Consumers have long placed a high value on convenience, and offering two-day shipping was once enough to meet that need. But as consumers continued to expect faster delivery options, it changed to next-day delivery, then same-day delivery and today it’s become delivery in 15 minutes.
And while companies like Amazon have mastered the speed game, this evolving definition of convenience is a challenge for physical stores who would need sophisticated warehousing and strong partnerships to meet consumers’ growing need for instant delivery.
It’s the reason why Henri Capoul, co-founder and CEO of French grocery startup Cajoo, said the instant grocery delivery space is one of the most difficult industries and one of the most complex businesses to run as a startup — and the reason why Cajoo’s partnership with French multinational retailer Carrefour is a “game-changer” for the six-month old firm.
“We are very lucky to get access to all of the available SKUs [stock keeping units] from Carrefour to make sure that we can, first of all, get the right products that we need, and also make sure we don’t have to renegotiate every product with every brand if we want to change anything,” Capoul told PYMNTS in an interview.
The retail giant, which has a presence in 30 countries, recently acquired a minority stake in Cajoo, offering the startup an exclusive industrial partnership to support for replenishment and operational logistics in the startup’s dark stores.
And Capoul said the deal is “a real acceleration in terms of expansion” for Cajoo, enabling it to maintain the freshness of products by gaining two to three days before the expiration date. Moreover, the burden of having to build an entire distribution network as it expands in France and Europe has been lifted now that Carrefour is in the picture.
The startup firm currently operates 20 mini-hubs or micro fulfillment centers — “a few 100 square meters big” — in 10 major cities across France, including Paris, Lille, Lyon, Toulouse and Bordeaux.
Read also: France’s 15-Minute Grocery Delivery Startup Cajoo Raises $40M as eGrocery Space Grows
Close to 2,000 food and non-food products are available on the Cajoo app, from fresh bread delivered to the mini-hubs from nearby bakeries each morning, to basic everyday items like batteries and cables.
Orders can be placed from 8 a.m. to midnight and up to 2 a.m. on weekends; once completed, they are attributed to the closest hub, then bagged in about two to three minutes before they are given to one of the 600 salaried bikers and delivery staff at the hub, who delivers the products within 10 minutes.
Generating Income in 15 Minutes
Delivering items in 15 minutes means that orders are often small, but Capoul said the economics of the fixed-cost industry work for the company given its large customer base, which has grown to more than 150,000 users in just six months and was one of the main things that attracted Carrefour to the brand.
The company has also signed some commercial agreements, including a supply agreement with various companies at “really great prices” that has given it an edge over competitors in terms of its gross margins.
The average order on the app is about 25 euros per delivery, which Capoul said “is not bad” considering the fact that it launched only a few months ago. “If people already consume around 25 euros, which is about $30 a month, we think we can push it even higher with a bit more views on the app, a bit of products, a bit of assortment and a bit of pricing,” he said.
The company charges a fixed delivery fee of 1.95 euros for a minimum order of 8 euros, which is “symbolic enough to make sure the customers don’t think of it as a barrier to consumption, especially as the price of the product is really good,” he said. Orders above 30 euros are delivered free of charge to incentivize customers to purchase more products.
On the logistics side, the Carrefour-Cajoo alliance means the startup doesn’t need to rebuild its entire logistics network, which Capoul said is very expensive for any new player in the market. “This is great in terms of margin, and in terms of average order value [AOV],” he said, adding that “we are lucky to already be at AOV levels that are significantly high for this 10- to 15-minute delivery business.”
Freedom and Comfort
In European cities where food halls and flea markets are common, Capoul acknowledged that buying groceries or wine at the street corner is an ordinary everyday routine.
“But what we propose is quite a dense offer with the right choices, meaning you will get all the national brands and all the basic products, but also some great cheeses and wines that you won’t find in the supermarket,” he said.
Consumers can also buy from digital brands, like small French brands that are not available in some supermarkets, adding that the app eliminates “shame moments,” making products like condoms and sex toys available to customers who might be too embarrassed to purchase them in-store.
“This enables the client to not plan anything, but to buy what they want when they need it,” Capoul noted. “What they actually value is the freedom and comfort we provide.”
The company’s main focus now is increasing their order volumes and margins, he said, adding that they will need to build the trajectory in terms of margins, AOV and volumes in order to get to profitability.
And “the fact that we’ve got a big retailer on board, whereas we are still a very young firm, is also a recognition of the fact that the team is great and we execute well, and that there is a great future for Cajoo,” he said.
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