Grocery delivery apps: the psychology and costs of super fast dispatch
Your worst nightmare has come true. You forgot the milk to make the Yorkshire pudding for Sunday lunch and your entire extended family is arriving in twenty minutes. The WhatsApp group has been buzzing all morning in anticipation of pink roast beef with all the trimmings. Do you panic?
A year ago, perhaps. But now? There’s been a surge in apps offering to deliver a pack of Aunt Bessies, a jar of horseradish, some stock cubes, a bunch of carrots, a bottle of Rioja or anything else you might need faster than you can whip up a batter. So really, panicking over food is old news.
There isn’t a lot to like about COVID, but this post-pandemic explosion of high-speed grocery delivery apps is one example of how lockdown has significantly evolved the way the UK shops for food. And it’s why when the UK collectively buries its head in its hands at the prospect of another lockdown, the online delivery sector rubs its hands together.
COVID-chaos creates cash for the delivery specialists because lockdown generated a consumer need greater than wanting more options than pizza, Indian or Chinese, or even relative newcomers to delivery like McDonald’s, or high-end restaurants. It meant the basics, like bread, butter, bananas and gin.
Why cram into a covid-riddled supermarket when ordering a top-up shop from your sofa is easier than smashing a level on Candy Crush? As a result, the list of apps springing up to offer online grocery delivery is longer than your list of New Year’s resolutions.
As well as established players like Deliveroo, Uber Eats and Just Eat, the pandemic has opened up opportunities for emerging operators like Getir, Gorillas and Zapp, or Beelivery, Yango, Dija and many more.
In turn, this has opened up a new revenue stream for supermarkets, which have teamed up with them, as well as pushing their own speedy ventures harder, like Sainsbury’s Chop Chop, Ocado Zoom and the Co-op, which has joined forces with Deliveroo and Amazon and deploys cheeky little robots on wheels to make deliveries in under 20 minutes.
It’s deploying the robots into more cities this year, and you might imagine gangs of naughty kids would smash them to pieces on sight, but Andrew Curtis, from Starship Technologies which built them, says he has been warmed by the “extremely positive reaction” to them from the local community.
Back to the speedy stand-alone apps, and Getir, which was founded in 2015 and started up in London last year offering 1,500 items, promises ‘Fast delivery in 8-12 minutes’.
That’s quick. And if Getir hits it regularly (it wouldn’t say how many deliveries are actually delivered inside 10 minutes) it would typically deliver a bag of shopping faster than it would take the average person to get to the shop in the first place.
Of course, many apps restrict operations to denser urban locations in order to hit those time-targets. And there is a delivery charge involved. But if you are within the delivery radius (Deliveroo now covers around two thirds of the UK) how much would you pay on top of the shopping not to drag the kids to the shop in the rain?
One pound? £2? A fiver? All could represent value, especially in the midst of a global pandemic. Unsurprisingly, despite an official lockdown still only hovering around, staying safe is the current biggest motivation for getting someone else to take the risk, suggests shopping psychology guru Phillip Adcock.
He says: “loss aversion” is one of “over 100 cognitive biases in the brain” and one of the “biggest drivers of human behaviour. In our heads, losses hurt twice as much as gains. If I go and buy a few things in Waitrose I gain a nice experience, because we are a species that needs social interaction and during lockdown lots of people are going shopping just for something to do. But the new loss on the block is the potential loss of my health or life.”
So COVID has rendered that gain “completely worthless. Loss aversion is behind all this, because people are now thinking ‘I’m going to get stuff delivered, because it’s safer’.”
Using delivery apps is also typically more expensive than doing the shopping yourself, but when it comes to spending a little more money, psychology also comes into play, says Adcock.
“The same loss aversion logic applies, would you pay three quid to stay safe? In the days before COVID you could go to any supermarket and get deals here and there. We don’t want that now. My life is worth more than three quid.”
And psychologically, breaking down the charges helps, he adds.
“If I said to you a bag of sugar is a fiver, you might say p*** off, excuse my language. Fair enough. But if it’s split into lots of little bits, psychologically that reduces the pain of paying.
“Say instead I said a bag of sugar is £2.99. Then there’s a 10p packing fee, £1.50 for delivery and a 40p service charge. You’d say, ‘That’s fine’. Spilt it up and you still end up with two quid more, but people don’t feel the pain psychologically. If you put it all in a single price, people would get cross.”
Also, the delivery apps have a big plus in that they are happy to deliver a little rather than a lot.
“People have top-up needs, but psychologically you get people feeling guilty and almost feel like they have to buy a lot to justify getting a big supermarket van to trundle along. So the whole Deliveroo thing allows you do to a top-up shop without the guilt, or the fear of ‘I don’t think I’m buying enough, I’m wasting their time’. In fact they think ‘I’m allowed to buy just a little bit using this app’. So they feel they are being given permission, because the apps are saying: ’Just order a McDonalds or a bottle of wine, we will deliver it’.”, says Adcock.
So all is rosy in the land of rapid refreshments. Well, not exactly. All this customer convenience comes at a cost. Sales might be flying, but profits are not. At Deliveroo sales may be rocketing, up 82% in the first half of 2021 to hit £922.5m, but its last Companies House filing reported a pre-tax loss of £105m, although this was an improvement on the £128m it lost the year before.
Profits are largely what they are as a result of heavy investment to mitigate those additional costs, expand range, and add value to build loyalty and make newcomers aware of the benefits. So introductory and ongoing promos are everywhere, like the free delivery on offer from Deliveroo between Boxing Day and the New Year when most of the UK was sofa-bound.
It all builds towards a time where the new wave of grocery apps can start to make money, and the heavy investments going on suggest the venture capital market believes it will happen.
According to research outfit Pitchbook, a ‘host of rapid grocery delivery companies secured mega-rounds of $100 million or more’ over 2021. Deliveroo has a market cap of £3.98bn, while Getir’s valuation has soared from £625m to £5.5bn over the last two years.
Still, with so much competition out there, customer loyalty will be key to the future of any of the new wave of apps. And they can also engender loyalty thanks to the data that streams from your phone to their databases every time you browse the app or place an order.
Love a Chinese on a Friday night? They know. Had a Chinese three Fridays in a row and fancy something different? They know. Love a steak and a bottle of Barolo? They know.
Thanks to those non-edible cookies everyone accepts, Uber Eats, Just Eat, Deliveroo, Getir, Gorillas and all the supermarkets know exactly who you are, what you like and dislike, how much you spend and how often, and what kind of offer they need to ping to your phone to stop you rooting around the fridge and start tapping on your smartphone to order your dinner instead.
Only now they have tapped into those that root around the fridge and realise they need juice and eggs, too. Or an emergency pint of milk.