Analysis

Is Deliveroo Co-op’s route into the online grocery market?

Deliveroo

This week saw Co-op announce that it is trialling home delivery using Deliveroo from a number of its London stores. The service is now available from 11 London stores, in addition to the five in Manchester where it has been trialled since last year.

The product range includes fresh foods, beers, wines, spirits and snacks and confectionery.

Co-op already offers home grocery deliveries, which are free for orders of over £25. So how is this different?

At the moment, however, Co-op’s delivery option is just offered in stores. The customer completes their shopping and then books a slot for a home delivery at a kiosk.

At the moment, the company’s online portal simply offers the latest prices for goods. Chris Conway, head of digital at the Co-op, commented in an InternetRetailing webinar last year that the retailer may sell online in the future.

However, he says when it comes that the offering will not be similar to that of its rivals, but “something very different and unique.”

Perhaps this “different and unique” online offering has arrived. The range of online home grocery options are advancing fast, with options available from rivals such as Sainsbury’s, Tesco, Morrisons, Asda, Waitrose and pure players such as Ocado.

Co-op is not the only retailer with such a partnership. In the UK, Spar and Paul Stone have both worked with Deliveroo since 2016. Elsewhere, Dutch grocer Albert Heijn also recently teamed up with the app to deliver hot meals in Amsterdam’s city centre.

The downside is, of course, that Deliveroo will take a margin from every transaction. There is no public fixed rate of commission that the app charges to its partners, as it is negotiated individually with each outlet.

The upsides are that Deliveroo has a network that is already ready to go and claims customers will receive orders in an average of 32 minutes. Co-op will not need to sink a chunk of capital into a gamble that may not pay off.

It also offers a different way to reach customers; those who search in a particular postcode will be able to discover Co-op since it will be presented alongside other local options. This could help the retailer reach a new convenience-focused, brand-agnostic customer base.

It is Sainsbury’s where perhaps the closest parallel exists to this new service. Through its Chop Chop app, the supermarket offers deliveries of up to 20 items within one hour.

A statistic, albeit somewhat limited, illustrates the obstacles Sainsbury’s faces. Chop-chop has over 10,000 installations from the Google Play Store whereas Deliveroo has over 5 million. By partnering with Deliveroo rather than launching its own service, Co-op has the chance to get a smaller slice of a bigger pie.

It is of course only a trial at the moment, but Co-op as a convenience store may be positioning itself for convenience without the store. After all, if a weekly shop can fit on the back of a bike then why visit the shop at all?