After cutting back its services in Belgium and a couple of other countries, flash delivery service Gorillas is now even cutting back its Dutch activities – despite calling the Netherlands one of its key markets just last month. Zapp is leaving the Netherlands as well: are flash delivery companies going out with a bang?
Gorillas is cutting back its operations in Europe: just last month, it left Belgium, Denmark, Italy and Spain to leave four European countries as its “core markets”. However, after “careful evaluation”, the Berlin-based company is also leaving six Dutch cities as well. This is not a one-off: competitor Zapp is leaving the Dutch market altogether. What is going on, if even in such a mature online market, flash delivery companies feel they have to retreat?
One of the main issues is that in the current climate, the extraordinary amounts of money that were available for the expansion of flash delivery companies have dried up. Expanding in the most promising regions, and achieving a sufficient scale there, now means that leaving other places is unavoidable. Maintaining a quick commerce hub is, obviously, very expensive: if you want to keep up a promise of delivery within 10 minutes, the costs for dark stores and couriers are extortionate. Moreover, those dark stores are unappealing and cause image problems, while legislation against them further increases insecurity for the companies.
Bad time for ‘flashy’ adventures
As such, “sustainable growth” remains a very difficult issue for flash delivery companies, which also explains the many takeovers and consolidation in the still very young market. And that is expected to happen even faster, now investors are withdrawing from quick commerce companies and their tendency to burn up years of cash before ever, if ever, becoming somewhat profitable.
Even an ‘old’ and experienced player in the market, such as Just Eat Takeaway, is still losing billions of euros. That used to be no problem for investors, but now shareholders are suddenly starting to protest, founder Jitse Groen notes. Investors think this is no time for risks and flash delivery companies – with still everything to prove – are now made to pay for that.
A lesson in humility
Does this already spell the end of the story for Gorillas and the others? Perhaps not, but the rapid expansion that quick commerce players hoped for – and food retailers feared – seems to be firmly off the cards now. Still, the fact that even flash delivery companies are now using words like “sustainable growth” is a good sign in itself. It means that from now on they will be less ‘flashy’ and a lot more modest than their ‘instant’ delivery promise suggests.
Sustainable growth is humble growth. Hopefully, the flash delivery companies can now also come up with sustainable solutions for their dark stores in the cities and sustainable partnerships with the retail sector, so that their ‘quick commerce’ does not become a quickie with a bitter aftertaste.