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Ultra-fast grocery delivery company Ninja’s head of product Gonzalo Graham checks a shelf at the company’s ghost store operation in Toronto on March 29.Frank Gunn/The Canadian Press

As competition begins to heat up in Canada among grocery e-commerce providers, Toronto-based service Buggy has struck a deal to buy 10-minute delivery startup Ninja Delivery.

Waterloo, Ont.-based Ninja, which operated out of two locations in Toronto and one in its home city before the deal, is among a growing number of companies promising ultraquick grocery delivery – sometimes in as little as 10 to 15 minutes. Inabuggy Inc. (which recently rebranded its consumer-facing service as Buggy) has been around since 2014, operating an Instacart-like grocery delivery service that sends gig-worker drivers to existing stores such as Costco, Metro and the LCBO to fill online orders.

After a recent leadership change, Buggy is joining the ranks of competitors looking to offer faster services while maintaining that existing business, and the Ninja acquisition is part of that, chief executive Nicole Verkindt said in an interview. Terms of the deal were not disclosed.

While such services have grown in popularity in other markets such as major U.S. and European cities, many of those players – including Gopuff, Getir, Jokr and Gorillas – have yet to launch in Canada. Here, large grocers offer e-commerce, but typically require customers to book pickup or delivery slots hours or sometimes a day in advance. (Some partner with third-party services such as Cornershop and Instacart to offer faster options.)

Meanwhile, a number of companies are vying for Canadian customers who want faster orders, such as Tiggy, Montreal meal kit-delivery service GoodFood, Ninja and now Buggy.

“It’s still really early days in Canada,” Ms. Verkindt said. “I think we’re going to see more consolidation of the smaller players, because it is a capital-intensive endeavour.”

These services typically work by building “dark stores” – storefront-type locations not open to the public, which function as mini-warehouses – that deliver to customers within a fairly small radius. By stocking their own inventory rather than shopping other retailers’ stores, the markups are not as steep. Restaurant-delivery players such as DoorDash and SkipTheDishes have been building dark stores in Canada to expand their grocery offerings.

The demand for grocery e-commerce has grown during the COVID-19 pandemic, but in an inflationary environment, shoppers could scale back on such services if they are perceived as too costly.

There are signs things are holding steady for now. The level of online grocery orders has remained consistent in recent months, according to regular surveys of about 1,500 Canadians that Dalhousie University’s Agri-food Analytics Lab conducted with research firm Angus Reid. Roughly 21 per cent of those surveyed in early June reported having ordered groceries online – half for delivery and the rest for click-and-collect pickup which was similar to the number who reported the same in March, April and May surveys, and down only slightly from the 23 per cent who reported doing so in February.

But there is still significant uncertainty about how profitable rapid-delivery services can become, since many offer zero or extremely low delivery fees. Buggy plans to charge a $2.99 delivery fee for its service. As they have expanded quickly, similar companies in the U.S. have gone out of business, while Gopuff and Getir both recently laid off hundreds of workers.

“The big key is we’re going to be doing this responsibly,” Ms. Verkindt said. “I’m actually really happy with our timing, that this wasn’t a year ago when the whole tech environment was different, and investors were kind of pushing for growth at all costs.”

Before the acquisition, Ninja operated one dark store in Waterloo and two more in Toronto, but ahead of the deal the company stopped taking orders and laid off staff. Buggy has now acquired Ninja’s assets, though it will not reopen those locations.

Instead, Buggy plans to open its first location in Toronto’s Leslieville neighbourhood next month, followed by two additional locations in August and September. The company has raised $6.7-million to date to fuel its expansion, including a $4.6-million round completed in May with a number of private investors. Entrepreneur and Dragon’s Den star Michele Romanow is among them.

Buggy has now acquired Ninja’s assets, and will be advertising to the company’s customers – the top 10 per cent were ordering from Ninja more than once a week. Buggy will also adopt Ninja’s model of employing its own e-bike riders for deliveries within a five-kilometre radius. It plans to hire back some Ninja staff who were let go, Ms. Verkindt said. Existing gig workers who act as Buggy drivers could also supplement some orders, she said.

“As soon as Amazon started promising next-day delivery with Prime, so many people changed their behaviour, myself included. Now there are all of these consumers that have a new expectation for products that they can receive at low prices – not hugely inflated – in 15, 20, 30 minutes,” Ms. Verkindt said. “I think next-day is going to feel archaic at some point, which is kind of a crazy thought.”

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