LONDON — Deliveroo is jumping into the rapid grocery delivery space with a service that ships fresh food and other goods to shoppers’ doors in just 10 minutes.
The food delivery company is partnering with British supermarket chain Morrisons to launch the service, which is called “Hop.”
To start with, the service will be available in southwest London. It will use a so-called “dark store,” a small warehouse which stores items to prepare them for delivery by a fleet of couriers. Morrisons will act as the wholesaler stocking Deliveroo’s inventory.
The move pits Deliveroo against a flock of new start-ups in Europe that promise to deliver groceries in as little as 10 minutes. It’s a crowded space, with Turkey’s Getir, Germany’s Gorillas and Britain’s Zapp all vying for a slice of the market.
Such companies have raised hundreds of millions of dollars this year thanks to a boom in online grocery shopping during the coronavirus pandemic.
Retail industry experts have questioned the sustainability of grocery upstarts, saying it would require burning through heaps of cash to reach the scale of a major grocery group like Tesco or Asda.
“It’s a useful service and will grow quickly [but] if you can’t differentiate, you’ll never make much margin or profit,” Jat Sahi, retail industry consulting lead at Fujitsu, recently told CNBC.
“The amount of money that’s being put against this opportunity is grossly disproportionate to the size of the opportunity,” said Luke Jensen, CEO of Ocado Solutions, a unit of U.K. grocery tech pioneer Ocado, earlier this year.
“I suspect there will inevitably be a lot of consolidation among these players.”
Shares of Deliveroo were up about 1.7% Thursday following news of its grocery tie-up with Morrisons. Morrisons, meanwhile, fell about 0.7%.
Morrisons recently became the target of a heated bidding war between U.S. private equity firms. The takeover battle is expected to reach a conclusion this weekend as Fortress and Clayton, Dubilier & Rice submit formal bids on Saturday.