Why We Chose to Vertically Integrate | Grocery Delivery Sydney


Why We Chose to Vertically Integrate

Mark Heath


Delivery grocery comes in a number of different forms. When coming up with VOLY we spent a tonne of time thinking through all varieties and landed on a model that we reckon is the best for the customer, our suppliers and our delivery riders. 

The three major forms of grocery delivery we see in Australia are: 

One - Big supermarkets that deliver from massive, highly centralised distribution centres. The whole premise of this is to batch a tonne of orders together and pop them all on a truck for delivery at once.

Two - Partnerships between those supermarkets and delivery platforms. These use delivery drivers from the platforms to pick up groceries from stores + deliver to the local area, usually in 60 mins or so.

Three - Distributed micro fulfillment centres that hold stock and have dedicated delivery fleets to deliver from each one. These get the goods to your door in 15 mins or less. 

VOLY is pursuing the third path. We have direct relationships with suppliers (the people making your food!), hold the stock in our centres all over the city and have a dedicated fleet of riders on electric bikes doing the deliveries. 

We didn't make this choice lightly or to follow a trend. Importantly, we believe VOLY solves problems seen in option 1 and option 2 above. 

Option 1 - Big Baskets to Feed Big Distribution Centres

For option 1, the incentive for supermarkets is to push minimum basket sizes and delivery times super high. This justifies the cost of the big delivery centre, the driver and the big truck that brings goods to your door. This is why we see big delivery fees ($8-$15), big delivery times (2-5 hour windows, next day) and big minimum baskets ($50+). It's simply not economical for a traditional supermarket delivery service to take care of your $20 order nor to get it to you quickly. 

Option 2 - The Goldilocks Basket

Option 2 is a little different and could be seen as a good solution in theory. The issue is, there’s pressure from multiple parties involved to simultaneously discourage small baskets AND big baskets.

For small basket sizes of say $30 or less, it's not economical for the delivery platform to deliver the goods. They take anywhere between 15-20% of a basket to cover the cost of delivery and for a small basket, this doesn't come close to covering the cost of the driver. Thus small baskets are discouraged implicitly by larger delivery fees ($5-$7) and batching orders together (which can blow out delivery times). 

For larger baskets, the delivery platforms are super keen to take the order. Their cost to deliver doesn't change relative to a big basket (still paying the driver the same amount!) but they make more money. Here, though, the supermarket partner starts to get discouraged. If the basket is bigger, it starts to eat into their existing online grocery delivery volume, on which they make a larger margin as they don't have to pay a third party delivery partner. Thus big baskets are discouraged explicitly by caps on the total number of items that can be delivered in one order & total products listed. 

Option 3 - No Toes to Step on, Built for the Customer

At VOLY, we figure that the people sourcing and stocking the goods on the shelf should also be the ones delivering it to you.The skill sets are different, sure, but our team is built around incredible expertise on both sides of this fence. Everyone is new to this space but this isn't our first rodeo.  

Importantly, this means that we are happy to deliver smaller orders. It's much, much cheaper for us to send an employed delivery rider on an electric bike to you than a full-blown delivery truck from a distribution centre 10kms away. We’re also happy to deliver the big stuff. We delight in seeing customers do a full shop with us and we’re prepared for it with customised bikes, packing solutions, etc.

We think we’ve found a great solution here, one with no toes to step on and is built directly for the customer. Our customers seem to agree - we’ve had customers order $150 of groceries on a Saturday and follow up with $15 of fresh veggies on the Tuesday after. We’re not here for you just at your best and biggest basket - we’re here for the long run and for all of your needs.