Overfunded Ultrafast Grocery Shakeout
Former head of strategy at a global on-demand giant on the economics of grocery delivery
The burst of capital into ultrafast grocery created a land grab for dark store coverage before anyone had shown steady, repeat demand at the neighborhood level. Teams were spending first to open small local warehouses, staff pickers and riders, and blanket cities with supply, even while many stores were still doing only a few dozen daily orders and the winning basket mix was unclear.
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The model was new, but the funding sprint was immediate. By mid 2021, on-demand grocery companies had raised about $14B from March 2020 to April 2021, while the UK alone already had six to seven funded dark store players racing to plant sites city by city.
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The core problem was not opening a dark store, it was filling it. One interview estimates roughly £100k to launch a store, but many UK sites were still only doing 30 to 50 orders a day. At that volume, fixed labor and delivery costs stay heavy and scale benefits do not show up yet.
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This helps explain why the strongest versions of the model drift toward convenience, not full weekly grocery. A mature dark store can work at around $25 AOV and 500 orders per day, but broad grocery adds fresh food spoilage, stockout risk, and more complex supply buying. That favors tighter assortments over supermarket breadth.
The category was heading toward a classic shakeout, where surviving players would narrow assortments, pull back from weak neighborhoods, and consolidate around the few catchments dense enough to support high order frequency. The long term winners were likely to look less like online supermarkets and more like software driven convenience chains with very fast delivery.