Coop Denmark ends home deliveries
Danske Coop stop home deliveries due to lack of volumes and profit and terminates the leases on a number of warehouse buildings throughout the country.
Coop is not alone. The closure of the home delivery service was announced almost at the same time as Salling also closed the Føtex stores' delivery service. It has proven to be financially unsustainable for Salling to run home delivery from a warehouse.
“There was a thought that large warehouses would have economies of scale and be cheaper in terms of logistics. But the central warehouse provides a whole extra layer. After all, it's an extra store, just online, to which you have to ship goods and from there to the customers when they have ordered them,” explains Ole Storm Jørgensen, associate professor at Danva Business Academy in a comment to the trade press.
Many struggles with home deliveries
In the UK, the grocery delivery company Getir says it is cutting nearly hundred positions after doing the same in the US. The layoffs will not be as extensive as the 14% global staff reduction at Getir last year.
The job cuts come as startups are switching their focus to sustainable growth and profitability instead of growth at all costs. The food delivery sector, a model known for low margins and fierce competition, has been forced to reassess in a funding environment very different to the pandemic boom.
Getir first entered the UK market in early 2021. Later that year it bought UK rival Weezy, acquiring its four fulfilment centres and 700 employees.
In the UK, Getir delivers food in cities such as Birmingham and Manchester. It recently signed a partnership with the Co-op to deliver products from some of its stores in London.
Globally, Getir operates in Turkey, the Netherlands, Germany, France, Spain, Italy, Portugal and the United States.
Who will crack the code first?
No one, or at least very few supermarket chains, have really found a good model for product deliveries to homes. This applies to all players in Scandinavia, but also in larger markets such as the UK and the USA, it is not easy to achieve profitability for home deliveries.
The reason is really simple: if you have to pay for what it costs to deliver the goods outside, the customers would rather go to the store themselves. For many, a visit to the store is also a social thing that many appreciate.
On the demand side, more and more people (but not enough) want to have their groceries delivered to their door. On the other hand, it is difficult to make the delivery of goods economically viable.
Tesco In a special position?
The British supermarket chain Tesco seems to be more on the cutting edge than many others and is increasing the rollout of the Whoosh Rapid Delivery Service. The service offers a range of Tesco's most popular products for delivery in as little as 30 minutes for a fee of £2.99 on orders over £15.
The expansion comes despite other rapid delivery players are reining in their expansion plans – following a weakening in demand for their services that prospered during the pandemic.
For Tesco it seems like a success from the outside, however we do not know the numbers. We will probably have to wait a few months to see what will happen with Woosh Rapid Delivery Service and in other chains in Europe, the USA and elsewhere.
What we know is that home deliveries are an area in which it is not easy to create profitability.