Quick commerce pushes the limits on grocery delivery

| Podcast

In this episode of the McKinsey on Start-ups podcast, McKinsey executive editor Daniel Eisenberg speaks with Berker Yağci, a top executive at Getir, a leading provider of ultrafast food delivery, or quick commerce. An edited transcript of their conversation, which took place earlier this year, follows. To hear more episodes of McKinsey on Start-ups, subscribe on Apple, Audible, Google Podcasts, Spotify, or Stitcher.

Daniel Eisenberg: Hello and welcome to McKinsey on Startups, I’m Daniel Eisenberg. It is no secret that e-commerce has exploded in recent years. In particular, the pandemic has fueled a massive boom in the food delivery sector. But it isn’t just the sheer volume of orders that is growing at an increasingly fast pace. The speed with which deliveries of groceries, or any number of household products, can arrive at your door has really taken off over the last couple of years, going from previous delivery times of an hour or 30 minutes to the new promise of 10 or 15 minutes. Though many of these so-called quick or q commerce ventures providing this ultrafast delivery were actually launched prior to the pandemic, they have really started to hit their stride more recently, as they expand from their home markets to points across Europe, Asia and most recently the US.

Joining us today is a top executive at one of the leading start-ups in this space, Berker Yagci, of Getir. Based in Istanbul, Turkey, Getir offers more than 2,000 everyday items across Turkey, the United Kingdom, France, Germany, the Netherlands, Italy, Spain, Portugal, and the United States. It was founded back in 2015 by the company’s CEO Nazim Salur, along with Serkan Borancili and Tuncay Tutek. To this point, Getir has raised close to $2 billion in several rounds, and was most recently valued at just under $12 billion. Berker, who spent several years as a consultant at McKinsey before entering the start-up world, joined Getir more than two years ago. He has served as its chief expansion officer and now oversees all operations in Europe as the company’s regional manager there.

Welcome to the podcast, Berker. Thanks so much for joining us today.

Berker Yağci: Thank you for having me.

Daniel Eisenberg: Tell us about Getir and your own journey as an entrepreneur within the company.

Berker Yağci: Getir is the pioneer of ultra-fast delivery in groceries. We started seven years ago with a very simple and strong idea: how can we provide the ultimate convenience to our customers in one of the largest industries in the world while serving the customer in the best way? The company developed the dark store model and perfected it over time. We began in Istanbul in Turkey, and last year started our international expansion.

Today we’re in nine countries including the US, UK, Germany, and France delivering hundreds of thousands of orders every day. I joined Getir two years ago, leading the Turkish expansion first. I most recently led the European expansion, and now I’m managing the business in Europe.

Daniel Eisenberg: Let’s talk about the background of the retail and grocery industry in Turkey before Getir came onto the stage. What were the pain points? And how is Getir seeking to reinvent that customer experience?

Berker Yağci: It wasn’t very different from anywhere else in the world. You have the traditional retail stores, grocery stores. But in e-grocery and delivery no one had cracked the ideal model to serve customers.

It’s a very difficult industry to ensure margins as well as customer quality and service quality. This was seven years ago, before the pandemic. It was a time when same-day delivery was a luxury in broad retail beyond grocery.

In grocery there were models that had been experimented with, like collecting from the store model, using existing infrastructure. The differentiator with Getir, as I mentioned before, is putting the customers at the center and writing everything else accordingly.

So, what is the ultimate convenience?

There are two elements. One is delivery. Ideally you want to get things fast. There is a moment of purchase and then magically the item appears at your door seconds later. Ten-minute grocery delivery is what we do. Ten minutes is almost now. That’s as close as you can get to the ultimate experience of speed.

The second element is substitutes. In Turkey especially, but in all grocery models around the world, the challenge has been that you order ten things—for example, pasta, drinks, and this and that—but you end up receiving goods that are a different flavor. They don’t have almond, but they have soy milk. That doesn’t exist in offline.

These were the two main pain points that the company addressed, as well as delivery fees. If you want to create that experience, what is the cost to the customer?

What we did was find the best setup. It’s entrenched in the dark store model, which allows you to own the inventory, have control over everything that you’re providing the customer, and do it in a cost-efficient way while also solving the high cost of delivery challenge.

Daniel Eisenberg: How would you define the dark store model?

