Quick commerce — rapid funding. Why are VCs happily backing on-demand grocery delivery?

Round Seed in mid-April. Round A in June. Round B in November. And there we have it! In just 7 months, a unicorn was created! The story of JOKR, MOC portfolio company is one of gaining unicorn status at a dizzying pace.

Why is the on-demand grocery delivery on a roll? What are the reasons behind our decision?

On-demand grocery delivery / rapid delivery / instant grocery delivery/ quick-commerce or Q (for quick) commerce startups. This is clearly their time.

What are they all about?

On-demand grocery delivery startups offer customers around 1,000 to 2,000 grocery goods (sometimes complemented by other FMCG categories like cleaning, personal care, stationery etc.) per dark store, which can be ordered via an app and arrive in less than 15 minutes. And yes… Such speed is the main WOW thing that should attract consumers.

These goods are stocked in warehouses — spots sometimes called “dark stores” or even “micro fulfilment centres” — located in city areas. The localizations close to local customers enable operators to deliver orders quickly, usually by couriers or e-bike riders. Most operators have small delivery fees. Some have none.

The sector is relatively young. Until November 2021 it has had three unicorns. Getir, launched in Turkey in 2015, has begun expanding into other countries after success in the local market.

Later on GoPuff (USA) and Gorillas (Germany) started to grow explosively. It convinced VCs to invest in the quick commerce sector.

In November 2021 JOKR joined the club, with overall valuation of $1.2 billion, earning the status in just 7 months.

The most significant growth of the on-demand grocery delivery sector came with the rise of the pandemic. Lots of people, for safety reasons, wanted to do their usual shopping online. But reasonable (i.e. shorter than… 3 weeks) delivery times were basically unavailable in many regions/geographies. It took a lot of luck to successfully order a package from a supermarket…

The emergence of rapid grocery delivery startups is therefore a positive surprise. Not only can you order something, but delivery is instant. That is one reason why VCs are rushing to make a bet in the category.

They are all addressing a global market of USD 11.7 trillion in the retail space which is expected to grow at a compound annual growth rate (CAGR) of 5.0%. It is estimated that only about 3% of the global food and grocery retail market is currently online, however there are discrepancies between experts. According to Kantar Group’s research, in 2019, the online share of global grocery sales was 5.8%.

The penetration of e-commerce into the traditional grocery space has lagged in most other retail sectors, but currently, the online grocery sales growth is accelerating markedly as barriers to consumer acquisition are rapidly tumbling around the world. A very strong trigger for change was the pandemic. It forced many “late-adopters” to start purchasing groceries online. Their positive experience helped to break down consumers’ mental barriers, which facilitated the development of a new model — ultra fast delivery. Thus, it presents an enormous opportunity for all fast players. Shifting the internet’s share by a few percent means billions of dollars in revenue.

Competitors and category confusions

First, we have legacy grocery shops — with central warehouses owned by large retailers that operate under well-known grocery brands like Carrefour, Auchan Direct, DIA %, Italian Esselunga or Spanish Mercadona. They usually deliver the next day (unless there is pandemic…) and have their own inventory and riders.

There are also online-only groceries like AmazonFresh, Polish Frisco, Czech Rohlik or Norwegian Oda (previously: Kolonial) with central warehouses which usually deliver the same day and have their own inventory and riders.

Then, there are many kinds of digital grocery delivery services.

Instacart is just one example: personal shoppers select your items from the store and then deliver them at your door. Depending on your location, you can get same-day delivery from a variety of stores in your area. Some non-grocery retailers have also partnered with Instacart. U.S. Shipt is another grocery delivery service that lets you shop from different stores depending on where you live.

Third, there is the ready-made meal delivery category.

Online Food Deliveries — that allow consumers to order from various food delivery platforms and restaurants with a single click on their mobile phone — are operated in two main business models: New Delivery Players & Aggregators. Some players are a mixture of both.

New Delivery Players platform is the new entrant in which the players build their logistic networks (hiring gig workers) providing delivery for restaurants that don’t have their drivers. Uber Eat, Glovo, Delivery Club are here to mention.

