It’s been a rough several months for grocery delivery apps in Australia. Just last week, MilkRun announced that it was closing down. Before this, lesser-known competitors, like Voly, Quicko and Send all folded. What’s going on with the grocery delivery industry?
Well, it’s important to consider things in context. We’ve just gone through two years where avoiding public spaces was the norm. While the convenience factor of grocery delivery apps is considerable, these businesses existed within a pocket of time, largely to service an immediate issue. With everybody working from home and avoiding public spaces, nobody was going down to the shops – so the solution was fast delivery.
COVID-19 is still a persistent issue, but for the most part, people are happy to return to grocery stores and supermarkets again. That means the market for apps like MilkRun is shrinking – to the point where there aren’t many similar platforms left at this point.
“At the time that Milkrun went into operation, there was always a risk that it would ultimately not be profitable,” Associate Professor of UNSW’s Business School Mark Humphery-Jenner told Gizmodo Australia. “However, it’s always difficult to know that in advance and a startup founder takes some risks and to give the founder and the team some credit here, they got significant traction and that’s not easy to do with a startup.”
Let’s not denote what MilkRun was trying to do – because it was quite ambitious. Humphrey-Jenner added that while MilkRun was profitable in some areas, such as the Sydney CBD, each delivery was costing the company between $10 and $13.
Additionally, onboarding customers wasn’t cheap, and was supposedly costing the company $50 per customer. “They were burning through money”, Humphrey-Jenner said.
Fast grocery delivery also makes sense as a service for vulnerable persons in our communities, but these platforms were operated primarily through phone apps, inherently making them inaccessible to many Australians.
Adding into the mix the fact that MilkRun facility rents were going up, along with inflationary price increases for the goods that MilkRun stocked, and it, unfortunately, doesn’t seem that surprising that the company has folded.
“I don’t think there are many [grocery delivery companies] left,” Professor of QUT’s Faculty of Business and Law Gary Mortimer told Gizmodo Australia. “As both Coles and Woolworths continue to invest in their online infrastructure, micro-fulfilment centres, and e-stores, in the case of Woolworths, whilst they continue to develop strategic partnerships with the likes of Uber Eats, in the case of Coles, I think we’ll continue to see the big retailers, the big supermarket retailers start to compete on speed, not necessarily price.”
Mortimer added that, while it’s likely that large retailers like Coles and Woolworths may start to compete closely on speed, it’s evident at the moment that this could be a challenge – in the light of Voly, Quicko, Send and now MilkRun shuttering.
“At this particular point in time, those business models simply aren’t scaleable,” Mortimer added.
What would need to change to see a company like MilkRun again? After all, there’s obvious value for a range of consumers to have groceries quickly delivered.
“Probably what would have been useful would have been to perhaps bring in alcohol deliveries earlier because the amount of money they could make per alcohol delivery is likely to be higher,” Humphrey-Jenner added. He said that there would be a chance for a lucrative clientele with this kind of service, particularly those willing to pay a higher cost during the evening or at parties.
Additionally, Humphrey-Jenner said that, while MilkRun could have restructured its business around becoming a gig work company instead of paying riders as employees (and not contractors), this would go against the company’s ethos. They could potentially, from the get-go, he said, had relaxed their delivery time frame.
“Of course, to some extent, the 10-minute delivery, while it’s a nice gimmick, is not necessarily what you need. What you need is for people to know when the delivery will come,” he added.
“What they could have done to begin with was maybe instead of launching with the 10-minute gimmick time, they could have launched with 20 minutes and then enabled their riders to do a couple of orders per run.”
It’s difficult to tell what the future holds for the grocery delivery business, but with Coles and Woolworths focusing more on the delivery sides of their businesses, we may not see another business quite like MilkRun.