Instant online groceries business VOLY is hoping an A$18m fund raising will help it turn first-mover advantage in Australia into sustainable market leadership. The seed round, announced today and led by Sequoia Capital India, comes following VOLY’s launch in July of Australia’s first instant groceries service.
VOLY’s promise to customers is that it will deliver the goods they order within 15 minutes. It has built a network of “dark stores” in Sydney, from which its agents collect customers’ order and deliver them by e-bike. The stores, not open to the public, are effectively micro-fulfilment centres; VOLY buys from wholesalers in order to ensure it has stock on hand to meet its customers’ demand.
“We think this is going to be a huge market,” says Thibault Henry, co-founder of VOLY. The Australian groceries market is worth A$90bn a year, he points out, but is much less competitive than those in other developed nations. A small number of retail giants dominate the marketplace and online shopping has been slower to take off than in other markets.
“We are already seeing shoppers change the way they behave as they use our service,” says Mark Heath, Henry’s co-founder at VOLY. With groceries available quickly and easily, shoppers are less likely to do one very large shop each week, he says, buying only what they need, when they need it.
It’s a shift that has been seen in other markets where instant grocery services have begun to crop up – most notably in the UK, where as many as 10 players are competing with one another. And VOLY’s founders are keen to dispel the myth that such services are the preserve of shoppers sourcing tiny numbers of goods, perhaps late at night. “It is easy to think this is going to just be chocolate and chips on a Friday evening, but we’re seeing all sorts of different types of customer,” Heath says. Some basket sizes are small, but others are much larger, he explains.
In any case, adds Henry, VOLY is finding its way. “We’re here to help everyone – and the shopper who buys a single avocado today, say, may come back to us with a bigger shop next week.”
In fact, VOLY’s founders say one of the most encouraging aspects of its five months of trading so far has been the high frequency rates of its customers. Shoppers are returning to the service over and again – in some cases, buying from VOLY several times a week.
For now, the company is not levying a delivery charge, making its living through the conventional route of a margin between wholesale acquisition cost and retail pricing. In time, however, the founders say they may introduce a token charge – perhaps A$2 – to deter the tiniest purchases.
Both Heath and Henry are also determined to push back on some of the criticisms made of instant grocery services in other countries – notably that their use of gig economy-style working practices can be exploitative, and that the environmental footprint of so many deliveries is too large.
“All our workers are on a contract because we don’t believe in the gig economy,” says Heath. “And I certainly think having an e-bike come to your home a couple of times a week is preferable to struggling through the traffic in your gas-guzzling car to get to the supermarket for a large shop in-store.” VOLY’s service can also help customers to reduce food waste, he points out, and the company is working with charities and other groups to find a home for its own unused stock.
In fact, the company tends to keep relatively low inventories. The model is that customers should be able to get everything they need from VOLY, but without being overwhelmed by choice. Both founders point to retail statistics that show 80% of supermarket spending is accounted for by just 20% of the grocers’ ranges. That means VOLY can stock its dark stores with less extensive choices in many areas while still serving customers with everything they want and need.
The key for the company now is to build on the success it has had so far, given that competitors will inevitably target the Australian marketplace. VOLY has so far launched a service only in Sydney, but says launches in other Australian cities are imminent. But crucially, it needs to open enough micro-fulfilment sites everywhere it has a presence to be confident of hitting its 15-minute delivery promise.
Today’s fund-raising will clearly help with that. The funding will enable VOLY to step up its roll-out efforts, says Henry. “We are going to have to spend a lot of money to go quickly,” he concedes.
However, Abheek Anand, managing director of Sequoia India, is confident that VOLY can pull it off. “With on-demand models traditionally scaling very successfully in the country, the decision to lead their seed round and help them scale their business across Australia was an easy one to make,” he says.