COMMENT Weezy, Gorillas, Dija, Getir, Zapp, Jiffy. For many, these will be unfamiliar names. But these and other grocery delivery operators have raised huge amounts of venture capital funding to support aggressive roll-outs, and the growing “dark store” market is central to their expansion.
Dark stores, which exist solely for the storage and distribution of goods, are used by most of the major UK supermarkets, whose built facilities are essentially just warehouses full of groceries and staff “pickers”. But in the last six months, there has been an explosion of start-ups racing to capture market share in the grocery delivery space by leasing as many local distribution hubs as they can in as short a time as possible.
The pandemic has led to a surge in online grocery shopping, and several new businesses are banking on the trend continuing even after restrictions have been lifted. For start-ups in this space, speedy delivery times, locally sourced products and slick, user-friendly mobile apps are the weapons of choice in what has become a thriving marketplace.
They offer customers groceries delivered to their door in as little as 10 minutes, and there is already proof that the concept works in other countries. GoPuff, a US digital delivery business originally set up in 2013 as an on-demand shisha service, now operates from 500 cities in the US and has 200 fulfilment centres.
Ambitious targets
In the UK, the fledgling operators are locked in a race to grab as much land as possible, starting in London but with eyes on other major UK cities.
Instead of creating huge facilities of 100,000-200,000 sq ft, as is the way of the major supermarkets, the new approach is to amass collections of small, local fulfilment centres of 2,000-5,000 sq ft. The number of sites that these businesses are aiming for is ambitious, with some having targets to reach more than 300 locations across the country.
As well as seeking out traditional industrial buildings, most of the start-ups have identified an opportunity to repurpose redundant spaces, such as high street shops, leveraging the new planning laws that were brought in on 1 September 2020.
On the face of it, the reforms allow changes of use from shops, restaurants and offices to warehousing. The new Class E is still in its infancy, however, and whether local authorities will allow shops and cafés to become local warehouses is uncertain.
Heightened competition
The success of the new entrants will depend on how they compete with the product range, brand loyalty and value proposition not only of the major supermarkets, but also of the likes of Uber Eats and Deliveroo, which are already offering groceries on their platforms.
Deliveroo currently operates a series of “Editions” sites – delivery-only kitchens in key locations around London and the UK. In 2020, as a response to the spread of Covid-19, the company started using these hubs to fulfil their “essentials” range, including basics such as tea, coffee, fruit, vegetables and milk.
An interesting alternative can be seen in the innovations made by US company Reef Technology. The firm is the largest operator of parking, logistics hubs and neighbourhood kitchens in North America and has seen an opportunity by creating mobile, self-contained units that sit on underused land, such as storage or car parking space. They too are now active in the UK, searching for spaces to convert into profitable delivery hubs.
Whether we will see our local high streets become logistics and delivery centres remains to be seen, but consumer behaviour has irreversibly changed, and the way that commercial property is used will have to mirror that in order to survive.
James Raven is a partner at Raven Rose
