During the epidemic, delivery startups — whether focused on groceries, essentials or takeaways — have become VC darlings. Early on, mandates and closures created barriers to brick-and-mortar shopping, but over time customers have grown accustomed to the idea of buying everything from toilet paper to roast chicken online.in 2021 polls Nearly two-thirds of U.S. consumers (60%) say they buy groceries online, up from 36.8% in 2019, according to Coresight Research.
old courier company and new reward The benefits of a changing landscape. In 2020, orders increased by 500%, bringing Instacart’s revenue to $1.5 billion — absorb $1 billion in capital in 2021 at a $39 billion valuation. On-demand grocery delivery startup Groillas caught $290 million, with a valuation of $1 billion in the same year. In a matter of months, Berlin-based instant grocery startup Flink guaranteed $750 billion, with a post-money valuation of $2.85 billion, while U.S.-based rival Gopuff, improve A $15 billion valuation, a $1 billion valuation.
according to a Report Data from AgFunder shows that 2021 total venture capital investment in “e-grocery” companies will reach $18.5 billion. From 2020 to 2022, investor A separate analysis shows that just-in-time delivery companies in New York City alone have invested more than $5.5 billion established.
The boom continues into early 2022, with startups such as Gettier, Zappand Zepto Improves Mammoth turns. But there are signs of a correction. Instacart, citing “market volatility” last month slash 40% of the valuation, Hiring slows. Publicly traded door punch and Delivery Their share price has been volatile over the past year. (DoorDash implement $400 million share repurchase program in May. ) gorilla, Gettier, Zappand Gopf is one of other delivery startups to lay off employees in recent months despite raising capital.Some were forced to close completely, such as refrigerator no longer1520 and Booker.
The delivery department can’t paint with a big brush, necessarily. Taken together, however, developments suggest that the fast-growing pandemic period is coming to an end.
“Some [delivery startups] It’s definitely safe — especially those with positive unit economics,” Matt Birnbaum, former head of talent acquisition at Instacart and now a talent partner at Pear VC, told TechCrunch via email. Spending in growth areas, such as marketing, can be profitable almost immediately. The most dangerous companies are those without a clear path to profitability in the short or medium term. As access to capital has become more restricted, so has the desire to grow at all costs. “
Jeff Fluhr, partner and co-founder of Craft Ventures and former CEO of StubHub, makes no secret of the woes of the delivery market. (Craft Ventures has invested in several delivery startups, including Shef, which enables home cooks to sell their food for takeaway. ) he blamed the “ultra-fast delivery” market — those food, beverage and household items that promise to be delivered in about 30 minutes or less — Due to “very high” labor costs relative to Product and transaction fees.
“The fast-delivery space is the epitome of boom 2021: Investors are pouring money into big-cash companies with fragile business models,” he told TechCrunch in an email interview. “Delivery companies are capital-intensive. They need local infrastructure, local people, and local operations, which are expensive to build. So all these companies have been burning a lot of cash in the last 12 to 24 months. , as they have expanded into new geographic markets. certainly Consumers love to enjoy a pint of ice cream in under 15 minutes, so revenue has grown rapidly, driven by a great consumer experience and word of mouth. Investors followed growth without focusing on earnings potential. But the idea that a startup can deliver on that promise profitably is a pipe dream. “
In Fluhr’s view, even for companies that buy at wholesale prices and sell them at a markup (unlike Instacart and GrubHub, for example, which act as intermediaries between the storefront and the end customer), ultra-fast delivery has sky-high operating costs. clownis a grocery delivery company headquartered in New York. it is said A loss of $13.6 million in 2021 on just $1.7 million worth of sales. Delivery vehicles, along with contract labor, including drivers and those responsible for packing or picking, are a mega-project— low pay and benefits or notThe same goes for the rental storefronts, warehouses, and fulfillment centers that companies like Gorillas run to meet their delivery promises, known as “dark stores,” which create waste such as unsold perishables.
buy claim At its peak, it had about 800 dark stores in 25 cities. Getir has about 1,1000 of them.
Rafael Ilishayev, Co-CEO and Co-founder of Gopuff, Tell CNBC said in May that the company’s business model is predicate In-app advertising about brands and “Making Profits from Products”. But promotion and marketing are eating into those profits. according to For The Wall Street Journal, Fridge No More spent $70 on advertising to win over regular customers, an investment that resulted in a loss of $78 per customer who stayed between December 2020 and September 2021.
Birnbaum also blamed “reckless” hiring. During the pandemic, high-growth couriers have adopted a “must catch it all” approach to recruiting, making headcount decisions with the goal of accumulating as many “assets” as possible, he said. Instacart Add to Hundreds of thousands of gig jobs to meet the surge in demand early in the pandemic – which has since declined.
