1. Channel: Ecommerce & Digital

Investors Gorge On Food Delivery Services

The Financial Times reports on the growing investor appetite for food delivery services, which found themselves much in demand during the pandemic.

There is, FT writes, “”a growing crowd of rapid delivery apps that have become beneficiaries of a lockdown-fuelled funding bonanza. Investors have ploughed almost $14 billion into on-demand grocery delivery services globally since the beginning of the pandemic, according to PitchBook Data, with more funding arriving during the first three months of 2021 than the whole of last year. The long-familiar concept of a doorstep delivery service, whose origins might be found in the humble milk float, has been turbocharged by a combination of the pandemic and Silicon Valley’s hype machine.

“‘One huge benefit during the past year is all this forced adoption [due to lockdowns],’ says PitchBook’s Alex Frederick. ‘It gave them [the delivery groups] a ton of consumer data to improve their products, and so you’re seeing these companies raise all this capital, to better serve what their customers want.’  Apps such as DoorDash and Deliveroo, focused on restaurants and takeaway meals, have proven consumer appetite for deliveries that are ordered online and arrive in as little as 30 minutes. But the new generation of start-ups eyeing the far greater market of groceries — estimated at $1 trillion in the US and more than €2 trillion in Europe — promise to deliver a basket of essentials in just 10 minutes.”

You can read the piece here.

KC’s View:

A couple of things are likely to play out here.

One of that there will be a bunch of companies that will over-promise what they can offer to consumers and over-estimate their ability to be profitable … which will lead to some business collapses (and at least one or two will be spectacular flame-outs).

The other trend we’re likely to see is more of these delivery services adopting hybrid models, which will allow them to both service retailer clients’ e-commerce shoppers and create more autonomous business segments (making direct deals with manufacturers, offering their own promotions and credit cards, opening dark stores so that they don’t need retailer clients) that they think will allow them to improve their bottom lines.

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