Yandex - Yango Deli Beta-Testing in Paris

While on vacation recently in Paris, our senior analyst, Mikhail Krasnoperov, decided to try out Yandex's Yango Deli, which officially launched on August 25. He also tried out other local express grocery delivery apps. Express delivery barely existed in Paris six months ago, but the market has already become overcrowded, with seven dedicated services launched since then. These providers are pushing for increased customer adoption and trying to cement future market share. As just one of the services is based locally, Paris appears to have become an interesting testing ground for global e-grocery delivery models. The early results of these services in Paris could provide some read-through for the players' global expansion.> The layout of Paris, its logistics infrastructure for bicycles, high population density and high incomes are all well-suited to the express grocery delivery business model. This, coupled with relatively higher prices in local convenience stores than in hypermarkets, suggests better unit economics.> On the demand side, one challenge is the strong support among customers for local produce. Ultra-fresh baked goods are a must. This requires a delicate balance between business scalability, speed of operations and meeting customers' needs.> Off-line competition is high with family-run specialists and boulangeries, though Yango Deli could also disrupt non-chain grocery retailers.> The local express delivery services are offering generous welcome promotions. A Parisian signing up to all the apps and using all the available promotional codes could save EUR100 on their grocery purchases (an amount comparable to monthly food spending per capita). > Yango Deli offers the widest assortment and highest discounts of all the services and is actively advertising offline. We were pleased with our experience with the app and the delivery, though it was still in test mode when we used it. However, other players are also already showing very good execution despite being in the pilot testing stage.> There are no major differentiating factors among the players at this point, in our view. This may not be that important while the services are striving to increase the customer adoption rate and building their market niches, though we think it will be important amid any future grab for market share.