Ocado Zoom may no longer seem quite so zoomy to Londoners using on-demand grocery delivery. Its promise of an average delivery time of one hour is in danger of looking pedestrian compared to the 10 or 15 minutes touted by a slew of recent new arrivals to the capital.

Getir, Gorillas, Dija, Weezy, Zapp, Fancy, Asap – the list is long, and it’s clear these ultrafast deliverers are rattling the one-hour players who have spent years selling the notion they are ‘rapid’.

Grocemania, once satisfied with offering one-hour delivery from shops, last week announced it would now manage as little as 10 to 15 minutes thanks to its first move into dark stores, the method favoured by the new arrivals.

“Dark stores have disrupted the food delivery sector,” said Grocemania founder and director Askar Bulegenov. “It was a logical next step, therefore, that Grocemania would expand into this exciting space.”

Investors are excited too. Getir and Gorillas both achieved ‘unicorn status’ in March, with a valuation over £1bn following funding rounds.

But Ocado CEO Tim Steiner seems neither rattled nor excited. Speaking as Ocado announced its half-year results this morning, he spelt out why.

Basket size

Steiner acknowledges there is demand for delivery faster than Ocado Zoom can manage. “I think there are times of the week or month or year where you suddenly want something and you want it right now,” he says. “There was one a couple of weeks ago where I would have liked a bag of fresh spinach and if somebody had been able to bring it to me in 10 minutes, it would have allowed me to cook the casareccia pollo piccante I was trying to make.”

The scene he colourfully conjures also illustrates the natural cap on basket spend for the ultrafast, he argues. There can only be so many things a shopper will need so urgently. “Whoever had got it to me would have got £2.50 for a bag of spinach.”

Meanwhile, between that ultrafast shopping mission and the next, Steiner will have “spent £2,000 with Ocado” (yes, he did say £2,000). Although that figure may not be particularly relatable, he’s illustrating a valid point about bigger baskets.

“The majority of our shopping is planned and occasionally you have top-up missions that Ocado Zoom serves really well,” he adds. “Ocado Zoom basket size is three to four times what we understand a grocery basket is at the likes of Getir or Deliveroo or Wheelie or Weezy or whatever it’s called, or Dija, or any of these other players, because it has a bigger range.”

Range and value

Indeed, Ocado Zoom promises a range of 10,000 products, while 1,000 would be an optimistic figure for some of the ultrafast players. But it’s towards big warehouses, with their tens of thousands of products, that Steiner argues shoppers will gravitate – even while physical supermarkets, such Asda, are closing customer fulfilment centres, favouring store picking for online growth.

“The stream of groceries, the channel shift, is going to move to the big warehouses because they are the format that offers customers the lowest price and the largest range and the freshest food. And customers have always migrated to those factors,” argues Steiner.

“That doesn’t mean there isn’t a market for ultrashort immediacy, but as you get more ultrashort you get more expensive and you get smaller ranges, therefore you use it less often.

“You don’t think to yourself, I’m not going to do an order for 45 or 50 items this week – every time I need something, I’m going to go on an app, call it and let it arrive 10 minutes later and pay a 20 or 30-point premium for it.

“That’s just not how people think. People do plan and people are quite happy planning most of their lives.”

The size of the market

Responding to a suggestion ultrafast delivery could take 5% of the market, Steiner doesn’t dismiss the notion. But he raises the question: 5% of what market?

“The thing to bear in mind is you can only run a 10-minute service in densely populated urban areas, because the whole reliance is that you’ve got a depot and it’s a 2km radius to do that ultrashort delivery.

“It only works for people who live in denser parts of the big cities. It’s not going to be available to people who live in more spread-out areas.”

Given online represents about 14% of the market, ultrafast certainly isn’t going to take 5% of total grocery spend, he adds. “We’re not suddenly going to see every corner shop and forecourt station in England close down because when you pull up in your car and you’re filling up with diesel, and you decide you want a Twix and a Coke, you’re going to get Getir to suddenly bring it while you wait.

“Or if you’re walking home from school, and you want a snack, a packet of crisps, are you going to use a Getir app and tell them you’ll wait at the bus stop for them?

“I don’t think that market’s going online.”

Nevertheless, it is the corner shop – not Ocado, nor bricks & mortar supermarkets – that has most to lose, based on Steiner’s thinking. “I think there is a lot of excitement about a very small part of the grocery market. Those [ultrafast deliverers] are competitors to effectively the local corner shop, as opposed to even the convenience store or the hyper market.

“I just don’t see this quite happening and I know a number of the players think they alone are going to get 5% of the market in four years.”

Still, Ocado will “watch with interest”, he concludes, adding: “Meanwhile we’ll continue to build our viable, better proposition, fuller service, bigger basket immediacy business across London and possibly beyond.”

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