NEWS ANALYSIS: Checkers Sixty60 maintains stranglehold on food delivery market

Woolworths, once the undisputed titan of SA retail, is stumbling in the fiercely competitive online food delivery market.   

Pick n Pay’s online sales have surged more than 74% as competition in the lucrative and growing food delivery market heats up, while the rival Checkers Sixty60 offering remains the market leader.

The volume of orders in SA’s food delivery market is expected to reach $1.1bn (R20bn) in 2024, according to Statista, as its convenience and efficiency continues attract high-end consumers.

Online food delivery services have grown rapidly in recent years, driven by the ease and safety they offer, especially in the wake of the Covid-19 pandemic.

Woolworths, Checkers and Pick n Pay have made significant strides in this space, each leveraging their unique strengths and strategies to capture market share.

Sixty60 remains ahead of the pack.

Woolworths: steady but lagging

Woolworths on Wednesday said its online sales grew by 13.3% over the past year, contributing 9.2% to the group’s total sales. Despite these positive numbers, Woolworths’ rapid delivery service, Woolies Dash, has faced several challenges since its inception.

Investment analyst Chris Gilmour said Woolworths was well positioned to dominate the market due to its affluent customer base who are more likely to pay a premium for convenience. However, execution had fallen short, which allowed competitors to gain an edge.

“Woolies Dash has been beset with problems from day one. Theoretically, Woolies is best placed among all the food retailers to provide a first-class rapid home delivery system,” he said.

“Their customers tend to be wealthier and don’t mind paying a premium for home delivery. But the results tell a different story. Checkers appears to be winning against Woolies, though independent objective analysis is difficult to come by.”

Checkers Sixty60: the market leader

Sixty60, operated by Shoprite Holdings, stands out as SA’s most successful on-demand grocery delivery service. Over the past year, Sixty60 saw sales climb by 58%, despite a notable drop from the previous year’s growth of 81%. The fall reflects a normalisation trend as the initial surge in demand for online services levels off.

Its robust performance has bolstered overall sales at its physical Checkers and Checkers Hyper stores, which reported growth of 12%.

Gilmour attributed Sixty60’s success to Shoprite’s innovative business model. He said Shoprite had effectively minimised logistical costs by using its extensive network of branches as micro fulfilment centres.

The strategic partnership with logistics company RTT had also enhanced efficiency. This model had resonated well with consumers, who frequently cited Sixty60 as the most reliable home delivery service, he said.

Pick n Pay: A promising contender

For the financial year to end-February, the group reported overall online sales growth of 74.4%, driven primarily by a 102.3% increase in on-demand platform Pick n Pay asap! and a collaboration with Mr D on Takealot.

Pick n Pay asap! was relaunched in October 2023 with enhanced functionalities, including artificial intelligence (AI)-driven search and personalisation features, and has since shown substantial improvements in delivery times and overall customer experience.

Despite these improvements, Pick n Pay faced numerous other operational challenges that may “sideline” its home delivery efforts, according to Gilmour.

With its scalable, cloud-based infrastructure and significant investments in store operations and logistics, Pick n Pay was poised for continued growth in this segment.

“Pick n Pay’s involvement with Mr D is still relatively new and by all accounts is going reasonably well. But PnP has got so many other things to worry about at this point in time that home delivery tends to get sidelined,” Gilmour said.

The overall online food delivery market revenue in SA is projected to reach $2.4bn (R43.68bn) in 2024, with expected annual growth of 8.45% between 2024 and 2029.

The grocery delivery segment is expected to show revenue growth of 15.4% in 2025, highlighting its significance in the broader industry.

“The bottom line is that Checkers is in a different league to the other players right now and that situation doesn’t appear likely to change any time soon,” Gilmour said.

goban@businesslive.co.za