Glovo: Expanding Quick Commerce

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A N T O N I O  MOR E N O J AM E S B ARN E T T

Glovo: Expanding Quick Commerce

We must make online grocery delivery like running tap water.

— Daniel Alonso, Glovo Vice President of Q-commerce

In early March 2021, Oscar Pierre, co-founder and CEO of the “deliver anything” on-demand courier service Glovo, convened with company leadership at Glovo’s headquarters in the city of Barcelona, Spain. Glovo’s eponymous mobile app enabled the purchase, pick-up, and delivery of products ordered by customers. It delivered more than 100 million orders annually across 20 countries in Southern Europe, Eastern Europe, Western Asia, and Africa. (See Exhibit 1 for a list of countries.) Since its founding, Glovo operated as a multi-category delivery service; however, most of its business came from the delivery of prepared foods from restaurants. To gain a competitive edge in a crowded industry, the Glovo team was trying to grow its quick commerce service (branded as Q-commerce) that delivered other categories of products, primarily groceries, but also sundries, health and beauty products, toys, electronics, and other convenience items in fewer than 30, 15, or 10 minutes.

In addition to couriers picking up goods from retail grocers and convenience stores, Glovo had started operating dedicated Glovo “dark stores” in some markets. Glovo situated these warehouses in central urban locations and stocked various commonly ordered products to shorten the available distance for courier pick-up and delivery. Glovo operated 11 dark stores across major cities in Spain, in Lisbon, Portugal, and in Milan, Italy.

Pierre and the leadership team, including co-founder and Chief Public Affairs Officer Sacha Michaud and Vice President of Q-commerce Daniel Alonso, had gathered to discuss two elements of their Q-commerce offering. First, they would discuss P900: Glovo’s internal project to offer ultra-fast delivery in 900 seconds—or 15 minutes. P900 was live in Barcelona and Madrid, but leadership had greater ambition and was considering increasing the speed of its offering to 600 seconds (10 minutes). Second, Alonso was to brief the team on the progress of the dark store expansion plans, including in Nairobi, Kenya, a very different market from the ones where Glovo operated to date.

Glovo had become one of the fastest-growing unicorns in Southern Europe.1 Following the February 2021 announcement of a strategic partnership with a Swiss real estate firm that included a

$100 million investment to develop Glovo’s dark store real estate expansion, the delivery app’s total raise had exceeded $634 million.2 Glovo intended to build on their momentum through expansion into

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Professor Antonio Moreno and Case Researcher James Barnett (Case Research & Writing Group) prepared this case. It was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by Harvard Business School and not by the company. The citation review for this case has not yet been completed. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

Copyright © 2021 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

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new cities and countries and considered how Q-commerce and P900 would factor into their growth strategy. The team had ambitions to open more than 100 dark stores by the end of 2021 and expand P900 into viable markets.3 How would they reach their objectives?

Industry Background: On-Demand Delivery

With roots in pizza delivery, on-demand delivery grew when third-party services, such as New York-based Seamless in 1999 and Chicago-based Grubhub in 2004, built websites for customers to order delivery and takeout from an aggregation of local restaurants. On-demand delivery apps, typically dedicated to prepared food (restaurant) delivery, proliferated with smartphones and Internet-enabled devices. By 2019, the global online prepared food delivery market earned $107.4 billion in revenue.4

Some food delivery services also offered other delivery categories, such as groceries, and offered services like scheduled delivery, in which a customer could place an order for later. Most companies generated revenue through delivery fees charged to customers, commissions charged to restaurants, and supplementary revenue sources such as online payment services, merchandising, and top- placement fees for restaurants and brands to appear higher on lists and search results within an app.5 On-demand delivery services charged restaurants commission rates averaging 10% to 30%.6 Expenses included software development costs, labor costs, including corporate compensation and courier compensation, and customer acquisition costs. Most platforms paid couriers as freelance workers without full employee status. Responses to government litigation over the employment status of couriers contributed to legal expenses. Income and costs also varied by market; established markets generated strong profits (30% to 50% per order), while losses were the norm in new markets.7 Overall, profitability eluded most competitors due primarily to high delivery costs, market competition, and low average order values.8

Major players, including Delivery Hero, Deliveroo, Just Eat Takeaway.com, and UberEATS, the most widely available service, had grown through consolidation, acquisitions, new category offerings, and expansion into new markets. For example, in 2020, Takeaway.com agreed to acquire Just Eat for

$8 billion; several months later, Just Eat Takeaway.com acquired Grubhub for $7.3 billion.9 Also in 2020, Uber, the parent company of UberEATS, acquired its U.S.-based multi-category competitor Postmates for about $2.65 billion.10 (See Exhibit 2 for data on the on-demand food delivery market.)

In 2020, global on-demand food delivery revenue increased 27% from the year prior due to the COVID-19 pandemic and related safety concerns, government restrictions, and restaurant dining room closures.11 Popular U.S.-based on-demand food delivery service DoorDash conceded in its 2020 initial public offering (IPO) filing: “The circumstances that have accelerated the growth of our business stemming from the effects of the COVID-19 pandemic may not continue into the future.”12

On-demand delivery platforms faced criticism. Drivers and riders had complained of low pay and lack of employee benefits, particularly in countries and regions that allowed companies to consider its riders as contractors and not company employees. Some restaurant operators criticized third-party delivery providers as too expensive and exploitative. Platforms charged restaurants high commissions per order, gained access to customer data, and controlled the last mile of the meal’s delivery and presentation upon arrival.13

Quick Commerce

Quick commerce referred to on-demand delivery that emphasized delivery of items from multiple categories in under an hour, and down to as little as 10-minutes. After a customer placed an order on

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an app-based or web-based platform, a quick commerce service picked up the order from a retail location or from a proprietary fulfillment center and delivered it to the customer. Quick commerce services typically delivered small quantities of goods to customers, with customers prioritizing speed and convenience over price discounts and product range. Quick commerce focused on groceries and convenience items easy to delivery within a short time frame, and was seen as a complement to larger grocery trips and other shopping habits. (See Exhibit 3 for an overview of quick commerce.)

Quick commerce boomed in 2020 amidst the COVID-19 pandemic. While Amazon Prime Now, launched in 2016 and promising delivery in one to two hours, had been at the forefront of convenience delivery, global COVID-19-related lockdowns closed grocery and convenience stores and drove increased demand for even faster delivery of grocery and convenience items. Most leading on-demand delivery services offered convenience categories and quick commerce options to supplement their existing prepared food delivery selections. DoorDash opened “DashMart” warehouses in August 2020 as part of a push into quick commerce, for example.14 Delivery Hero launched its first “Dmart” in 2019 and by 2020 operated hundreds across the Middle East, South America, and the South Pacific.15

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