At the peak of the pandemic, rapid grocery delivery services (RGD) boomed across Europe with periods of lockdown leading increasing numbers of urban dwellers to reach for their phones to order almost ‘instant groceries.’
The closing of high street retail shops, often as a consequence of lockdowns, has provided dark stores with opportunities to increase their presence in ultra-urban locations and the increased demand for fast groceries has resulted in a explosion of RGD companies such as Gorillas, Getir, and Flink opening dark stores across the continent.
According to research by Interact Analysis, there are currently around 6,000 dark stores globally and this is expected to increase to 45,000 by 2030, with 12,000 stores across the UK and Europe.
But now that the pandemic is behind us and the cost of living crisis creeping in, what’s in store for this retail disruptor?
Currently, the dark store operators are aggressively competing with promotions and discounts to attract customers. This, however, results in losses and most, if not all, dark store operators are yet to report their first profits. The sector’s expansion has been supported by venture capital (VC) funding – but will that continue if they are still to see any return on investment?
Additionally challenging is increasing resistance from local communities due, to amongst other things, late-night disruption. As a result, major cities like Paris and Amsterdam are taking action and suing dark store operators, banning the opening of new dark stores, and/or finding other ways to shut down existing dark stores in their cities.
With a longer term outlook in mind, the acceleration of e-commerce during the pandemic introduced consumers to the convenience of shopping online and, although this growth is expected to slow down, it is forecasted to grow further in coming years. The number of users clicking online for food delivery services in Europe are forecast to increase by 47 per cent in 2027 to approximately 173 million users. If we also factor in an increasing urban population (by 2050, 7 of 10 people will live in urban areas, according to the World Bank, in October 2022) these drivers both indicate that the demand for ultra-fast deliveries and dark stores will grow.
Although impact on the current real estate market is yet to be seen, based on this year’s take up data from CoStar, we anticipate that, by 2030, approximately 5 to 6 million square metres of space will be leased by dark stores across Europe. This is, however, subject to further policies from governments that might slow the expansion of dark stores.
Furthermore, additional uncertainty around the affordability of prime rents for the ultra-urban locations will challenge the sector, already so reliant on VC funding.
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