Quick commerce businesses have taken a hit due to the fall in lockdown-driven demand in Europe

Print

Email

The quick commerce business gained rapid ground during the global pandemic outbreak in Europe, as it did in other parts of the world. However, after the rapid expansion, the sector has taken a hit due to the fall in lockdown-driven demand for deliveries. Factors including ease in lockdown restrictions and a higher interest rate environment have severely impacted the segment growth. With inflation at multi-year highs across several European nations, consumers have reduced their discretionary spending, which has affected the delivery volumes for quick commerce businesses.

Furthermore, the ongoing funding winter amid the current macroeconomic environment has also put pressure on the quick commerce sector in Europe. Firms have failed to raise required funding from venture capital and private equity firms over the last few years. This has, therefore, driven the consolidation trend across the European market.

• In June 2023, Getir, one of the leading players in the quick commerce space, announced that the firm is exiting operations in France. At its peak, the firm was valued at US$11.8 billion and expanded to several European markets. In addition to the funding winter, the complex legal environment and stringent regulations imposed by local authorities have made operations difficult in France.

Getir is not the only firm that has left the French market. Flink, one of its competitors based in Germany, has also filed for bankruptcy in France. Gopuff, another player in the segment, already left the market in January 2023. This is an indication that the quick commerce market, especially the instant grocery delivery business, is disappearing fast in France.

Getir, alongside France, has also announced that the firm will be exiting operations in Spain. The decision, announced in July 2023, comes after the firm failed to raise enough capital in its recent funding round. As a result of this, the firm is also laying off the entire workforce of 1,560 employees in Spain.

Notably, a number of food delivery providers across the European markets have adopted the cost-cutting strategy over the last few quarters. Just Eat, for instance, announced that the firm is laying off 1,700 workers in the United Kingdom. The decision to lay off the workers comes at a time when the firm is moving back to a gig economy model. The firm announced that it is scrapping guaranteed minimum pay, sick pay, and holiday pay model. The move to the gig economy model will enable the firm to focus on profitability.

• Inflation has taken a toll on Just Eat Takeaway.com’s operations. In Q1 2023, order volumes have declined 14% year over year. This is a clear indication that consumers are making more conservative choices in terms of food spending. The firm has also experienced a decline in the North American market, where lockdowns have not been a major issue over the last 12 months.

In addition to inflation and declining consumer spending in the region, online food delivery providers are also faced with the clampdown on dark stores. Barcelona, for instance, rolled out new restrictions on buildings that are used by providers like Glovo and Getir in January 2023.

Both of these firms were expanding rapidly in the region and were using dark stores as their distribution network to speed up deliveries. With residents complaining about excessive noise levels and gatherings of couriers on the streets, authorities have unleashed a wave of actions against dark stores. The restrictions, therefore, added another obstacle to the operations of food delivery providers who are already reeling under the impact of reduced consumer spending and a worsening economy.

The restrictions announced by authorities in Barcelona are expected to largely impact Glovo. The firm has invested heavily in launching new dark stores and also partnered with real estate firm Stoneweg to source properties. Rather than shutting down the stores, the firm announced that it will seek to comply with the new regulations. Across countries, the firm operates more than 100 dark stores. 

This is not the first time authorities are clamping down on dark stores. In 2022, similar moves were announced in Amsterdam and Rotterdam to control the spread of dark stores in the cities. The Netherlands' capital city now requires delivery centers to acquire specific permits to operate. The new rules were implemented after residents lodged complaints regarding dark stores.

Overall, the landscape of the instant grocery and food delivery market has changed significantly over the last few quarters in the European region. From the high-growth period during the pandemic to consolidation and lack of funding in 2023, the market dynamics have shifted substantially leaving many at the brink of bankruptcy. Going forward, PayNXT360 expects consolidation to further continue in the quick commerce space, as providers grapple with various macroeconomic factors.

To know more and gain a deeper understanding of the B2C E-Commerce market in Europe, click here.