One of the smaller delivery startups, Quiqup, is exploring deals with supermarkets, despite the inherent challenges of low margins and umpteen products.
2 Dec 2016
Delivering groceries from supermarkets to consumers is far tougher than delivering restaurant food, but several companies are quietly working in the background to find a solution.
The delivery company Quiqup is understood to be preparing a partnership with a major retailer in the coming weeks.
Quiqup, founded in 2014, is an on-demand delivery service that offers to pick up everything and anything; from takeaway meals to birthday presents and the weekly shop.
It has already worked with the upmarket grocery shop Whole Foods by putting its own pickers into the aisles of its High Street Kensington store, ready to receive and bag orders, then pass them onto a courier. The idea was that if it could prove the model worked, Whole Foods would take on responsibility for picking and packing.
Quiqup’s CTO and co-founder Danny Hawkins said delivery startups like Uber, Deliveroo and Jinn had focused on restaurants for their lucrative margins. ‘The grocery market is huge but the margins on delivery and on fulfilling are so small that it’s difficult to get the right economics working,’ he pointed out.
Restaurants typically operate on margins above 50%, while groceries operate on a far thinner slice. There’s also a much bigger range of products in supermarkets, with various permutations and packaging.
Firms with huge investment behind them have been happy to run losses for years in a bid to build scale. Uber launched Uber Rush in New York in April 2014, operating as a typical courier delivery business, and partnered with Walmart earlier this year, as it starts resembling the complete logistics firm it aspires to be: shuttling people, food, groceries and anything else around a city.
To illustrate how hard it is to make supermarket deliveries sustainable, one of the most well-known online-only grocery shops, Ocado, only broke into profit last year – 15 years after it was launched.
Quiqup, meanwhile, is keen to adopt a less narrow model than that of Deliveroo around restaurants. Hawkins said the rise of online retail and groceries has created opportunities for small and independent retailers to use services like Quiqup to fulfil orders at speed, and compare with Amazon’s promise of same day delivery.
‘It’s difficult for a lot of bricks-and-mortar retailers to reach their consumers and there is this need for business to push [products] to their consumers,’ says Hawkins. ‘This is a natural evolution for us because of the way the market is moving.’