Filed Under: Tech

Hunger games: Ultra-fast delivery startups race to be last one standing

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With a multi-billion-dollar industry up for grabs, ultra-fast delivery wars are breaking out on city streets. But it’s expensive getting into these hunger games, and U.S. companies have yet to deliver profits.

The industry is full of casualties, like New-York-based startup 1520, which didn’t even last a year, shutting down at the end of 2021. In early March 2022, two more ultra-fast delivery startups, Fridge No More and Buyk, folded in the same week. Together, March layoffs totaled nearly 1,500 people.

Even the surviving companies are far from thriving, like JOKR, which spends $80 to fulfill a $10 order. Still, venture capitalists, investors and even celebrities are betting millions on these ventures. Pop star Selena Gomez invested in Gopuff in late 2021.

“The problem is that these players have raised a lot of money with high expectations and then scaled way too quickly,” said Matt Newberg, the founder of HNGRY, a subscription service exploring how tech shapes the way people eat.

“It’s going to be kind of a ‘survival of the fittest’ to see who can build the best tech, to reduce their food waste, to build the best inventory picking system, to acquire customers the most efficiently,” Newberg added. “There’s so many different things that have to go right to make this work.”

How ultra-fast delivery works

Companies curate and warehouse a small selection of goods from major suppliers using so-called ‘dark stores’ as mini-fulfillment centers. These closed-to-the-public retail spaces are centrally located, so when someone places an order through the app for bananas, avocados or toothpaste, a courier can quickly bike or scoot items to its destination.

While players like Gorillas, Gopuff and JOKR are now aggressively peddling goods in the U.S., for the last few years, a well-funded pack of international trailblazers have been doing the legwork. Getir out of Turkey, Russia’s Samokat and Germany-based Delivery Hero are all ahead in the race for profitability, once they temper the ‘scale-at-all-costs’ strategy.

New firms jockeying for a seat at the table are frantically one-upping each other with sign-up promotions, discounts and delivery speed, trying to ensure survival and make investors whole.

“I think that the 15-minute promise was just more of a marketing play to get people to try the app,” Newberg said. “So it’s like, not only are we going to give you $20, $25 to just order whatever you want, we’ll give it to you in unprecedented speed.”

Survival of the fittest

In an overcrowded field of companies starving for profits, the payoff comes with being among the last ones standing. And while rapid delivery is rampant in big cities, Newberg said it’s only a matter of time before emerging markets see the swell.

“I’m bullish that it’s going to spread throughout the country, it already has, but I’m not so bullish on the idea that it’s all going to be done on scooters,” he said.

As if there weren’t already enough players, traditional giants like Kroger are in test mode and Instacart and DoorDash are also entering the race.

The resistance

In New York, local grocers and politicians are already starting to fight back against ultra-fast delivery startups, blaming them for ruining the neighborhood and threatening the survival of local convenience stores.

“We cannot let these venture-capital-backed companies operate at a loss, undermining what makes our neighborhood so great,” New York City council member Lincoln Reslter said at a January rally outside of Stop 1 Deli on Manhattan’s Lower East Side. The local establishment is situated right across the street from a Gopuff dark store.

SIMONE DEL ROSARIO: ON DEMAND DELIVERY IS IN DEMAND – AND ULTRA-FAST DELIVERY WARS ARE BREAKING OUT ON CITY STREETS.

WITH A MULTI-BILLION DOLLAR INDUSTRY UP FOR GRABS – A BARRAGE OF BIKERS ARE ZIPPING AROUND TOWN – DELIVERING EMERGENCY AVOCADOS AND BANANAS TO BUSY URBANITES IN JUST 15 MINUTES. 

BUT IT’S EXPENSIVE GETTING INTO THIS GAME – AND U-S COMPANIES HAVE YET TO DELIVER PROFITS.

TAKE UPSTART JOKR. FOR EVERY 10 DOLLAR ORDER, IT COST THE COMPANY 80 BUCKS TO CARRY IT OUT.  

AND NEW YORK-BASED STARTUP 1520 – THEY DIDN’T EVEN LAST A YEAR, FOLDING THE END OF 2021.

SO WHY THEN ARE VENTURE CAPITALISTS, INVESTORS, EVEN POP STARS, WILLING TO BET TENS OF MILLIONS ON ULTRA-FAST DELIVERY? 

MATT NEWBERG: the problem is that these players have raised a lot of money with high expectations and it’s scaled way too quickly. And are now really feeling that the pain of that.

SIMONE DEL ROSARIO: MATT NEWBERG FOUNDED HNGRY, A SUBSCRIPTION SERVICE EXPLORING HOW TECH SHAPES THE WAY PEOPLE EAT.  

MATT NEWBERG: it’s going to be, you know, kind of a survival of the fittest to see who can build the best tech to reduce their food waste, to build the best inventory picking system to acquire customers the most efficiently. There’s so many different things that have to go right to make this work. 

SIMONE DEL ROSARIO: SO HOW DOES ULTRA FAST DELIVERY WORK? COMPANIES CURATE AND WAREHOUSE A SMALL SELECTION OF GOODS FROM MAJOR SUPPLIERS USING SO-CALLED DARK STORES AS MINI-FULFILLMENT CENTERS.  THESE CLOSED-TO-THE-PUBLIC RETAIL SPACES ARE CENTRALLY LOCATED SO WHEN SOMEONE PLACES AN ORDER THROUGH THE APP, A COURIER CAN QUICKLY BIKE OR SCOOT THE ITEMS TO ITS DESTINATION. 

