead of relying on gig workers. This provides better oversight of operations and customer experience standards. Apps are localized with native language support and localized assortments to better serve the tastes of local populations.
Regulatory Environment Conducive to Growth
The European regulatory environment remains favorable for quick commerce to scale rapidly. Existing regulations around grocery retail and delivery do not prohibit 10-15 minute delivery timelines. And unlike the United States, the European Union does not have complex liquor license laws that can restrict alcohol delivery. This allows European startups to offer full grocery assortments including beer, wine and spirits. Ambient temperature conditions across much of Western Europe also allow for deliveries without thermal insulation in e-bikes and scooters. Meanwhile the push for reducing carbon emissions and inner city congestion makes quick local delivery an attractive proposition. These factors are driving the preferential regulatory treatment and funding support quick commerce startups receive.
Business Model Profitability Under Scrutiny
As with other on-demand segments, the sustainability of quick commerce business models faces questions around profitability. Operations require complex micro-fulfillment infrastructure and dense last-mile delivery networks that entail high set-up and running costs. Startups defend short delivery windows as crucial for acquiring and retaining loyal customers in competitive markets. However, analysts argue 10-15 minute delivery is difficult to achieve profitably at scale given current cost structures. Exit through consolidation or achieving profitability will depend on robust unit economics, cost optimization through technology and achieving higher basket values beyond impulse purchases. European startups will need to evaluate subsidies carefully and explore non-grocery revenue sources to strengthen their financial profiles in the long run.
Funding Environment Remains Vibrant
Funding continues to pour into Europe Quick E-Commerce (Quick Commerce) companies, indicating investor appetite remains strong. In 2021, Flink raised $750 million while Gorillas closed $1 billion and Getir hit $1.1 billion in funding rounds. 2022 has already seen Dija raise $235 million. Large funding allows startups to build delivery infrastructure, expand supply chains, onboard more vendors and fuel marketing campaigns to capture greater market share. Backing also comes from leading global investors in the online grocery space like Tiger Global, DST and Silver Lake that see quick commerce evolving into a large sector. With healthy balance sheets, startups are well positioned to withstand short-term financial pressures and consolidate the market as it matures over the next few years.
Future Outlook Remains Promising
While profitability challenges exist, most industry experts believe quick commerce has long term potential in European cities. As millennials and Generation Z have more spending power over the next decade, their preference for immediacy will only increase. Social commerce triggering on-demand shopping behaviors is another emerging trend. partnerships with restaurants and other verticals for coordinated delivery could expand the addressable market. European quick commerce companies that optimize operations, automate workflows and introduce subscription programs stand to cement their leadership positions. Competition will intensify but consolidation may start in 2-3 years. Overall, quick commerce could emerge as a integral part of daily life in large European metropolitan areas over the coming years.
*Note:
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it
