Aldi recently ended its partnership with Deliveroo, which began in May 2020 and was rolled out across 129 store, as the discount grocer said that a return to normal shopping habits had seen the demand for the service melt away.
The discount supermarket said it made the move so it could is prioritise its click-and-collect service and that home delivery was never part of its long-term business model.
Deliveroo seems to have taken the decision in its stride, as a spokesperson told Charged: “Deliveroo has enjoyed working with Aldi during the trial period. Deliveroo delivers from over 4,600 partner grocery sites in the UK and Ireland and we look forward to our service continuing to grow.”
But Aldi’s decision begs the question – have shoppers had enough of rapid grocery delivery? And if this is the start of a market adjustment in the industry, are other supermarkets likely to follow suit?
Despite rapid grocery delivery services booming in popularity during lockdown, supermarket footfall is steadily increasing. Recent industry data from the Office for National Statistics revealed that consumers are returning to more normal, pre-pandemic shopping patterns. Online grocery sales decreased by 3.7% from December 2021 to December 2020, while total spend accounted for 12.2%, compared to 14% at the peak of the pandemic.
Aldi is not the only supermarket to have established a relationship with Deliveroo, as the company has secured deals with Sainsbury’s, Waitrose, Morrisons and Co-op during the pandemic. Tesco has also teamed up with rapid-delivery service Gorillas to offer 10-minute deliveries from its supermarkets.
In response to questions over whether demand for rapid delivery service has fallen away, the Co-op told Charged: “Co-op continues to see its online offer grow with our physical stores well placed in communities to provide rapid home deliveries locally.
“A key part of our strategy includes using local stores to deliver quickly in the community, providing flexible options online to make life easier for our Members and customers.
“This is delivered through Co-op’s own online shop and with partners, including Amazon; Deliveroo – where Co-op is the most widely available supermarket on the App – and our autonomous robot deliveries.”
Waitrose also insisted: “The Deliveroo service remains very popular with our customers and continues to be available from 150 of our shops.”
As a discount retailer, Aldi relies on high volume and low margins. While a Deliveroo partnership may have made sense when demand was high, the service was never part of its core business model. For low-cost groceries, the click and collect model makes more sense financially and logistically.
“Aldi UK pulling the plug on its partnership with Deliveroo really shouldn’t come as a surprise,” jump! innovation partner Jeffrey Roberts commented via LinkedIn.
“Happy to be proven wrong here but fast, small deliveries seem to miss (what I had always assumed) is the mission of most Aldi UK shoppers: variety and value, with a touch treasure hunt. Fast deliveries of small orders runs contrary to this, so not terribly surprised to see the partnership ended.
“But fair play to Aldi UK for launching and scaling the experiment and even more power to them for ending it when it didn’t pan out. Always exciting to see organisational learning in action.
“Click and collect seems a more sensible solution. Allows for a speed play but brings the customer into the store for a bit of treasure hunt. Curious to see how the next round of experiments play out.”
The benefits of super-speedy delivery apps are the convenience and efficiency of their services. However, their network and coverage is mainly limited to cities, with Waitrose only offering delivery via Deliveroo from 150 of its 338 supermarkets across the UK.
The key supermarket players have tested the waters via services such as Deliveroo, Gorillas and Uber Eats. Although the numbers may reflect that the demand for ultrafast delivery via apps is waning, home delivery remains valuable to the industry.
Therefore, the question becomes whether retailers should outsource to a third-party delivery service or develop an in-house operation. Despite external partnerships, Tesco and Sainsbury’s have been trialling their own rapid delivery services – Whoosh and Chop Chop – to keep up with the market.
Tesco began trialling Whoosh in May, delivering small grocery orders within 60 minutes, before extending it to a further 11 UK Tesco stores.
However, Tesco chief executive Ken Murphy is still unsure how to make the delivery service profitable and worthwhile.
“The truth is we are unsure yet about the economic proposition and we’re not entirely sure about what the customer need is. Is it 10 minutes? Is it half an hour? Is it an hour?” Murphy said.
“I would describe our view on it as we’re very curious about what the proposition could look like. We’re very curious about what the customer need really is and we’re very curious about what a viable economic model could look like.”
The appeal of companies that deliver groceries in as little as 15 minutes – perhaps less time than it takes to walk to the corner shop – is not difficult to understand. However, Aldi’s decision to part ways with Deliveroo and the return to more normal shopping habits raises questions over the long-term growth for specialist speedy delivery groups.
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“Due to the nature of rapid grocery delivery apps, demand is more saturated in urban areas, among younger and more tech savvy individuals,” Cardlytics retail partnerships director Charlotte Jamieson told Charged.
“Chasing and responding to this customer base might not always be relevant for every grocery brand, whose customers can range from older retirees who value the in-store shopping experience to budget conscious families who may need a broader range of items than is available on these platforms.
“This is exactly what we’ve seen with Aldi’s decision to end its partnership with Deliveroo. If rapid grocery delivery apps are set to maintain the speed of their growth, their ability to appeal to a broader range of customers will be important. That means, being able to offer a full range of products at competitive price points, without compromising on quality.
“We’re increasingly seeing brands bet on their customers’ desire for fast and fresh grocery delivery and invest in their own door-to-door offerings; Sainsburys is developing its ‘Chop Chop’ offer, while Asda has introduced a one-hour express delivery service.
“However, the delivery and online grocery market is a competitive and costly one for brands. This is where partnerships with delivery platforms have a lot to offer, reducing the cost and logistical investment of setting up a delivery service, while giving brands the flexibility to trial and test their offer with consumers.
“As the pandemic has started to subside, so too has the boom in spend we saw on rapid grocery. Spend on these brands dropped 7.5% in the first three weeks of January compared to the previous three weeks. That isn’t to say there isn’t huge potential in this growing market, and brands should be looking seriously at new platforms and channels to expand their customer base.
“Whether it is through delivery apps, social media or banking channels – how grocery invests in ways to reach new customers will be key to sustaining the growth they have experienced during the pandemic.”
For grocers and delivery services alike, keeping an eye on consumers’ evolving needs and desires will be key to taking advantage of the market.