E-grocers are racing ahead to meet the rising demand
On-demand grocery delivery service is growing as more shoppers gain confidence. Though still in its infancy in SA, on-demand grocery delivery is no longer the preserve of high-income households.
With smaller providers tapping into niche markets, the on-demand grocery delivery sector has the potential to grow.
The shift towards ondemand grocery delivery is reflected in global marketing and analytics data company Kantar’s e-commerce ON 2022 study, which found that one of the most talked-about phenomena of the coronavirus pandemic was the rise of rapid grocery delivery apps.
The study, based on an analysis of shopping behaviour in 19 countries, found that 60% of e-commerce shoppers worldwide now use rapid grocery delivery or on-demand grocery delivery services.
However, the study concludes that “e-commerce in the post-pandemic era is a competition of heavyweights. The big local retailers are leading the e-commerce trends and setting the direction for e-commerce to grow.”
This finding could apply to an extent to SA, where big grocery retailers seem to dominate the on-demand food delivery space. The dash to lead the on-demand grocery delivery sector is well under way.
Checkers’ Sixty60 platform, launched in November 2019, is the gold standard with its fast deliveries, sufficient stock and a simple app.
Pick n Pay Groceries has partnered with Takealot’s delivery app Mr D to aggressively compete with Sixty60.
Woolworths has not been aggressive with its delivery app Woolies Dash. Spar entered the e-grocery space in March 2022 with the launch of its delivery platform SPAR2U. Last June, Massmart — the owner of Game and Makro — acquired OneCart to pursue its on-demand grocery delivery strategy.
At the same time, smaller, fast e-wholesalers are posing a challenge to big grocery retailers in the on-demand grocery delivery sector.
SURGE
Fitch Solutions — a unit of Fitch Group, the global financial information services company
— predicted in January that SA would see a surge in e-groceries for the next seven years.
More consumers from various income groups are expected to buy more groceries online. Fresh Foods, based in Cape Town, has been quick off the mark and is already enabling township households to buy groceries online. Three months ago, the company, founded in 2018 by Jessica Boonstra and British entrepreneur Stefan Allesch-Taylor, raised R78m to expand its food delivery service to townships.
The service, which operates in partnership with Spaza shops, is available in more than 25 townships in Cape Town and Johannesburg. Yebo Fresh delivers food within 24 hours, eliminating the cost and hassle of buying from wholesalers.
Yebo Fresh uses a dark store, which is a large warehouse that can be used for a click-and-collect service.
In addition, Yebo Fresh offers a “buy now — pay later” option for Spaza shops.
Zulzi, which became a success story during the lockdown, has also tapped into a new space and operates seven dark stores in Johannesburg. So far, Zulzi has hired 300 independent drivers and pickers to serve the more than 200,000 registered users of its platform.
The rapid e-grocery player, cofounded by Vutlharhi Donald Valoyi and launched in 2016, is quietly acquiring new customers.
Another interesting e-wholesaler is Yassir. Founded in Algeria, Yassir entered the SA market in December 2022. It is also positioning itself for growth as it targets new suburbs.
The company, which uses dark store format, already has a presence in Johannesburg and Pretoria suburbs and has enough capital to expand after raising R2.6bn last November.
The biggest win for Zulzi and Yassir will be to penetrate townships and remote areas to deliver food to the doorstep.
While food will continue to be the focus of e-commerce, one hopes Yebo Fresh, Zulzi and Yassir will make enough money from delivery services to stay in business. Delivery services are rarely profitable unless they have a large market share and are run efficiently.
In the words of Fitch Solutions, what will excite e-grocery shoppers is that they will get value through lowpriced items and a high level of convenience.
JOB CREATION
Hopefully, the emergence of Yebo Fresh, Zulzi, Yassir and other smaller e-grocers will contribute to the structural transformation of the SA economy. If big funders see value in these businesses, they will encourage their growth, which can contribute to job creation.
Fitch Solutions believes that Zulzi, with its dark format, is one of the leaders in fast e-bulk purchases, delivered in less than 20 minutes. However, the company warns that the biggest challenge for darkstore and rapid e-grocery operators is the strong demand from SA consumers for wellknown brands.
That said, SA’s e-grocery space will be different in the future and the business model that meets consumer expectations will win.
But the road ahead will test the innovation of smaller players such as Yebo Fresh, Zulzi, and Yassir in delivering value and convenience to consumers, as mass-market food providers have enough capital to compete aggressively.
Ultimately, the new developments bode well for online grocery consumers and those looking for jobs.