The rapid decline of ghost supermarkets

After the takeoff of the ghost kitchens, where the restoration works behind closed doors with orders by app and riders at home, a model with a similar idea arrived in Spain but with market and pharmacy products -except prescription drugs-. When the pandemic receded and people took off their masks, the ‘dark stores’ arrived with anxiety and haste. They offered deliveries in less than half an hour, some even in ten minutes, and began landing just as quickly. Companies such as Gorilla, Getir and Goproff opened stores on the ground floor of buildings in the center of several Spanish cities and their backpacks on the backs of delivery men became part of the urban landscape. Protected by million-dollar financing rounds, these e-commerce companies sought to displace traditional supermarkets that offer deliveries according to availability and schedules, and inaugurated a new niche, that of ultra-fast deliveries, which they baptized as ‘quick commerce’ or ‘Q-commerce ‘.

The system is designed to start when the user places the order from the app and enters a logistics center that is within a radius of between three and ten kilometers from the customer. The stocker, called a ‘picker’, has two minutes to put the items in the cart and bag them. Arranged in numbered lines, this employee pays attention to the ordered codes to go through the store in the shortest amount of time. Companies claim that they have between 2,000 and 4,000 products available at a click, and only offer what is available on the screen. “The ‘dark stores’ hope to create a need in the consumer who buys food, products that we see with greater delicacy,” explains Cristian Castillo, professor of Economic Studies at the Open University of Catalonia (UOC). «If the user does not feel that need, he will hardly buy there. With marketing work, they could gradually win over the new generations, who are very used to making online purchases».

Once his race is over, the ‘picker’ delivers the baton, that is, the bags, to the rider, who has up to eight minutes to ring the bell of the person who has placed the order. “There is an obsession with the speed of delivery that is totally absurd for a service such as supermarket shopping,” maintains Gustavo Gaviria, spokesman for the United Distributors organization.

The shifts, the employees say, would have been “overworked” if successful. It has not been the case. In some stores, they chat boredly over a cigarette on the sidewalk until an order finally comes in. A neighbor from the center of Madrid approaches them. He asks. He wants to enter, they won’t let him. They ask you to download the app.

The Iberian expansion of these companies that rely on technology for their sales and delivery services began with great excitement on the part of the investment funds, with the background of Glovo and the disappeared Blok and Dija, which already had a handful of supermarkets ghost in 2020. American venture capital companies such as Sequoia or Tiger, Germans, Arabs from Abu Dhabi, Swiss and Chinese technology specialists such as Tencent came together. The idea of ​​imitating the distribution of hot food to imperishable products achieved large transfers. The Turkish Getir raised 700 million euros in April 2021 and a year later announced that it had 40 Spanish stores. At that time Glovo raised 450 million, the North American Gopuff raised 1,150 million and Gorillas another 240 million. However, the model would begin to crumble before it was one year old.

The ‘quick’ had a dozen large Spanish cities in their sights. “We have always seen a huge opportunity here,” says Hunab Moreno, head of Getir in Spain, which operates in Madrid, Barcelona, ​​Zaragoza, Valencia, Malaga and Seville. “Spaniards place a lot of value on their food purchases and our culture is closely related to making the most of time. And we sell time thanks to speed.”

Employment also pointed to the rise, because these companies comply with the ‘rider law’, which requires the hiring of delivery men. Among the five, they added about 3,000 on motorcycles and bicycles “at the peak moment,” according to calculations by Redistribudores Unidos. Getir hired about 1,000; Glovo, double; Gopuff, around 300 and Gorillas, less than 200, always according to this source. “They came as the saviors of the riders after the departure of Deliveroo and Amazon Flex, and the reduction of Uber Eats, but they did not give work to even a third of those laid off with the new law,” warns Gustavo Gaviria, spokesman for kis delivery men, who have begun to protest in the street.

urban punishment

To function, these technologies look for the ground floor of downtown buildings. On the outside, the shop windows are boarded up, it only shows a sign with the brand, a slogan like “From the app, in minutes” and a QR code. The ideal surfaces were close to 1,000 square meters, with easy access to the street and outside space for parking. Behind closed doors, motorcycles or bicycles parked nearby give them away. A row of Gopuff blues or Getir purples, for example.

Their presence does not raise as much dust among the neighbors as the hives of blind kitchens, with their enormous smoke outlets and their noise from delivery men, especially late at night. “In Spain, when the rider stays outside the premises and does everything with such urgency, it annoys the neighbors and generates pollution and traffic,” says Neus Soler, a researcher at the IQS School of Management at Ramon Llull University and the UOC.

