Poor economies of scale raise questions about viability of grocery delivery startups

OVER a decade after homegrown online grocer RedMart launched its delivery services, many Singapore residents have got used to the idea of having milk, rice and toilet paper delivered to their doorsteps. It’s a great convenience for customers. But it shows no signs, still, of being a great business for investors.

Just last week, grocery startup UglyFood announced its closure on Instagram. Indonesia-based HappyFresh said in September 2022 it would lay off staff and restructure as it faced a cash crunch. And rival Sayurbox is reportedly cutting staff too. On-demand ride and delivery platform Grab, meanwhile, appears to have called it quits on a grocery business launched in December 2020. It still provides delivery for supermarket partners on its platform.

As interest rates rise and the era of easy money comes to an end, the startup space is rationalising. Grocery delivery is one segment that is turning out to be particularly unappealing.