It is no secret that the ultra-fast grocery delivery space is fiercely competitive and oversaturated, with several major players vying for investment and market share.
In a surprising move, Jiffy announced earlier this week that it will no longer be providing its rapid grocery delivery service, as it makes a “major strategic pivot” to become a dedicated software company.
Jiffy launched in April last year and prior to this announcement, offered rapid grocery delivery orders within around 20 minutes from 14 dark stores in London.
All consumer-facing operations have now ceased, while Click & Collect services from its network of dark stores will only continue “for the coming week or so”.
The company launched its ‘Quick-Commerce as a Service’ (QCaaS) programme in January. It enables brands to offer sub-15 minute delivery of their products or services via their own direct-to-consumer (DTC) website, powered by Jiffy’s ordering system and fulfilment network.
A number of companies around the world are already using Jiffy’s proprietary technology, including one major grocer in Asia and craft beer brewer BrewDog, which became the first partner of the service when it launched BrewDog express.
But is Jiffy making the right call and is it more likely to achieve long-term success as a software company?
Why did Jiffy make the pivot?
According to Fudami managing director Simon Browning, it is incredibly difficult for delivery companies to achieve profitability as they scale.
The economics of running a delivery fleet, coupled with huge marketing spend and general overhead means the gap between current operating costs and making a profit is a very long way off, he says.
“Abandoning the operations and moving to a software company means ditching all of that cost and complexity,” Browning tells Charged.
“If Jiffy can sell software, then this is where the most profitable margins are. This is how Just Eat started.
“As a software business, although I don’t know what model Jiffy will employ, if they took a small percentage of each order via their software, the convenience market is worth multiple billions in the UK and globally is worth trillions.”
Mostafa Abolnasr, chief executive of Omniful, also believes the decision was down to a challenging economic structure.
“The 10-min dark store model is great for the consumer but has not yet come anywhere near healthy unit economics,” he says.
“It also incentivises the consumer to buy less on each order, because why would someone think about their weekly needs or even daily if they can order multiple times just when they need the stuff?
“This results in lower average order value, which hurts any store, dark or not.”
For Brittain Ladd – chief supply chain officer at KPI, it is the best decision the company could make, after a series of poor initiatives.
“I’ve never believed that Jiffy could succeed as a rapid grocery delivery company,” he says.
“Over the last year, I’ve watched as the company made one bad strategic decision after another, for example, delivering pizzas.
“Jiffy could never answer this question: Why do we exist? And it resulted in a lack of focus and wasted effort. I question if Jiffy will have long-term success as a software company, but I believe it is the best strategic move they can make.”
Is supplying software a smart move for Jiffy?
Rapid grocery delivery is a cut-throat and crowded industry and not every player can obtain enough market share or have enough resources to scale to profitability.
In this vein, Simon Browning believes it is a positive move from Jiffy, as they already know the challenges of winning in this sector.
“If they can successfully pivot and differentiate their software then yes, they can win – and this decision may give them a chance where their current model may not,” he says.
However, others are not convinced that Jiffy’s software is unique or valuable enough to achieve success.
“An assumption comes into play here – those who can, do; those who can’t teach,” says supply chain and logistics consultant Gregg London.
“Selling software that ‘powered’ an unsuccessful business is problematic. If Jiffy couldn’t ‘make it’, why would anyone purchase their software, which may have been the cause of their demise.”
Dean McElwee, director at Stanley Black & Decker, explains that providing software is a complex endeavour, with every provider of quick commerce needing a website and app tailored to language and market and are often custom built, not white label.
“If this industry was as easy as buying software off the shelf, wouldn’t the likes of Tesco and Sainsbury’s have simply bought software instead of partnering with the likes of Deliveroo?” he asks.
Will Jiffy turn profit within a “shorter horizon”?
As a software business, the company expects to achieve profitability within a much shorter timeline. Jiffy’s chief executive Vladimir Kholiaznikov told The Grocer that he has 20 leads and a “strong pipeline” of retailers and brands wanting to use its technology.
In its current form, SaaS (software as a service) is a high margin business, particularly in comparison to the rapid grocery delivery model. However, SaaS is very different from running operations or building software for your own business, with pre-agreed flows in operation.
Mostafa Abolnasr points out that with SaaS, “sales cycles are relatively long, and the integrations side of the business is quite heavy with legacy systems and different sales channels.”
Despite this, he believes that when Jiffy are able to “adapt their software to play well with external systems, and cover enough use-cases in retail, they can do well.”
However, many are not convinced with Jiffy’s prediction, including Gregg London who believes the company is mimicking Instacart with its switch to software,
He also believes it is unlikely to achieve the same level of success as Instacart.
“Instacart is able to “white label” their systems, because they already have a significant revenue stream. Jiffy does not – having closed down,” London says.
“Would you buy a used car from Jiffy, as in, would you buy software from a firm that collapsed? I think not.”
Will Jiffy’s surprise move change the grocery delivery landscape?
Borne out of necessity and comfort during the pandemic, rapid grocery delivery has been one of the key success stories of the past few years.
However, the sheer number of services is overwhelming; from Deliveroo, Getir, Gorillas, UberEats and more, there is a constant battle for market share.
As Jiffy’s move into software indicates, there is not enough space for everyone. The ongoing consolidation of the sector can also be seen in Getir’s acquisition of rival company Weezy last year.
“As competitors to the leading players dwindle, either through acquisition or business pivots such as this, then winning becomes that little bit easier,” Simon Browning says.
“Jiffy will have a customer base that will have enjoyed using their service. These customers won’t leave the channel but switch to one of the other players.
“Rapid grocery is here to stay but I expect some changes over time as companies work out a profitable operating model that satisfies the customer demand.”