Berker Yağci: Dark store is not a great term; indeed, we call them g-stores. When a customer orders something, they need it to be efficient. The store needs to be as close to the customer as possible.

We have stores that are hyper-local in the neighborhood, and we stock our inventory based on the needs that consumers have in that neighborhood. A store would be like a mini warehouse, which is optimized with data and all the infrastructure and tech designed around serving consumers in the best way. It’s dedicated to delivery. When a customer opens their app, they only see goods that are available in their neighborhood. This takes inefficiencies out of the system and optimizes everything in order to minimize food waste, improve the customer experience and service levels, as well as optimize on cost, which creates the magic.

Daniel Eisenberg: So, you have the logistics and the other benefits of a warehouse model, but you’re not located far away in a warehouse district where it would be impossible to meet the time demands.

Berker Yağci: We call it the second generation of retail transformation. We started with groceries, but we go beyond that today. I think the future will be beyond groceries. Instead of putting large warehouses outside of the city and trying to solve the last-mile challenge from every perspective, it’s more in line with hyper-localization and the sustainable city. Being close to customers really solves a lot of the logistical challenges in end-to-end retail.

Daniel Eisenberg: When Getir was first introduced in Istanbul and Turkey, how did the investor community look at the value proposition?

Berker Yağci: There was some skepticism. If you go back seven years and think about ten-minute grocery delivery, people would have said, “Oh, I don’t know if you can deliver it that fast” and more importantly, “I don’t know if you can do it logistically.”

That was the reaction from the investor community. Getir went against the norms of the time, which was the sharing economy and marketplaces. Here you have a fully integrated model with stores dedicated to this service, which owns the inventory, and owns the delivery with couriers on the payroll.

This is not like a platform. It was quite revolutionary back in the day, when I believe that investors were looking for lighter capital solutions. So, it was met with a lot of skepticism. There needed to be a few years for the company to prove that the model unlocks a lot of efficiency and a lot of customer satisfaction.

Times have also changed in the sense that younger people have now developed into their professional lives, where the need for ultimate speed and convenience has become more and more relevant. Also, with COVID, the speed of that change accelerated.

Daniel Eisenberg: That’s interesting that you mentioned demographics. Do you think there is a generational push for the whole model of ultra-fast delivery or quick commerce? Is there more appetite for that among younger folks?

Berker Yağci: If you take a step back and think about whether people really need things in ten minutes, I would look at that question in a couple of different ways. Firstly, we call groceries our errands, right? If you want errands done easier and faster versus more difficult and slower, which one would you prefer? Obviously, it has a value. And that is different for different demographics and different groups of people.

Also, there is certainly a demographic shift. If you’re a child that grew up with iPads and everything being at your fingertips, you won’t wait for hours or days for your groceries. There is definitely a hunger for immediate service delivery.

There is also another question around whether customers actually need things in ten minutes or not. Some customers do, and some customers don’t. If you’re able to serve groceries in ten minutes, with items having a very short shelf-life and low margins, then you’re designing everything from your physical infrastructure, your technology, data, and your team and mindset culture, to the way you operate around that ultimate experience. This gives a lot of power to the company. They can deliver everything, anywhere, at the pace and with the value and cost optimization that any customer wants.

So, aside from whether everyone in the future will want items in ten minutes or not, which I believe a lot of people will, we already have that ability to serve. This opens up a lot of possibilities for additional efficiencies or productivity in other areas, demographics, and service channels.

Daniel Eisenberg: Another player in this is retail partners. How was Getir initially viewed by retail partners in Turkey, and how has that relationship evolved? Are there opportunities to partner and for them to thrive in this new model?

Berker Yağci: Initially it was considered a niche or luxury service, but more and more we observed that retailers are realizing that this is an inflection point for the industry and the future of how people consume. They are experimenting and looking into the model and partnering up with different players. There are certainly opportunities for these companies to reinvent themselves. But if you have a certain infrastructure, designed and optimized around a certain way of thinking and everything else behind it—your logistics, your buying, your assortment logic, your pricing, even branding—shifting from that to a really different logic of service is a difficult transformation for many players.

Daniel Eisenberg: Traditionally the grocery business can be very low margins. What we’ve heard about the ultra-fast delivery, the Q-commerce model, is that cracking the code on unit economics is the most meaningful challenge, and the key to success. Has balancing the growth and profitability imperatives been something that Getir thought about as it has grown?

