Forthcoming NYC Bill Would Threaten Ultrafast Grocers

New York City may ban grocery delivery apps from advertising 15-minute delivery, the promise on which ultrafast grocers have built their following.

Councilman Christopher Marte intends to introduce a bill prohibiting these guarantees in coming weeks, arguing that they lead to traffic law violations, endangering drivers and pedestrians, The New York Post reported Monday (Feb. 21). The proposed measure is part of a broader push to regulate on-demand delivery services.

Read more: NYC Council Moves to Ban Grocery Apps’ 15-Minute Delivery Guarantees

The Context

New York City has been a hotbed of ultrafast grocery, with many startups including Buyk, Jokr, Fridge No More and Gorillas choosing the city as their U.S. starting point. Consequently, local businesses have been pushing back against ultrafast grocers for months.

In November, for instance, news broke that bodegas and other small retailers have been struggling to compete against these venture-capital-funded newcomers. Many of these services are burning through this funding, promising consumers delivery times and prices that lose the grocers as much as $20 per order.

See more: Struggling NYC Bodegas Seek City Funding for Tech, Delivery Apps

Read also: Ultrafast Grocers’ Losses Mount in the Face of an Uncertain Future

Additionally, the city has been active when it comes to legislating food delivery players. Most recently, New York City Mayor Eric Adams and Department of Consumer and Worker Protection (DCWP) Commissioner Peter A. Hatch released a statement in late January requiring food delivery aggregators to have a DCWP license, imposing new regulations.

See more: Third-Party Food Delivery Apps Must Now Be Licensed

What Insiders Are Saying

Those in the space expect that, even as adoption of ultrafast grocery continues to grow, there will be some consolidation in the category.

“I think as ultrafast grocery begins to mature, we’ll see some shakeout,” Buyk CEO James Walker told PYMNTS in an interview. “Players that are very focused on the business model as well as the customer experience ultimately will be successful, and those that are not spending the requisite amount of time will not be as successful.”

Read more: Ultrafast Grocery Delivery Moves to the Midwest as Competition Heats Up

Additionally, other voices from the eGrocery category have been expressing doubts about the feasibility of the model on the whole.

“There’s a lot of effort going in around instantaneous delivery, and there’s a lot of brilliant minds trying to make it so that your item is there not in 30 minute but in 15 minutes,” Alex Weinstein, chief digital officer at online grocer Hungryroot, told PYMNTS. “It’s definitely structurally better if your item arrives in an hour than if it arrives in a week or longer … However, at a certain point, there’s just diminishing marginal returns … [It] is small AOV scenarios that really aren’t particularly either profitable or scalable.”

See more: eGrocery Customers Expect More Than Digital Shelves; They Expect Personal Relationship

By the Numbers

Findings from PYMNTS’ August study “What Consumers Expect From Their Grocery Shopping Experience,” created in collaboration with ACI Worldwide, revealed that 23% of consumers buy groceries online to have the products delivered to their homes. Plus, about a third of these shoppers ranked this channel as their most preferred purchasing method.

Read more: Digital Features Can Help Grocers Win Over 43% of Shoppers

Moreover, one in five consumers said that delivery options would improve their loyalty grocers, according to data from PYMNTS’ study “Decoding Customer Affinity: The Customer Loyalty to Merchants Survey 2022,” created in collaboration with Toshiba Global Commerce Solutions.

Get the report: The Customer Loyalty to Merchants Survey 2022