Ultrafast grocery delivery services vie for space in crowded Chicago market
The convenience grocery services, already booming abroad in cities like Paris, London, Istanbul, are snowballing in Chicago.
Ultrafast grocery delivery companies promising 15-minute deliveries to satiate late-night cravings and last-minute grocery needs have flocked to Chicago.
“It’s the ultimate convenience,” said John Mercer, head of global research at Coresight Research, an advisory and research firm specializing in retail and technology. “It’s one of these services that consumers don’t know that they need or that they want until it’s put in front of them.”
Several ultrafast grocery delivery services have expanded to Chicago in the past year, promising faster delivery times than more-established companies like Gopuff that deliver in 30 minutes or more.
“If I’m out of milk and my husband is out of town, 15 minutes literally from start to finish, it’s at my door. It’s fabulous,” said Morgan Hoffman, 38, a stay-at-home mother of two in Lincoln Park. “To lug them both out, when I just need a few things, it’s a pain in the butt.”
The first time Hoffman used Buyk, she was shocked at how quickly her items came. Now, she said she’s used the service five times in the past three weeks for anything from a near-full grocery haul to just a few last-minute items.
More shoppers turned to online grocery orders since the start of the pandemic, with online orders making up 12% of grocery sales nationwide. They made up just 2% before the pandemic, according to Coresight.
“The pandemic obviously added a health and safety layer to it, I think, accelerating what was already a trend in the marketplace,” Linda Tuncay Zayer, professor of marketing at Loyola University Chicago’s Quinlan School of Business, said. “So if you don’t want to go into a crowded store, you can have contactless delivery from the comfort of your home.”
The services are attracted to Chicago by its density and diversity of customers. However, some retail experts are skeptical of the industry’s sudden growth, saying the apps’ steep discounts and fast delivery times may be hard to maintain long-term.
While grocery delivery services like Instacart send workers to pick up goods from brick-and-mortar supermarkets, ultrafast services use a network of mini-warehouses scattered around a company’s coverage area. The companies buy goods directly from suppliers, allowing them to operate with lower overhead costs. These so-called “dark stores” are minimally staffed, and they stock a fraction of the goods as a typical supermarket. Most are closed to the public.
Like most of the newcomers to Chicago’s market, Getir, a Turkish grocery delivery company, uses this model to offer 10-minute delivery by couriers on e-bikes and scooters.
Getir was founded seven years ago and expanded to Chicago — its first U.S. city — in November. The company has taken a heavy advertising route, wrapping CTA train cars and flooding Chicago’s street with its fleet of purple-clad couriers.
The company’s estimated value skyrocketed in 2021 from an estimated $850 million in January to $12 billion by year’s end, according to Business of Apps.
Getir expects to maintain this growth rate, said Langston Dugger, head of Midwest operations for the company. He pointed to the company’s success in Turkey and in Europe as indicators of a bright future in the U.S.
“A lot of our competitors were launched last year,” Dugger said. “I think one of the things that gives us confidence in terms of being a long-term player and being more effective than other companies in this space is that we’ve had a head start.”
Coresight’s Mercer said it’s notoriously hard to turn a profit in the grocery industry.
Delivery company 1520 expanded to Chicago in September and closed in December after reportedly running out of money. On its apps and social media channel, it redirected shoppers to Getir.
“We expect consolidation, which probably will include some falling out in the market,” Mercer said. “Investors will need to play the long game. They need to be willing to accept that they’re gonna turn losses probably for a number of years before they get the scale and the market reaches the scale that allows profitability.”
Tuncay Zayer said that while the companies differ in offerings, advertising strategies and delivery styles, the customer experience remains largely the same across the board, making it a highly competitive market.
“I think that there’ll probably be a shakeout to see which ones will survive,” Tuncay Zayer said.
Some small-business and bodega owners have raised concerns this shakeout might hit local supermarkets and convenience stores, although not all are worried.
Jorge Rosales, who helps run his wife’s Ravenswood business, Salsa’s Family Market, said he isn’t bothered. With 15 years in the grocery business, Rosales is confident that the influx of convenience delivery services won’t affect his business and that neighborhood stores will always provide for their communities in a way delivery services can’t.
“I don’t mind them,” Rosales said of the delivery services. “I don’t care about the little startups and all that stuff because I know they’re gonna crash one day.”
“It’s all about customer service,” Rosales said. “People like the communication, they like to talk to other people. Right now, we need love. We need to talk to each other. We don’t need to be in the computer. People spend all day in the computer.”
Food Rocket, another rapid grocery delivery service, expanded to Chicago at the end of February and hopes to launch 160 dark stores by the end of the year.
Buyk, a New York-based bike-courier driven startup, launched in Chicago in January. It already has seven Chicago stores, with plans to open 14 more by summer, according to CEO James Walker. It also has fostered a partnership with Grubhub.
Despite the crowded market, Walker said he was confident there is a need for fast grocery delivery services.
“If you aggregate all of those companies and all of their locations, and you divide that into what even the potential demand is today for the service, then frankly the U.S. marketplace, Chicago and New York, more specifically, are massively underserved,” Walker said.