Berker Yağci: It’s a difficult industry to execute, and there are thousands of details that you need to get right at the same time to make it work.

Once you start going at scale you realize there are different challenges but also different opportunities. It is a low-margin industry. If you put delivery on top of an existing unit economic structure, or cost base, then it becomes even more challenging.

What we have done is rethink the whole industry. We don’t have existing supermarkets; we don’t have existing large square meters on the high street. There is an end-to-end system that’s optimized with technology and data. We cannot execute this business just by being good at operations or logistics. Having the technology and data infrastructure at the center is crucial. It’s really important to understand, and maybe inspiring for other industries, how we went back and re-thought the basic assumptions of the industry.

Yes, delivery is a cost to optimize and manage. But the model has a lot of redundancies because of the frictions in an existing retail grocery business with waste, with forecasting inaccuracies on how to plan and serve products, how you create your assortments.

We focus on everyday needs, and the most important goods that consumers rely on most often.

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Daniel Eisenberg: What operational challenges did Getir experience in the early days?

Berker Yağci: This is a people business. We want to become a major force in the industry by being good people. That is at the center of what we do at Getir, and how we define our culture.

It’s about putting the safety of our couriers first and investing in training and quality. This resonates with the consumers. It unlocks a lot of efficiency and people actually own their business and own their work.

Daniel Eisenberg: It sounds like it’s moving away from the traditional gig economy approach. Is it fair to say that you take a longer-term view of their role within the company?

Berker Yağci: That’s fair to say. We designed the whole delivery experience around putting people at the center. When we open a store, for example, the first thing that we do, even before the design of the inner area, is to create the space for our riders and couriers to relax and take their breaks while they’re not delivering. We also provide the highest standard of safety on our fleet and protective equipment. Starting from there and building the model around it has had a lot of value around the longer-term engagement with our workforce and members of the team.

Of course, some people seek more flexibility, and we welcome different setups. But the idea is that we ensure the safety and wellbeing of our riders and couriers.

Daniel Eisenberg: Let’s move to talk a little bit about the internationalization success Getir has had moving beyond Turkey into Europe. I know you’re also moving into parts of the US as well. This is a topic that’s of importance to so many entrepreneurs and something that is often a major challenge as they try to move beyond their home market. At what point in the Getir journey did the company begin to consider international expansion? What were the specific triggers that fueled that decision?

Berker Yağci: The idea was to go global from the first day. The infrastructure and the business model was perfected over time with the objective of establishing and pioneering this model globally. We have a different mindset in the sense that we want to disrupt this industry and we believe there is a better way to do it. So why not start with the biggest potential and where the ultimate customer experience and customer expectation would be, which is Europe and the US?

Our first market outside of Turkey was the UK at the beginning of last year. Then came other markets, including the US with Chicago, New York, and Boston in the last couple months.

There have been inflection points obviously, with the investment cycles and having the resources to launch in a good way, learn about the business itself and find the perfect market fit. So, the company took some time before going global. But once we started it was a very fast expansion journey. We’re now in nine countries.

Daniel Eisenberg: That’s a huge undertaking, moving into that many markets in a year with such a logistics-heavy, complicated operations business. When you’re selecting which market to enter next, how does the company weigh and prioritize the different criteria?

Berker Yağci: It’s more about the vision than prioritization. Our vision is to lead the industry’s transformation. To be at the forefront of it globally, you need to do business in the biggest markets. That becomes the main criteria. Obviously, you have major markets like China and India, but we went where we believe we know the markets better, like Europe and the US.

Daniel Eisenberg: So, moving to the UK seemed natural.

Berker Yağci: The UK was the first market. We looked at things like how much consumers are already inclined to do online grocery, what are the alternatives? What are the current solutions people using? What is the level of service provided? If you put all of that together the UK was a very natural choice to begin with and has gone quite successfully. That encouraged us to accelerate and move very fast in other markets.

Daniel Eisenberg: How much competition have you faced from traditional grocery, or other e-delivery players, in these new markets?

Berker Yağci: From a certain angle it looks like a hyper-competitive industry right now, especially in the last two years, with a lot of new players popping up around the world. I believe it’s not just about the competition but more about consumer transformation.

This is like the founding story of a new industry. For us, it’s been about finding the nuances of product market fit, what consumers expect from ultra-fast delivery in each country.

