Speedy grocery unicorn Getir is in advanced talks to acquire competitor Gorillas in a cash and equity deal
What is Q-commerce? This refers to an on-demand service which emphasises deliveries typically under an hour. This sector came into prominence during the Covid-19 pandemic in 2020 when established brick-and-mortar grocers could not keep pace with soaring online order demands. This led to customers being unable to access online delivery slots for weeks, hence this dilemma caused the emergence of a new market: ultra-fast grocery delivery.
Fast forward to 2022, some of the largest names in the on-demand grocery sector, such as Getir, Gorillas, GoPuff and Jiffy, are met with criticism for being remarkably unprofitable as consumers are abandoning their apps whilst overheads are increasing, coupled with a large amount of competition, resulting in poor bottom line performances. So, what could be potential solutions for Q-commerce deliveries to survive in this current climate? Acquisitions.
Turkish-based instant-delivery startup Getir is rumoured to be in advanced negotiations to acquire its competitor, Germany-based Gorillas, in a cash and equity deal worth $1.5 billion. This valuation comes much lower than the $2.1 billion investors placed on them in 2021, attributable to falling valuations across the Q-commerce market entirely, Bloomberg reports. If the deal does proceed, Gorillas’ shareholders would reportedly receive $100 million in cash and 12% equity in the combined entity, as reported by the Financial Times.
Prior to this, Getir, founded in 2015, managed to close a $768 million Seed E funding round to fund its loss-making operations, led by state investor Mubadala and participated by Abu Dhabi Growth Fund (ADG), Alpha Wave Global, Sequoia Capital and Tiger Global.
Conversely, Gorillas, founded in 2020, soared to unicorn status just a year after closing its $290 million funding round in March 2021. The company later that year launched a Series C round worth $1 billion. However, after using the proceeds to aggressively expand to over 100 dark stores in Europe and the U.S, operations have been very unprofitable. It was then announced earlier in the year that it would make its 500 employees redundant, representing 50% of its workforce. Since then, they have been working with JP Morgan on fundraising and strategic options to reverse those losses; one option includes divesting a portion of its business.
What does this mean for Q-Commerce?
As the first major merger in this still rapidly-growing industry, this could be an early sign for good things to come for this struggling channel. To understand why, it firstly has to be said that none of the ultra-fast grocery deliveries are profitable; one or two stores could be but most are not.
The main driver for profitability in this industry is order density. Essentially, if one rider is able to secure multiple orders and deliver them in that same area or somewhere nearby, this would decrease travel time between each order, substantially driving down the average rider cost, and thus boosting the profitability of the company. Although aggregate order density is sufficient, with superabundant competition in the industry, orders are being apportioned by too many companies, which results in a smaller density per company, says Jiffy’s former head of delivery.
He has once experienced Getir, Gorillas, GoPuff and Zapp all delivering to different houses on the same road simultaneously, reaffirming to him that demand for the service exists but supply has totally outstripped it, causing all players in the market to lose out. Therefore, Getir acquiring Gorillas makes economic sense; they would also acquire Gorillas’s customers, volume and Gorillas’s existing dark stores in the six common markets they each serve.
Analyst: Arif Muhammad
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