Chastened by the protests that arose over the ghost kitchens, cities like Madrid and Barcelona took steps towards regulation. Since March, Madrid has allowed these stores in residential centers if they are less than 350 square meters, and requires delivery men to remain inside the facilities. Two months later, the Catalan Competition Authority issued a ban on opening new premises within the jurisdiction of Barcelona, ​​although those that already existed could remain.

  • Clara Moreno | Glovo
    “The customer profile is heterogeneous and, after the pandemic, the average age has increased”

  • Hunab Moreno | Getir
    «The future of the sector is bright, there is a great demand from consumers»

  • Neus Soler | Ramon Llull University and UOC
    “These companies have never made a profit, and it is costing them to keep investors”

  • 2.540
    million euros in investment received by four companies in 2021 for the expansion of ghost supermarkets

In the “convenience supermarket” model with “the most purchased products on a day-to-day basis”, as Glovo defines it, the customer profile is “very heterogeneous”, maintains Clara Moreno, head of the Urban Logistics Warehouses division (MFC) from Glovo. “After the pandemic we see that the average age has increased and that purchases no longer only take place in the densest urban centers, but in any type of population.” What they buy the most at Glovo is beer, soft drinks and toilet paper, while at Getir, “fruits, especially bananas and tangerines, and vegetables,” says Hunab Moreno.

swift fall

But in three months the business collapsed. With a strategy of rapid expansion in a scenario of fierce competition in the same territory and at the same time, the disaster came at a dizzying pace. This summer Gopuff announced his intention to leave the country; Getir began a withdrawal and Gorillas left Spain with the dismissal of its staff (the company, through its international press department, declined to participate in this report, while Gopuff did not respond to the requirements of this newspaper). “The future of the sector is bright, there is a great demand from consumers,” Hunab Moreno (Getir) conjures up the threat. “We will continue looking for training to continue growing in a sustainable way.”

The underlying problem seems to be in the germ. “That a supermarket order arrives at home in ten minutes is not a response to a real need and that explains why we do not see a greater use”, continues Professor Cristian Castillo. At street level, the perception among the riders confirms it. “It is very minority in the world of delivery,” says Gaviria.

Faced with the withdrawal, companies prefer to use the words “consolidation” and “strengthening”. In any case, the financiers close the portfolios. “These companies have never made a profit and work at a loss. But they are leaving because they are having a hard time keeping the investors who are seeing that the idea is not going to take off and it will not be something big, “says the researcher Neus Soler.

Mutual funds are holding back upward expectations of a possible IPO, the fast track to profits. “The macroeconomic situation is having an impact on the startup ecosystem and technology-based companies. We have seen it in ‘Q-commerce’ but also in other verticals,” says Clara Moreno (Glovo), whose department has allocated 100 million euros in “urban infrastructure” in “about 400 cities.”

These investments have, however, created the “loyalty” of a young audience accustomed to improvisation and apps, with strategies similar to those of mobility, such as Uber. “They started with rates against which taxi drivers could not compete and then they raised prices in search of profitability,” compares Soler. “People by then already valued other things, like service.” In this sector, Glovo is ahead because its ghost supermarkets rely on the same food delivery app.

So there is the possibility that the business can be maintained, although at a different rate. Although there are no openings on the horizon, ‘quick commerce’ is facing the perfect storm that threatens its survival.

A dance of millions in stores that open and close

As part of an expansion process, Getir arrived in Spain in September 2021, and to operate it bought another company, the Spanish Blok. Ten months later it announced the layoff of a sixth of its workforce globally and in the summer the layoffs began and the closure of 20 of its stores, although its intention is to resist. “This model will grow in the coming years,” says the head of Getir in Spain, Hunab Moreno. The one that did not last was the German company Gorilla, which settled in four cities and six months later ended its operations. It was not the first to go bankrupt. It was preceded by Rocket, a Ukrainian firm that opened in November 2021 and closed three months later.

Another that is beginning to leave is Gopuff, an American company that arrived in Spain in February 2022, after buying the British company Dija. It promised 40 stores this year but changed its mind in August, laying off some 180 employees and announcing the closure.

The great rival of these ‘Q-commerce’ is Glovo, which invested 21 million to counteract them and put another 100 on the table. “The user has been trusting our application for years, now to buy and receive all kinds of products, including those of our supermarkets”, summarizes Clara Moreno, responsible at Glovo.