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

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.