🌶 An Update on Grocery Quick Commerce

Overlooked #93

Hi, it’s Alexandre from Eurazeo (ex. Idinvest). I’m investing in seed & series A consumer and consumer enablers startups all over Europe. Overlooked is a weekly newsletter about venture capital and underrated consumer trends. Today, I’m sharing an update on the grocery quick commerce category.


In the past 18 month, quick commerce grocery startups have flooded European and American main cities. I previously wrote (i) a deep-dive in Nov. 20 on GoPuff who created the category and (ii) a post in Apr. 21 on why European copycats were doomed to fail from day 1. I've been monitoring the category since then and I think that it's interesting to look how it has evolved.

I divided this post in 3 sections:

  • How is GoPuff pushing the category forward?

  • How is a food-delivery platform like DoorDash building an alternative value proposition partnering with old-school retailers?

  • What happened in the past 18 months and what may happen in the next 12-18 months?

How is GoPuff pushing the category forward?

As category creator, GoPuff is a key player to follow because it's constantly pushing the category forward. In 2021, GoPuff raised $2.2bn in two rounds ($1.2bn in March and $1.0bn in June) and reached a $15bn valuation. It's using the funding to lock the U.S. market, to start international expansion and to launch special projects that can increase by 10x the size of the company in the coming years.

GoPuff is working on 3 special projects that I find noteworthy:

  • Catalogue expansion: GoPuff has expanded well beyond the grocery category adding categories like pharmacy, baby products, pet food, etc. GoPuff has also launched ghost kitchens to complement its offering with fresh food like coffee or pizzas. It works with mobile kitchens located within or next to dark stores.

  • Advertising for CPG brands: with traditional retailers, it was impossible for CPG brands to do performance marketing (hard to track offline + retailers refusing to share data). This is possible on GoPuff with a self-served advertising platform for CPG brands (3.1x ROAS in average, 10.3x for top quartile). It offers several ad products: programatical display & video ads, messaging campaigns, product sampling, experiential features. CPG brands are massively adopting it and GoPuff is able to generate revenues with extremely high gross margin to strengthen its global unit economics.

  • Opening physical locations: you know that I'm bullish on omni-channel retail stores as the definitive innovation in retail. GoPuff is doing two experiments in this direction.

    • First, it will open an omnichannel store in San Francisco. The store will be a dark store with a front desk where customers can pick up their order after having placed it either through the app or through a kiosk. In the back, pickers will prepare the order for both in-person customers and riders.

    • Second, it launched in Oct. 21 in New York stores with similar omnichannel capable of processing both curbside pickups and deliveries.

How is a food-delivery platform like DoorDash building an alternative value proposition by partnering with old-school retailers?

When we talk about quick-commerce startups, we tend to forget that they are not only competing between themselves. There are indirect competitors within two main categories: traditional retailers and restaurant food delivery platform. And guess what? These two indirect competitors have decided to partner up to offer fast grocery delivery. In Europe, both UberEats and Deliveroo have stricken key partnerships with retailers. Same in the U.S. with DoorDash.

Below are DoorDash's key initiatives in 2021:

  • DoorDash is partnering with generalist and specialised retailers which are aggregated on the DoorDash marketplace. DoorDash manages the deliveries from the store network of these partners. Retailers can also leverage DoorDash last mile delivery network to sell and deliver their products in less than 30 minutes on their proprietary channels.

  • DoorDash is expanding its advertising capabilities into two directions: (i) restaurants can now use the platform by themselves, having their own self service when all the other players need to be in contact with DoorDash, (ii) enabling any brand to start promoting their products on the DoorDash marketplace.

  • DoorDash is building its own network of darkstores (under the DashMart brand). Moreover, DoorDash is collaborating with retailers to help them master this new logistics format. Retailers act as wholesalers providing the products (inc. their private labels) and the delivery to the darkstores while DoorDash operates the dark stores and takes care of the delivery to the end-consumers. Both DoorDash and the retailers are selling the products on their channels.