In contrast, the aggregators, which are part of the traditional-delivery category, take orders from customers and route them to restaurants, which handle the delivery themselves. Just Eat (serving Europe, North America, Australia, New Zealand, and Latin America under iFood brand.), Deliveroo (serving Europe, Australia, and Asia) and GrubHub — are the most popular. Pyszne.pl is the no. 1 in Poland.

Last, but not least, we get on-demand grocery delivery services like the JOKR. They offer customers grocery goods and other products, usually available in convenience stores, which can be ordered via an app and arrive in less than 15 minutes.

The most important rapid-delivery brands

In recent months, investors have been fighting to spot early the new rapid delivery companies, many of them with little or no operating history before the pandemic. A dozen startups are already tackling the market.

The veteran in the space is Getir, which launched its 10-minute grocery delivery in Turkey in 2015 and now operates in 23 cities in its home country, and in London.

German Gorillas, which launched in Berlin in June 2020, became the fastest company in Germany to achieve the unicorn status. Since January 2021, Flink in Berlin and GetFaster in Düsseldorf have been following their footsteps.

Weezy, recently aquired by Getir, was the first operator to launch in London, followed by Zapp, Dija and Fancy (currently operating multiple micro-fulfilment sites in Newcastle, Leeds, Liverpool, Manchester, Bristol and Birmingham, acquired by GoPuff in May 2021).

By acquiring Fancy, the US startup GoPuff accelerated its geographic growth towards the UK — to Newcastle, Leeds, Liverpool, Manchester, Bristol, and Birmingham with upcoming launches in London, Sheffield, and Nottingham, among others.

However, there are still a considerable number of countries where no player is active. This was one of the reasons why we decided to place our bet on JOKR.

Why has MOC started observing the on-demand grocery delivery category?

The COVID-19 pandemic has led to an unprecedented surge in online grocery sales around the world. Although some of the shift in consumer spending towards online grocery may prove ephemeral, a significant portion of it will be permanent. (Since March 2020, Ocado — an U.K. online grocer with automated delivery warehouses — cannot meet all the demand, and has about 1 million names on a waiting list, showcasing the future growth potential.) Therefore, investors are focused on the enormous and mostly offline market they could take a bite out of. Many prominent investors have already backed one of them.

Grocery is a great, one of the last e-commerce targets to be disrupted. It has been known for quite some time now, how interesting the online grocery market is. The on-demand grocery delivery is even hotter. It is fundamentally changing the supply and logistics of the way we all order grocery and convenience items.

It’s a whole new user experience. It is absolutely delightful to get your order delivered in 10 or 15 minutes. Such experience makes us, investors, count on the viral spread of information about the new brand. Go-to-market will be easy in the first phase of adoption. JOKR makes the experience faster and more enjoyable, all while returning an extremely valuable asset back to the consumer: their time.

It is also easy to explain what the JOKR phenomenon is all about. “Just check it out for yourself! Get your order now! Literally!”

The economics of the solution also impresses. Especially when viewed with a cool business eye. The costs of equipping and decorating a shop and renting space in tier-one locations are completely different for convenience stores like Żabka or Carrefour Express. In the case of the full blown model — once a critical mass has been reached in terms of the number of orders per store — the unit economics can be significantly better compared to ordinary convenience stores. Even twice as good!.

Thanks to technology, dark store-based solutions also have an advantage over regular shops at the level of understanding consumer needs and predictive analytics. The platforms that make rapid deliveries possible collect data on the preferences of local communities — to better serve what customers want. They learn what products are popular and machine-learn what the customers may like next. This data-driven approach, as well as the immense market opportunity within instant retail, presents enormous growth potential for JOKR.

Why JOKR?

We have been looking at the category for almost two years. We chose JOKR because we were impressed by the pace of the operations and grand vision of the company. JOKR benefits from the vast experience of its founders and leadership team — the same entrepreneurs that created the online food ordering and delivery service Foodpanda and helped steer the success of Delivery Hero. Among the co-founders of the platform is Piotr Lagowski, who is responsible for developing the company in Central Europe and Africa. He previously built and developed companies such as Foodpanda (Delivery Hero), Quandoo and WeWork.

We were also convinced by the fact that JOKR plans to offer not only grocery, but also cover other consumer categories.

We are delighted to have been able to support JOKR seed stage round. We are looking forward to see what the future unfolds.