Bank analysts call them "the emperor's new clothes."
Millennials and folks who otherwise believe themselves too busy to trek to the store might be clamoring for online grocery delivery services, but not HSBC.
HSBC retail analyst David McCarthy and his team are “unconvinced of long-term viability of home deliveries for grocery,” according to a report from Business Insider. What’s more, they call the entire industry the “emperor’s new clothes:”
HSBC also has a “reduce” rating on Ocado [fortune-stock stock, a U.K. online grocery retailers expected to get some fierce competition when Amazon rolls out its grocery delivery service in London.
HSBC’s argument focuses on the premium customers pay for delivery rather than pay less by going to the store themselves—something it’s not convinced is worth the higher price. Two of the U.K.’s fastest-growing grocery retailers are discount chains Aldi and Lidl, which have no online business.
Moreover, according to McCarthy and team, other U.K. retailers like Tesco and Sainsbury’s are engaged in a battle with these discount chains by offering loss-making delivery while charging higher prices in stores.
Silicon Valley investor Bill Gurley has expressed similar views about grocery delivery services like U.S.-based Instacart, describing its business model as “handing out dollars for 85 cents.”
But as Business Insider notes, HSBC doesn’t mention Ocado’s growth, which is right in line with Aldi’s. In 2015, Ocado’s revenue hit £1.1 billion ($1.6 billion), a 17% bump, and its net profit hit £11.8 million ($16.8 million), up 62%.