January 22, 2013

Online delivery service Food.de plans growth

Food.de delivery van (photo: Food Direkt)
In the fast lane: Food.de wants to expand its online home delivery service rapidly throughout Germany
Berlin-based online supermarket Food.de has ambitious plans to extend the geography of its home delivery service.

After Berlin and Leipzig, the start-up operation will now also provide its service in Dusseldorf.

Consumers in this Rhenish city, famous for its ale and advertising companies, will be able to choose from a range of more than 10,000 lines, including fresh produce and frozen food.

The company uses its own temperature-controlled van fleet to guarantee same-day delivery. Alternatively, customers can choose a two-hour time slot for any of the seven workdays subsequent to their order.

The goods are supplied by "a local C&C wholesaler in each metropolis," says Karsten Schaal, founder and CEO of limited company Food direkt GmbH (Food.de).

Sounds good, but will it work?

Hopeful, young entrepreneurs

"Custom-made indoor route planning software speeds up picking and gives us an advantage in terms of efficiency," says co-founder Christian Fickert.

Both these young entrepreneurs are optimistic that Food.de will "probably cover its costs soon" and want to make a profit as early as this year. "We've now added Dusseldorf because we see that we can be profitable," Schaal adds.

Cologne will also be delivered by the end of this month. A total 14 towns and cities in the Ruhr area as well as Frankfort, Hamburg, Munich and Stuttgart are on the agenda for the coming months.

Food.de has now found a "high six-figure sum" to finance rapid nationwide expansion. Its backers include IBB Beteiligungsgesellschaft-managed venture capital fund Kreativwirtschaft Berlin and Leipzig-based investor Olini Verwaltungsgesellschaft as well as Business Angels Venture Elements, Spandau Ventures, and Lemonade Invest.

As Karsten Schaal is also CEO of Leipzig investment company Lemonade Invest, one might call this a classic example of putting one's money where one's mouth is.

Given the cost of delivery logistics, the generally low margins in German food retailing, high store densities, and the hitherto lukewarm reaction of German consumers to e-food services, it is also a brave one.

Titans vs. start-ups

Despite a recent resurgence of interest in the segment, fuelled by Amazon after a decade-long lull, German home delivery roads are littered with the wrecks of those who dared, but lost.

Supermarkt.de is merely the latest victim. Dusseldorf-based Froodies was obliged to file for insolvency in May 2012, and Andreas Prüfer's Lebensmittel.de gained majority control of Gourmondo in September after it had failed to make a profit in ten years.

As a business-friendly newspaper, Lebensmittel Zeitung obviously wishes any start-up operation well. Seen dispassionately, however, it is irrelevant whether Food.de is successful with its ambitious growth plans, or not.

In the greater scheme of things, Food.de represents a further example of how more and more capital and entrepreneurial skill, from both within and without the trade, are being stirred into the online pot. It is therefore not a question as to whether, but simply when the nut will be cracked.

Surely, it is also a sign of the tectonic shift within the industry that Lebensmittel Zeitung's editors do not seem to have reported on the creation of any store-based businesses for a long time now.

Lebensmittel Zeitung is often asked who will win the "battle of the titans"? By this they mean the struggle for supremacy between the AGFAs (Amazon, Google, Facebook, and Apple) and the Walmarts, Carrefours, Metros and Tescos of this world.

Come on, guys, it ain't rocket science, just follow the operating profit...

 
Related article in German: Lebensmittel Zeitung, no. 3, 18.01.2013, by Silvia Flier

 

Podcast. Click arrow to listen to an audio version of the text:





Comments for this article are closed.

  1. Robert Clark
    Created 27 January, 2013 15:35 | Permanent link

    Your Food.de piece logically concentrates on Germany, but it also has relevance to the UK. Will for instance Ocado -- with Stuart Rose shortly at the helm -- make it here?

    Personally, I am sceptical and far from convinced that the Ocado model and hence infrastructure is appropriate and has longer-term UK viability. Indeed, one must ask why John Lewis Partnership/Waitrose quietly got out, including their pension fund. Was it only for Waitrose to do its own home delivery thing?

    I suspect Ocado might struggle on till about 2016, but after that? -- by which time they might be desperately hoping some white knight will ride in to take them over (with the existing Waitrose arrangement also about to run out around then).

    But who? Morrisons would have been the obvious one, because it would bring them instant, food-oriented facilities, but they've now already bought in much of the expertise and brains with that really hot children's product outfit based near Peterborough.

    Tesco very much have their own system that has been established for years and is by some distance the largest in the UK. Tesco's non-food side remains the more underdeveloped element, for which Ocado would not be relevant.

    It is certainly true that Marks & Spencer don't have a presence in the mainstream grocery delivery side (i.e. regular deliveries, rather than seasonal hampers etc. where they do have a significant but expandable business), so that might be a possibility.

    Amazon keep threatening, although their current grocery offering is seriously underwhelming, so they certainly could take the Ocado plunge.

    The other outfit that is talked about is the main Co-op (not any of the much smaller regional ones). The Co-op just might, and certainly they could be expected to run the slide rule over Ocado, but I suspect that not only would they deem it outside what they could afford but would also go about it in their own way, more logically based on their existing distribution and/or store network.

  2. Mike Dawson
    Created 28 January, 2013 13:28 | Permanent link

    Some analysts have joked: "Ocado? Two zeros with nothing in between!"

    Ocado doesn't really have the economies of scale; its business model is based on fully-automated picking centres which require considerable capex. To date, they haven't attained an inspiring pick rate. They are also at a logistical cost disadvantage in being sited nearer to suppliers than to consumers.

    You list the likely store-based purchasers. Ocado's new Chairman, Sir Stuart Rose, could point to Marks & Spencer as a potential buyer. But isn't the M&S food offer more about convenience?

    As you write, given its ambition and deep pockets, Amazon might be interested. However, could the two systems really be bolted together?

    So Ocado, now it's your turn to tell your side of the story!

This is an English-language blog, please write all comments in English!
Thank you.

stats