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What are the trends in basket size in the grocery industry?


Ex-head of strategy at on-demand giant

Guest: In terms of the actual basket size, these basket sizes are currently fulfilling only impulse orders. So if you look at Zapp, I think they focus a little bit more on the impulse purchase segment itself, like cigarettes and alcohol and ice creams at night and late-night cravings. 

Dija and, I think Getir and all of these guys have groceries as well, and they're broad base focussed. This doesn't mean that one is not going to move in the other direction. I think the idea is everyone's waiting to figure out what works out in terms of margins because with fresh produce there are the storage costs, there are wastage costs, things like that. You have to be very precise with what you want.

There are also selection issues. So if a customer is looking for tomatoes and they don’t have them, that becomes a problem, so essentially that space has more promise to have the higher AOVs. Eventually, if you can be super reliable, a Morrisons or a Tesco's, you can have a £100 average basket size there or at least a weekly frequency as such.

Or you can basically go the other way and you'll have a 20 pound, 15 to 20 pound kind of basket size, which you basically have, but with much lower margins than food delivery. Food deliveries are about, I think an £18 to 25 basket. Essentially what you ended up having is a higher frequency, but much smaller basket size kind of business when you're looking at impulse purchases.

If you have a higher-order frequency, your fixed costs get amortized over more orders. So whatever generates more orders, and on a hyper-local basis, you'll be able to divide your fixed cost divided by more orders. So essentially the greater number of orders you have sometimes, your variable will stay high enough, but your fixed we'll drop that basically becomes important in hyper-local space.

Find this answer in Former head of strategy at a global on-demand giant on the economics of grocery delivery
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