Cities’ next headache: Ultrafast grocery delivery

By Updates

January 30, 2022

Sci & TechUpdates

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Airbnb showed that one person’s convenience could become another’s annoyance.

Now, European city councils face deep-pocketed startups promising to bring groceries to residents’ doorsteps “within minutes” through online or in-app ordering. To that end, firms are setting up so-called dark stores, micro-warehouses where orders are fulfilled and collected by couriers for delivery.

City councils fear that such dark stores will take over shopping-street storefronts, reduce commercial foot traffic or cause nuisances in residential neighborhoods. Some cities, like Amsterdam, have already ordered dark stores to relocate — or are investigating whether such stores can stay. But — as with Uber, food-delivery couriers and e-scooters before — the growing trend has caught cities off-guard.

They could have seen it coming, though.

Investors poured $4.6 billion into European grocery-delivery companies last year, almost double what was invested in their American peers. Well-known tech companies have made big bets on grocery delivery, either by setting up their own operations or by investing in startups. Berlin-based grocery delivery company Gorillas made the biggest splash, grabbing $1 billion in funding in October, thanks to investors such as China’s Tencent and Germany’s Delivery Hero. Delivery Hero said in a press release announcing its investment that Gorillas had handled 4.5 million orders in the six months before October.

Money is all around, and for good reason: In Europe, ordering groceries online is in its early days and there’s still room for expansion.

“Groceries is an industry that if you look at the online penetration, [it] is probably one of the lowest in comparison to electronics, furniture, fashion and many others,” said Daniel Alonso, who is responsible for Q-commerce (quick commerce) at Spanish delivery company Glovo. The coronavirus pandemic changed that by a bit, but not much: “Even when people were prisoners in their house, they had time to go to the grocery store.”

Companies aim for ultrafast delivery to win over new clients. Turkish firm Getir, founded by Nazim Salur in Istanbul in 2015, was one of the first to raise that bar — promising a delivery ETA of minutes instead of hours.

“Why don’t I bring people their everyday necessities, say, in 10 minutes,” Salur said, recalling delivering his business idea on the stage of the Finnish startup conference Slush in December. Getir is reportedly seeking a valuation of $12 billion.

Dark stores rising

The industry has embraced the target of delivering groceries in 10 minutes or less — and opening dark stores in cities is essential to making that happen.

The key to keeping promises of super-quick delivery times is “that you need to be very close to the customer,” Glovo’s Alonso said. “If this is what users want, then we need to be in the middle of the city. We need to build little warehouses in premium locations.” Glovo started opening dark stores — although it prefers to call them “micro-fulfillment centers” — in 2018, with Madrid being one of the first cities to house them.

The number of dark stores has skyrocketed since — all over Europe.

Amsterdam is another city experiencing dark-store growth. In West, a borough heavily populated by families, 10 dark stores are already up and running, overseen by the companies Gorillas, Getir, Flink and Zapp. “But come back, and it might as well be 12,” said Melanie van der Horst, a member of the borough’s executive committee. She’s a local politician who has seen dark stores emerging — and is now racing to clamp down on them.

“We noticed fairly quickly that they took over places where this was not really convenient, and where you could see trouble emerge quickly,” she said. “There are the trucks driving into the street, also at night, unloading at inconvenient moments, parked on the bikeway. There are the couriers waiting, not inside, but in the public space, until late at night. They leave their trash, they urinate, drugs are used.”

The borough has already ruled that one of the dark stores, belonging to Zapp, in West didn’t fit the development plans of the area — and although Zapp can appeal the decision, the tone has been set. Several other locations are under the municipal microscope as well. Amsterdam’s city council is preparing a framework for how to deal with these kinds of warehouses — something city councilor Elisabeth IJmker has been asking for since the summer.

“When Airbnb landed, we were quite late with dealing with the negative consequences. For me, this was a reason to start asking quite early, before the summer, to have a look at this,” IJmker said.