Can Deliveroo’s white label offer tempt supermarkets?

Like its rivals, Deliveroo sees “significant growth potential in on-demand grocery and retail” says its VP of new verticals Suzy McClintock. After all, she argues, “speed and convenience [is] no longer desirable but a basic consumer expectation”.

But there’s a snag when it comes to the supermarkets, many of which list products directly on delivery apps. Despite not wanting to build their own rider networks, the mults do want to “maintain autonomy over customer interaction”, Deliveroo has noted.

Step in a white label service: Deliveroo Express. The platform launched this month as a rival to Uber Eats’ similar offer.

But does the model make sense for retailers? And what chance does Express stand in a market so far dominated by Uber Direct?

The new offer is a clear sign the aggregators “are recognising their businesses have two different value propositions for grocery retailers”, says e-commerce consultant Viv Craske.

“The first is to bring new revenue streams from their marketplace audience. And the second is to manage existing demand more efficiently for supermarkets,” he explains.

While smaller, quickly delivered orders are less profitable for supermarkets, they do need “to find a way to serve the proportion of customers that do want faster delivery, without making heavy investments into motorbikes, cargo bikes and courier staffing”, Craske says.

There’s further advantage in being able to keep sales on a retailer’s own website or app. That “can encourage loyalty and enables the ability to show retail media advertising to more eyeballs”, he argues.

Trojan horse

But there are risks. A senior industry source says supermarkets should be wary of the “Trojan horse” of white label services. The aggregators “ultimately want to have all customers on their own apps”.

“They support restaurants and supermarkets running their own direct sales channels, but that’s all part of a long-term plan to own the whole fulfilment side and push customers towards their own sales channels,” the source explains.

Despite not owning the customer interaction, the aggregators do stand to gather valuable information on order sizes, popular times and areas.

“Uber Direct runs at either very low margin or potentially a small loss for this reason,” says the source. “I don’t think the likes of Tesco have realised they are giving away customer data and becoming so reliant on a competitor.”

Deliveroo has “now realised the strategic position Uber have acquired by offering cheap white label delivery”. It’s not the only one: Just Eat is also building a delivery-as-a-service white label offer called Jet Go.

Both lack the first-to-market advantage of Uber Direct, but they may well shake things up.

After all, nothing appears to be stopping supermarkets and convenience stores partnering with multiple delivery services – and playing them against each other for better rates – to provide the last-mile element of their rapid services.

Indeed, most grocers are not monogamous with regards to aggregator apps, listing products across all the major players. Nor when it comes to their own branded apps. Tesco Whoosh – which notably doesn’t appear on the delivery platforms’ own apps – partners with Uber Eats and delivery firm Stuart for delivery in the UK, and is the first partner of Deliveroo Express in Ireland.

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Meanwhile, the ability to use multiple third-party courier partners is touted as the main “differentiator” of Co-op’s new rapid delivery grocery app, Peckish, aimed at independent c-stores seeking to tap the growing home delivery market.

“We allocate that order to the appropriate courier that we’re integrated with,” said Co-op e-commerce director Chris Conway on its launch in February. “And we’re integrating with a few couriers, which gives us market-leading coverage across the UK.”

The polyamorous play by supermarkets points to a tough market in white label services. Aggregators are likely to find themselves in “a price war”, suggests the source, and even a war of unprofitable attrition.

But ultimately, the supermarkets have the most to lose. “Grocers will go for the lowest cost, reliable option but will eventually find they are fully reliant on companies that want to own the customer relationship,” the source warns. “They have not appreciated their vulnerability.”