On-demand delivery is tough, but these Northern startups are going for it

Nick Huber, July 17, 2017 4 min read

This article was originally posted on the Tech North website.

Britons have a growing appetite for on-demand services, particularly for takeaway food delivered by startup businesses

The UK’s home delivery and takeaway food market grew by four per cent in 2016, according to Euromonitor International, a market research company.

Startups are cashing in on the change in eating habits. Investors have put their money in on-demand delivery startups, such as Deliveroo, which delivers restaurant food and may soon be worth about $1.5bn (£1.2bn), according to press reports.

Other companies, including Uber (Uber Eats) and Amazon’s Prime Now, and Tesco (Tesco Now) have also started one-hour delivery services for items ranging from a Thai curry and games consoles, to dishwasher tablets and groceries.

As competition intensifies, can, and should, Northern startups take on the big names? What are the main challenges for startups in the on-demand market? Is the market big enough? And is the best outcome for startups being bought by a big rival if it gets enough market share to be a threat?

Bee there soon

Tech North spoke to some northern startups in the growing on-demand market.

Beelivery is a Manchester-based startup that delivers groceries and alcohol within 90 minutes. It’s active in UK cities including Manchester, Liverpool, Bristol, Cardiff and Glasgow.

The average order is between £20 and £30. Delivery is free for orders of more than £20.

Beelivery

CEO Lee Parkinson says Beelivery has developed is own tech to make sure customers know how much they’ll pay before they order.

“Our website has a feed from a lot of stores across country. We designed it ourselves and integrated it with [retailers’] EPOS [electronic point of sale] terminals,” says Parkinson, a former technology developer and IT contractor.

He says that Beelivery delivers in more UK towns and cities than Deliveroo.

Beelivery drivers − students, young professionals, retirees and courier drivers who may work for other on-demand delivery companies − are ‘fully self-employed,’ Parkinson says.

Collext from you, delivered to them

Collext is another Manchester-based on-demand, delivery company, although it describes itself as a ‘next generation shipping company.’

Customers send Collext a photo of the thing(s) they want delivered. The company collects it within 30 minutes, packs it and takes it to its storage hub near the city centre. A mail courier company, such as Hermes and Yodel, then delivers the item.

“We can get a better price than the [customer], [which is how we make a profit],” says Craig Parren, founder of Collext. “It’s not really a cost-saving app for the client. It’s more of a convenience. It saves the customer time.
Collext

The service is aimed at startups and small businesses. “We don’t charge for pick and pack for order fulfilment, Parren says. “We charge higher for storage, which encourages a higher turnover.”

Collext also imports goods for overseas customers.

Identifying a pain point

Parren got the idea for Collext when he worked in the logistics industry and sold goods on eBay in his spare time.

“I was doing little bits on eBay. It came to a point where I was doing like 10 or 15 orders in the evening. Because I was in a full-time job I wasn’t settling down to about 9 or 10 o’clock. I was Googling whether there was a kind of [shipping] service where they would come and take it off your hands.”

In the US, a company called Shyp offered this kind of service. But Parren saw a gap in the UK shipping market.

“[The] Logistics industry needs to be disrupted because it’s so lacklustre [and has little] forward thinking,” Parren says.

It’s early days for Collext, which is developing an app. Parren is pleased with the business so far. “[I] started my business using my money but now it’s paying for itself. The most exciting part is the app because that’s innovative. It will take a lot of work and I think that’s where I will need the funding.”

Beer fans may also want to keep an eye out for a beer-delivery service from Manchester brewery ShinDigger. It plans to start an on-demand service delivering American-style craft beers.

The challenges of on-demand

But are there enough people with disposable income who need beer or food within one hour and can’t be bothered to go to their local pub or supermarket?

The experience of Pocket Shop, a startup which delivered groceries within one hour in London and closed in 2013, is a cautionary tale. Despite delivering more than 4,500 items in London, the startup said it closed because it was unable to create a large enough customer base in each area it delivered to.

Rob Bamforth, principal analyst, business communications, at Quocirca, a technology research company, says that startups offering on-demand services should focus on building a good app that’s easy to use and differentiate themselves from larger rivals.

“Basically, they just need to put a bit of thought into addressing customer pain points,” Bamforth says.

He reckons that the on-demand market is likely to consolidate. “Being part of a portfolio of services, each tailored and targeted at different customers, but having some common shared infrastructure might be best combination of economies of scale with individual service.”

Treating drivers in the ‘gig economy’ as self-employed may get harder. Last year, a London employment tribunal ruled that drivers for Uber were entitled to holiday pay, paid rest breaks and the national minimum wage.

Last week, the Taylor Review, a government review of employment practices, said that employers in the gig economy should be given more rights and there should be a new category of worker called a “dependent contractor”.

There’s growing demand for on-demand, but that doesn’t mean it’s an easy market to serve.

Image credit: Kat Northern Lights Man / Flickr

How to, Bristol, Cardiff, Glasgow, Liverpool, Manchester, North West, Scotland, South West, Wales