The ‘golden’ businesses of the pandemic in crisis

Drinks and juices, cold meats and cheeses, at your door in minutes – many product distribution startups have done golden jobs in times of lockdown. But for how much longer?

In the midst of the pandemic, they appeared on the market completely out of the blue: start-ups like Gorillas and Flink set up a dense network in German – and not only – big cities, hired hundreds of distributors and promised to deliver fresh food and supermarket products within minutes at the customer’s home. All one had to do was open the app and select the desired products – at supermarket prices. Demand skyrocketed during the coronavirus crisis and investor profits were huge. However, the success of the past two years began to wane with the lifting of the measures. So-called “fast trade” has overtaken retail in 2021, points out Kai Hudetz, managing director at the Cologne Institute for Retail Research (IFH). “Even then, though, one had to wonder if actually delivering a yogurt to the office within 15 minutes could be a viable business model in the long term,” he adds.

Startup in times of pandemic, war and inflation

Of course, this sector was not unaffected by the war in Ukraine, as well as the effects of inflation. Investors are now more cautious, Hudets notes. Many product distribution services that bet on vertical growth are now facing problems. Berlin-based startup Gorillas, for example, announced just a few months ago that it was cutting hundreds of administrative jobs, and recently exited some distribution cities in North Rhine-Westphalia. Its competitor, Wolt, has focused primarily on restaurant food deliveries.

The pressure due to competition is huge due to the numerous companies in the market, while maintaining warehouses for the products is very expensive. Added to all this is the self-confidence of the workers, who are constantly achieving success in their struggles for better pay, security and better working conditions. And of course the increase in prices: “Delivery costs now lead customers to walk 300 meters to the supermarket by themselves to buy the products they need or order from a cheaper app,” says Hudets. Of course, the options available to companies are actually minimal: Flink now only offers free delivery for purchases of €50 or more, while all companies have dropped their 10-minute delivery promise – now the ad promises delivery at the door “within a few minutes”.

However, the supply may not disappear completely as the potential for growth in this industry remains huge. According to the German Retail Association (HDE), the sector had a food sales turnover of 204 billion euros last year. Online sales were just 2.4%.

Cooperation between distribution companies and supermarkets

Lieferando has been established in restaurant food delivery for years. And its competitor Wolt, in turn, has not completely left the food sector, it has simply changed its concept: Instead of creating an expensive product storage infrastructure, the company now cooperates with local supermarkets, from whose stores the products are collected. products, to then be delivered to the customer. Already, large food retail and supermarket chains in Germany, such as Rewe and Edeka, have been investing in such services for some time. The supermarket Rewe, for example, in addition to its own product delivery service, has invested in the start-up Flink.

French giant Carrefour has also entered the game strongly, following Flink’s takeover of local competitor Cajoo. With such business partners, Flink believes it is well equipped for the changing market. However, changes are foreseen for the consumer: Deliveries will take longer and become more expensive, says Hudets: “It will evolve into a luxury service,” the expert believes.

Matias Arnold, dpa

Edited by: Chrysa Vachtsevanu

Source: Deutsche Welle