Around Warsaw, new shops are springing up that do not let customers in. One outlet in the central Mokotów district has its windows taped over with grey stickers, but inside workers are visibly shuffling around.
The electric bikes parked outside hint at the purpose of these so-called “dark stores”, which offer to deliver goods to people’s homes in 10-15 minutes.
This speed and convenience has attracted a growing number of customers. But it has also caused concern among some urban activists, who worry that such outlets drain the life out of districts.
Now more are likely to spring up, as homegrown and international competitors vie for Poland’s growing e-commerce market, which reached 14% of all retail value last year. Yet experts say that low margins on groceries and the high costs of rapid delivery mean that such businesses could be loss-making for a while. It is also unclear if they can expand beyond big cities.
Ready, steady, go
I click the “buy” button and start the stopwatch. Lisek, a delivery app that is rapidly expanding in Poland, promises to deliver groceries to my Warsaw flat in under 15 minutes.
Thirteen minutes and 28 seconds later the doorbell rings. A bicycle courier in a purple Lisek raincoat hands me a branded paper bag with my cold brew coffee and pet treats.
Founded in 2018, Lisek was the first Polish quick commerce company to operate a network of dark stores. Within its first few months, the company had covered a third of Warsaw and tested its service until 2020, when it shut down for some time. Now, it is revamping its model and quickly expanding with almost two dozen stores across the capital and Kraków, Poland’s second biggest city.
Its dark stores in each city district stock products familiar from convenience stores: from milk to baby wipes, from avocados to frozen pizza, as well as Covid supplies and Wyborowa vodka. But the company only offers deliveries through its mobile app.
When a customer places an order, a race begins to pack the products and deliver them by a courier on a bicycle or scooter. The company’s key advertising line is speed: its posters around Warsaw pledge to deliver in 10 minutes (although it extends to 15 for further-off locations).
That taps into market expectations. “This model adds incredible value because speed is of utmost importance to the youngest segment of customers,” says Maciej Kroenke, a partner at PricewaterhouseCoopers (PwC), an international consultancy in Warsaw. He adds that such deliveries could drive the future development of the e-groceries market.
A number of companies are scrambling to speed up their deliveries. Poland’s largest convenience chain, Żabka, has partnered with Uber Eats, which has a network of drivers able to deliver its products from shops within 20-30 minutes of ordering. Large grocery chains also offer expedited home delivery within two hours of ordering.
A growing e-commerce market
The concept has also benefited from a wide boom in home deliveries, accelerated during the pandemic, when many shops and restaurants were required to close to in-person customers. A new report by PwC found that over 74% of Poles said they would maintain the level of online shopping after the pandemic ends, and 10% said they would like to shop more this way.
The mobile model has also allowed Lisek to operate on Sundays, when most regular shops must close due to the government’s trading ban but e-commerce is exempt.
“When we started out, Sunday was the most important day for us in terms of customer acquisition. It still is a very busy day,” said Justyna Sztengreber, the company’s head of customer acquisition and marketing.
According to Sztengreber, the average size of orders is growing. “The most popular are basic [perishable] necessities…but customers are increasingly also buying for days ahead, including dry products like rice and pasta,” she said.
The e-commerce market is expected to reach a value 162 billion zloty (€35 billion) by 2026, according to PwC, meaning an average annual growth of 12%. The consultancy expects that the fastest growing segments will be groceries and health & beauty products.
The dark store model
Yet unlike simple delivery models from brick-and-mortar shops and restaurants, Lisek and other rapid delivery apps are based around the concept of dark stores – or “dens” as they call them, referring to the fact that the firm’s name means “little fox” in Polish.
Each one is between 100 and 250 square metres in size. They function like small warehouses, strategically located around key avenues of the city, allowing the company’s full-time couriers to zip in and out.
“These locations can be effective in terms of rent because they can be off the main streets,” says Kroenke, the consultant.
But their shopfronts are blacked out and closed off to the public. This is disgruntling urban activists, who believe that the closed-off venues are killing off the vibrancy of the high street.
“This is a great threat, killing the city and local trade,” says Kuba Czajkowski, a member of the Miasto Jest Nasze (The City is Ours) activist group, quoted by Gazeta Wyborcza. “The essence of life in the city is interpersonal relationships, contact with other people.”
“The city’s role is to prevent the extinction of entire quarters,” he says, calling on municipal authorities – who are the biggest owner of commercial spaces in Warsaw – to act.
“It is city-forming when on the ground floors of the buildings there are commercial premises – gastronomy, services – and not logistic warehouses with sealed windows,” he adds.
To this, the e-grocery company responds that such concerns are overblown. “It is not as though Lisek, like Żabka, will have 6,000 sales points on main streets for a while…We are not changing the landscape of the city,” said Sztengreber.
She adds that “not everyone wants to chat at the greengrocer” and that “there are those for whom this is an important service”. She also notes the usefulness for people who are unable to leave the house, such as those with disabilities.
Low margins and high costs
The market is already getting busy as Lisek runs up against a number of homegrown competitors, such as Jokr and Swyft, and potential international entries, such as German startup Gorillas.
A number of food delivery companies such as Glovo, Bolt and Wolt are reportedly eyeing the e-grocery market and considering opening their own dark stores. Larger retail chains, including Carrefour and Żabka, are also experimenting with the fulfilment model.
“There will be lots of demand, but it is a challenging business requiring significant investment in infrastructure and client acquisition,” says Kroenke. He argues that, in the short term, dark store operators will not be able to break even, especially with promotions and aggressive advertising strategies aimed at growing their market share.
Looking at the Polish market, he estimates that, with prices at the level of convenience stores, products may carry a margin of up to 40%, meaning around 20 zloty on an order of 50 zloty (the threshold for free delivery).
While delivery costs in quick-commerce are hard to estimate, those for a single order in regular e-groceries – including processing, packing, payment and delivery with its own fleet of refrigerated vans – stand at roughly 40 zloty, says Kroenke.
Many disruptive companies, like Uber and Spotify, have accepted losses in the short run in order to undercut competitors. But the capital-intensive growth could prove draining for Poland’s startups, which may eventually be bought by larger traditional retailers looking to optimise deliveries. The quick delivery model may be adopted by convenience chains too, which could adapt their sprawling urban networks of stores to deliver groceries.
Another challenge will be expanding outside of densely populated cities. “There needs to be enough volume to cover the costs of warehouses and workers,” said Kroenke, who notes that other successful grocery delivery businesses, like Frisco, first focused on the biggest cities.
Finally, as demand grows, it will become trickier for rapid retailers to fit into their tight 10-minute delivery windows.
Kroenke says there is space for ultra-fast deliveries alongside slower ones. He sees the “end-game scenario” for e-commerce as a varied landscape of formats similar to that for traditional shops, which spans big-box outlets and convenience kiosks.
Till then, competition for the quick-groceries market will be fierce, with just one or two winners emerging. It could be a “race to the bottom,” he says. On your marks, go!
Main image credit: Jacek Marczewski/Agencja Gazeta
Maria Wilczek is deputy editor of Notes from Poland. She is a regular writer for The Times, The Economist and Al Jazeera English, and has also featured in Foreign Policy, Politico Europe, The Spectator and Gazeta Wyborcza.