WHILE PLAYERS LIKE GORILLAS, GOPUFF AND JOKR ARE NOW AGGRESSIVELY *PEDDLING THEIR GOODS IN THE U.S. – FOR THE LAST FEW YEARS A WELL-FUNDED PACK OF INTERNATIONAL TRAILBLAZERS HAVE BEEN DOING THE LEGWORK, LIKE GETIR OUT OF TURKEY, RUSSIA’S SAMOKAT AND GERMAN-BASED DELIVERY HERO…ALL AHEAD IN THE RACE FOR PROFITABILITY – ONCE THEY TEMPER THE “SCALE AT ALL COSTS” STRATEGY. 

AND GROWING THEY ARE –  LEASING MORE STORES, BUYING MORE PRODUCT, HIRING STAFF AND PROMOTING…BEFORE THEY BURN THROUGH ALL THE CASH. 

NEW FIRMS JOCKEYING FOR A SEAT AT THE TABLE ARE FRANTICALLY ONE-UPPING EACH OTHER WITH SIGN-UP PROMOTIONS, DISCOUNTS AND DELIVERY SPEED…TO ENSURE THEIR SURVIVAL – AND MAKE THEIR INVESTORS WHOLE. 

MATT NEWBERG: I think that the 15 Minute promise was just more of a marketing play to get people to try the app. So it’s like, not only are we going to give you $20, $25 to just order whatever you want, we’ll give it to you in unprecedented speed.

SIMONE DEL ROSARIO: IN AN OVERCROWDED FIELD OF COMPANIES STARVING FOR PROFITS, THE PAYOFF COMES WITH BEING AMONG THE LAST ONES STANDING.

AND WHILE RAPID DELIVERY IS RAMPANT IN BIG CITIES – NEWBERG SAYS IT’S ONLY A MATTER OF TIME BEFORE EMERGING MARKETS SEE THE SWELL. 

MATT NEWBERG: I’m bullish that it’s going to spread throughout the country it already has, but I’m not so bullish on the idea that it’s all going to be done on scooters.

SIMONE DEL ROSARIO: WOULD YOU USE ULTRA-FAST DELIVERY? LET ME KNOW IN THE COMMENTS.

 

With a multi-billion-dollar industry up for grabs, ultra-fast delivery wars are breaking out on city streets. But it’s expensive getting into these hunger games, and U.S. companies have yet to deliver profits.

The industry is full of casualties, like New-York-based startup 1520, which didn’t even last a year, shutting down at the end of 2021. In early March 2022, two more ultra-fast delivery startups, Fridge No More and Buyk, folded in the same week. Together, March layoffs totaled nearly 1,500 people.

Even the surviving companies are far from thriving, like JOKR, which spends $80 to fulfill a $10 order. Still, venture capitalists, investors and even celebrities are betting millions on these ventures. Pop star Selena Gomez invested in Gopuff in late 2021.

“The problem is that these players have raised a lot of money with high expectations and then scaled way too quickly,” said Matt Newberg, the founder of HNGRY, a subscription service exploring how tech shapes the way people eat.

“It’s going to be kind of a ‘survival of the fittest’ to see who can build the best tech, to reduce their food waste, to build the best inventory picking system, to acquire customers the most efficiently,” Newberg added. “There’s so many different things that have to go right to make this work.”

How ultra-fast delivery works

Companies curate and warehouse a small selection of goods from major suppliers using so-called ‘dark stores’ as mini-fulfillment centers. These closed-to-the-public retail spaces are centrally located, so when someone places an order through the app for bananas, avocados or toothpaste, a courier can quickly bike or scoot items to its destination.

While players like Gorillas, Gopuff and JOKR are now aggressively peddling goods in the U.S., for the last few years, a well-funded pack of international trailblazers have been doing the legwork. Getir out of Turkey, Russia’s Samokat and Germany-based Delivery Hero are all ahead in the race for profitability, once they temper the ‘scale-at-all-costs’ strategy.

New firms jockeying for a seat at the table are frantically one-upping each other with sign-up promotions, discounts and delivery speed, trying to ensure survival and make investors whole.

“I think that the 15-minute promise was just more of a marketing play to get people to try the app,” Newberg said. “So it’s like, not only are we going to give you $20, $25 to just order whatever you want, we’ll give it to you in unprecedented speed.”

Survival of the fittest

In an overcrowded field of companies starving for profits, the payoff comes with being among the last ones standing. And while rapid delivery is rampant in big cities, Newberg said it’s only a matter of time before emerging markets see the swell.

“I’m bullish that it’s going to spread throughout the country, it already has, but I’m not so bullish on the idea that it’s all going to be done on scooters,” he said.

As if there weren’t already enough players, traditional giants like Kroger are in test mode and Instacart and DoorDash are also entering the race.

The resistance

In New York, local grocers and politicians are already starting to fight back against ultra-fast delivery startups, blaming them for ruining the neighborhood and threatening the survival of local convenience stores.

“We cannot let these venture-capital-backed companies operate at a loss, undermining what makes our neighborhood so great,” New York City council member Lincoln Reslter said at a January rally outside of Stop 1 Deli on Manhattan’s Lower East Side. The local establishment is situated right across the street from a Gopuff dark store.

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