Layoffs, closures, takeovers… After a thunderous start, the express delivery start-ups are making it time. Between an impossible quest for profitability and administrative constraints, the future of high-speed trading in France is now in limbo.
Is fast trading going to be a shooting star? After a rapid surge in 2021, 10-minute grocery delivery services appear to be stalling. While start-ups in this emerging market, born during the Covid epidemic, multiplied last year, the buds seem to have quickly wilted in recent months.
Zapp, KOL or even Yango Deli have ceased operations in France. BAM Courses, La Belle Vie’s fast trading service, has given up on its promise of 15-minute delivery for an hour-long service. And while spectacular fundraising interrupted the industry news, it is now layoffs that herald the big players. From Gorillas to Flink via Getir or Gopuff, more than 7,000 jobs have been lost worldwide to the major players in fast commerce.
Add to that a concentration of the expected sector, but that happens very quickly for an activity that is barely two years old. The giant Gopuff has offered the British Dija to tackle the European market. And the more fragile French are easy prey. At the beginning of this year, Frichti was taken over by Gorillas and Cajoo was swallowed by the German Flink last May.
From 11 to 4 actors in one year
“Of the 11 players mentioned above, only four are now left on the French market: GoPuff (leader in the United States with a valuation of more than 40 billion euros), Flink (valuation of 5 billion after the acquisition of Cajoo), Gorillas (3 billion) and Getir (12 billion),” Vertone noted in a note.
Soon there may be only three. Despite a very rapid expansion and a leading position in France with a market share of 61% according to Iri, Gorillas could fall into the hands of the Turkish Getir. According to Bloomberg, talks between the two groups are well advanced. The German had been looking for several months to get closer to a competitor to reach critical size and accelerate his quest for profitability.
Will express delivery have been just a short-lived fashion favored by the lockdowns and other curfews of the Covid period? In any case, panelist Iri’s data does not indicate a slowdown in demand. In the first half of 2022, fast trading represented 174.5 million euros in turnover, according to Iri, compared to 122 million over the entire past year. The “lazy business” of using the qualification of Dominique Schelcher, the boss of System U, therefore still seems to entice consumers for the time being, even though the panelist notes a “delay in the past three months with a growth of “only” 64%”.
The problem is more on the side of the economic model and the financial markets. As a reminder, these services charge on average between 2 euros for delivery. However, to make the cost of a delivery person profitable (about 18 euros per hour), the latter has to make no fewer than 9 deliveries within the hour. Most platforms have chosen to provide permanent contracts rather than freelancers.
10 minute delivery stopped
However, to fund this service at a loss, the platforms had no choice but to raise funds. Between the end of 2020 and the beginning of 2022, i.e. in just 18 months, these platforms raised almost 7 billion euros worldwide.
“But at the beginning of this year, the financial markets suddenly flipped and now it is becoming very difficult for them to raise funds,” notes Frank Rosenthal, a trade advisor. Mutual funds wonder whether they are not investing in vain. Where there was enthusiasm, there is now suspicion.”
In the inflationary context of rising interest rates, investors are no longer signing blank checks. To reassure their creditors, fast start-ups therefore need to show that their activity is not a bottomless pit. Hence the cutbacks in recent months with the many layoffs.
But also the decline in service. Today, no platform promises delivery in less than 10 minutes, as was the case when they launched. The services are also trying to boost their activity by offering more products for sale (such as small electronics, for example) or working on new business models such as Amazon’s Prime-type subscriptions to offer free delivery with recurring revenue.
Still, the platform’s voluntarism, mergers and acquisitions may not be enough to save the industry. The constraints associated with urban planning should largely hinder their deployment. In September, the government decided by qualifying the “dark stores” as warehouses, giving the mayor the power to decide their location with the local urban plan.
“The mayors have won and since there are many of them, the platforms will have to adapt on a case-by-case basis, city by city, Frank Rosenthal believes. This legal reversal is a very strong impediment to rapid trade, it could even sign its end .If a platform has a billion euros to invest, it is certain that it will not put it in France.