  • DoorDash is reviving its international expansion mindset. It opened Japan. In Europe, they were rumored to start operating in Germany and to acquire/invest into Gorillas. In Sep. 21, DoorDash led a $600m round into German quick commerce startup Flink at a $2.5bn valuation. In November, it announced that it was acquiring European multi-category delivery startup Wolt for €7.0bn. Wolt operates in 23 countries, has 2.5m MAUs, has a $2.5bn annual GMV run rate in Q3-21 (130% YoY growth) and is present in 15 categories. It means that DoorDash is now a serious contender also in the European market and we should expect DoorDash to double down there on its key strategic priorities (be multicategory, integrate vertically with dark stores and dark kitchens, develop its advertising platform).

I think that it's now fair to say that DoorDash and GoPuff are now competing head to head. Even if they came from a different angle, they both want to become the all-in-one platform for food (prepared meals + groceries) and other retail categories by leveraging their respective last mile delivery networks.

What happened in the past 18 months and what may happen in the next 12-18 months?

Regarding what will happen in this category in the next 12-18 months, I believe that it’s just a question of determining how far the two main trends that are already happening in the market: consolidation and differentiation will go

Consolidation has started with companies in the grocery space acquiring, taking minority equity positions or striking partnerships with ultra-fast grocery delivery startups.

There are 3 categories of consolidators:

  • Incumbent retailers. They want to get exposure to a new category with players who claim that they can build the next generation of retailers starting with convenience delivery. Moreover, they know that they can be kingmakers when they support a player with their central purchasing body to access at products at competitive prices. In Jun. 21, Flink started a long-term term supply agreement with German grocer Rewe. In Sep. 21, Cajoo signed a similar deal with French retailer Carrefour which also led a $40m series A in the company.

  • Online grocery giants in adjacent categories. Grocery delivery is perceived as an adjacent eldorado to conquer - esp. for restaurant food delivery platforms who already have the last mile delivery infrastructure. In Oct. 21, restaurant food delivery company Delivery Hero took a 8% equity stake into Gorillas' last $1bn funding round. Previously, DoorDash was rumoured to invest or acquire Gorillas.

  • Ultra-fast grocery delivery category leaders. To accelerate their time to market in certain countries, they are buying local players which have opened markets for them and to reduce the competition intensity. GoPuff has bought two European contenders with Fancy and Dija. Getir has snapped a Southern Europe player called Blok.

Players are starting to make differentiated strategic moves.

  • Incumbents (traditional retail chains but also online supermarkets) are making defensive moves because they understand that convenience commerce may challenge their core business in the mid-term. We talked earlier about equity investments and long term partnerships established by incumbents. We also see players testing and launching their own quick commerce operations (Auchan in Bordeaux, La Belle Vie under the "bambamcourse" brand).

  • Category creators and leaders are making offensive moves to bring the category to the next level - beyond acquisitions to start consolidating the market. GoPuff has launched its self service advertising platform for CPG brands which want to invest in brand and performance marketing on its app. Moreover, GoPuff is starting to open hybrid stores which are both retail stores and dark stores. Another illustration is Getir which is expanding its successful franchise model in its new markets (e.g. in France and in the UK).

  • New players are trying to build differentiation by going beyond the grocery category. Jokr has positioned itself from day 1 as the "next gen. Amazon" targeting 100k SKUs (vs. 2-3k SKUs for other quick commerce players). It started with grocery to build the consumer habit because it's a high frequency purchase category but it has quickly expanded into other categories. Arive has taken a more radical positioning. They think that high end consumer brands will never want to be on a platform where their products are sold next to bananas and alcohol. They decided to re-use the convenience commerce logistics model to build a completely reinvented ecommerce experience (mobile first, ultra convenient, premium, etc.).


Thanks to Julia for the feedback! 🦒 Thanks for reading! See you next week for another issue! 👋