During the pandemic a new rapid delivery service came out of stealth mode seemingly every week. GoPuff, Jokr, 1520, Gorilla, Getir are all new startups offering delivery of convenience store goods to NYC residents. Even traditional delivery incumbents, like DoorDash and UberEats have entered the crowded market.
These startups aren’t competing in the traditional restaurant delivery space; instead they promise rapid delivery of convenience store goods. Think a replacement for a bodega run — toiletries, eggs, snacks, drinks. But what sets them apart? And what happens to the market in the long-run?
First off, how do these rapid delivery startups get you goods so quickly? They operate Dark Stores, mini warehouses that are stocked with all the possible items, strategically placed around the city. At first glance, they look just like an ordinary grocery store, but customers are not permitted inside, there’s no price tags, and there’s no check-out registers.
Product Differentiation, is there any?
Spoiler: Not really.
To test this, I downloaded three of the most popular rapid delivery apps, Getir, Gorillas and Jokr. All of the apps have similar user experiences and inventory availability.
All the apps have similar delivery fees, somewhere around $20 minimum + 2.49 delivery.
Not all the delivery apps operate everywhere, likely due to Dark Store placements. This might be a short-term competitive advantage, but will likely be eliminated once competitors enter.
So what is it that makes these products different? For now, it’s almost exclusively delivery time — each of these apps has the anticipated delivery time prominently displayed, with some times as low as 14 minutes. Pretty crazy that I can get things delivered to me faster than if I were to go in-person myself to the local store.
But is this all really sustainable?
The biggest challenge with all of these rapid delivery startups is scalability. Just like we saw with Uber/Lyft and Doordash/Ubereats/Grubhub, how do these companies continue to provide faster, better, cheaper services whilst fending off competition and still growing? The short-term answer is to take on massive losses to keep prices low — in a perfectly competitive market, consumers will flock to the cheapest option. These rapid delivery startups have taken on massive amounts of funding to keep operations running, with Getir recently closing a huge $800M round that values it at $12B.
What happens though when your customer base grows faster than you can scale? When there are so many customers but not enough drivers and locations to fulfil the 10 minutes or less delivery promise? Well it’s not good.
Driver conditions suffer, consumers don’t get deliveries in time and labor strikes persist. These companies must find a way to differentiate themselves amongst consumers, otherwise its a race to attrition — whoever is the last one standing will be the winner.