“When companies look at their balance sheets, they’re concentrating and they no longer have to hire at the pace they’ve been hiring at the past few years; hence the hiring freeze,” he said. “Companies that fail to adjust or don’t have enough runway to support their current headcount will be in a completely different position.”
TechCrunch reached out to a number of delivery companies to inquire about hiring, including DoorDash, Delivery.com, GrubHub, Grab, Deliveroo, Just Eat Takeaway, and Delivery Hero. Several companies declined to comment or did not respond, but respective spokespersons for DoorDash and GrubHub said the companies had not made any adjustments to their hiring plans.
“I think, in general, it depends on the model and whether it works,” Rob Kniaz, a partner at Hoxton Ventures, told TechCrunch by email. Hoxton was an early investor in Deliveroo and recently led a funding round for UK-based next-day delivery startup Both. “Quick Commerce” companies [like Gopuff] They compete on price and speed, and the basket size is smaller, so it’s harder for them to break even.I think this model is for where you can get very high profits and/or deliver goods Fees, but this will never be an everyday low-price model. In my opinion, this is a luxury business. “
Some investigation support Delivery customers are a fickle concept. One of the most pessimistic people at Rensselaer Polytechnic Institute, Suggest More than 90% of people who use online delivery services during the pandemic are likely to revert to their old ways of shopping.
“When the overall market sentiment shifted over the past few months, investors started looking at profitability and cash flow. Investors who once funded this space are now rejecting it, stopping altogether,” Fluhr said. “As these companies faced the reality of not having more free money over the past few months, they realized they needed to consume less, extend the runway, and have more time to figure out a business model with better unit economics. . . Why are we seeing so many layoffs in the fast-delivery space…the layoffs and hiring freezes are really just getting started and could get worse before they get better.”
Pundits say it’s history repeating itself. In the 1990s, California-based Webvan was one of the first quick grocery delivery startups, briefly valued at $7.9 billion before going bankrupt. Rivals Kozmo and Urbanfetch collapsed after losses mounted.
But compounding the challenges delivery startups face today is the broader recession. Inflation continues unabated, pushing up food, rent and transportation costs.supply chain disruption threaten Postponing shipments of goods such as infant formula.Investors are increasingly wary of capital-intensive bets, preferring to put money into commercial software.
“If the unit economics per delivery are negative, the only savior will be at scale, which will reduce costs,” Phil Haslett, co-founder and chief strategy officer at EquityZen, told TechCrunch via email. “Achieving scale requires a lot of capital. In the current market environment, this is a tough sell for venture capital and growth equity investors.”
Consolidation is imminent—in fact, it has already begun.take out only paid GrubHub is $7.3 billion.door punch purchase From Square and nearest competitor food delivery app Caviar sold out Walter trades all stock. 2020, before buying a grocery delivery startup street shop and drizzleUber finally determined get postman.Last year, Gopuff – it had a partnership Partnered with Uber – acquired Fancy and Dija.
Business models are also expected to change. Jokr and Buyk are introducing longer lead times to fulfill more orders per drive. Before its collapse, Fridge No More had been looking to obtain a liquor license and invest in more private-label products for delivery customers. FastAF is a relatively new company in the delivery space, focusing on premium and luxury goods.
“The transfer of the goalposts will bring discipline into the field,” Fluhr said. “Companies need to figure out a model that works or die. Most people will die, but maybe a few will choose a new model that balances the consumer’s value prop with one that actually generates profits .”
Investors say delivery companies can cut losses by raising prices, selling private labels and increasing order sizes for more expensive items like alcohol.Or they can invest in technology such as robot technology fulfillallowing couriers to ship more orders at a time.
“I think these models mirror the market, as businesses with low or negative profit margins will be the first to wade into the water,” Kniaz said. “That said, I think there are other interesting distribution models that are just getting started, similar to riding a motorcycle to 1 They have lower variable costs than people who ship bananas in pounds. We do things like Pill assortment And in a down market where value is both a convenience and a factor, it actually makes sense. “
Jon Carmel, managing partner of MVP and investor in DoorDash and Postmates, added: “When it comes to venture capital, we don’t just evaluate our investments from verticals. We can expect to see some consolidation in this space, some startups Will perform better than other companies. But in the long run, the pandemic has helped change consumer habits. People used to order groceries during the lockdown are now recognizing the importance and financial value of the time they save by not going shopping As for differentiating courier startups, we would focus on courier startups with strong e-commerce and advertising businesses, as well as startups whose infrastructure does not depend on real estate, such as renting out local warehouse space.”