Food by nature has national boundaries across brands, and consumption habits are different. What we do is invest in local capabilities and local organization. We keep our scalable solutions and bring our learning and DNA from our core market to global markets. In a way we recreate Getir in every new market again and again.

Daniel Eisenberg: As the company gets bigger and moves into different markets and geographies, how much of a challenge is maintaining quality standards?

Berker Yağci: Going from a few hundred orders a day to thousands or hundreds of thousands has been the biggest challenge. Globalization hasn’t challenged us that much because the scale up challenged us, and we learned a lot. Starting early in this industry has given us that experience and competitive advantage quite a bit.

Daniel Eisenberg: Getir is one of the first technology start-ups out of Turkey to expand internationally at this kind of pace and scale. Have there been any challenges in that?

Berker Yağci: If you want to be a global company it doesn’t really matter where you come from. It’s very much appreciated now in the investor community, or entrepreneurial community, that innovation can come from anywhere. It’s democratic. Of course, there are enablers or barriers that you face coming through a certain culture, or access to capital can be more difficult in certain markets. The most important thing is your vision and your belief in the business.

Daniel Eisenberg: How important are sustainability considerations and carbon footprint for a company like Getir?

Berker Yağci: It’s very central to how we do things. We use electric bikes and e-scooters for our delivery in Europe and the US, but also, all the logistics are really critical.

Beyond that, the most important thing about how we approach it are the opportunities it creates for the circular economy. It’s a new way of bringing goods to the consumers. Instead of shopping out of fear that you will run out of something at home, having access and convenience optimized through data and technology allows consumers to minimize food waste, and rethink how they stock their fridge and kitchen. So instead of a supply-driven industry it becomes more optimized around the last moment of consumption. There’s major potential to rethink how our food value chains and supply chains are organized.

The value chain is invisible to most of us in daily life, but it has a major part to play. So does the use of space within city centers. If you optimize your use of space within city centers, that has the power to change the way that neighborhoods organize space. So, we are already considering and working on the impact of a broader sustainability agenda.

Daniel Eisenberg: Given the scale of the expansion that’s underway, what keeps you up at night with respect to the Getir journey and also day-to-day execution?

Berker Yağci: One is the pickle of any hyper-growth players that are going global, which is, our people and culture. How do we stay true to our founding story and that initial vision? And how do we create that across our offices around the world, using our learnings and keeping standards while still keeping it agile? Day to day, the most important thing is bringing the best talent into the company. It’s the most important thing to enable everything else.

Daniel Eisenberg: How do you see the ultra-fast grocery industry playing out over the next five to ten years?

Berker Yağci: The most important thing is that we lead the industry towards its true potential.

We already do food delivery and run multiple businesses in Turkey, where we initially started, beyond groceries. There’ll be a convergence of different models in retail and food, and we will be at the forefront of that transformation.

As ultra-fast grocery becomes more and more mainstream and captures a major share within total consumption in our current markets, but also beyond current markets globally, that’s one of the focuses we have. How do we bring the same logic, innovation, and spirit into other services and other industries beyond groceries?

Daniel Eisenberg: As you say, Getir offers a much broader range than just groceries. How far can you go along that continuum of products?

Berker Yağci: That’s down to what the consumer demands. Patterns will be defined with the demographic shift, as well as by us and other players becoming better and better, using data and technology. What that enables for us and how far the boundaries of the on-demand economy and ultra-fast will go, that’s what we are looking forward to exploring.

Daniel Eisenberg: You’re an alum of McKinsey. How has your McKinsey experience shaped your approach to working at start-ups?

Berker Yağci: Typically, there’s some skepticism around how relevant consulting is for entrepreneurship. What I learned is that facing new problems again and again and problem solving them every time, in a dynamic way and at a very high pace, is very relevant. I brought that from my experience with McKinsey into my journey in the entrepreneurial world. It’s helping me a lot every day.

Daniel Eisenberg: Berker, it’s been great to hear about Getir and its incredible growth. Thanks a lot for joining us today.

Berker Yağci: Thank you, Daniel.

Daniel Eisenberg: As always, I want to thank our McKinsey on Start-ups production team: Molly Karlan, Polly Noah, Sid Ramtri, and Myron Shurgan. And finally, thank you for listening. We hope you’ll join us again for McKinsey on Start-ups.

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