Latest apps promise fast service but can they deliver?
NEW YORK » When Mahlet Berhanemeskel gets back to her home from her 90-minute commute, she doesn’t feel like cooking. Instead she orders food like BLTs, Cheez-Its and cookies from an app called Gorillas. It’s affordable and takes 10 minutes.
“It’s instant gratification,” she said.
Gorillas is one of several companies that venture capitalists have poured billions into in the latest pandemic delivery craze: companies that promise to get you a bottle of Tylenol, an iced coffee, hummus, a cucumber or a roll of paper towels in 30 minutes — or even 15 minutes — or less. Experts say they are unprofitable. Bigger companies are nonetheless muscling in. Officials in European cities and in New York, which has become the launching pad, have already started complaining about how they operate, saying it’s bad for employees and residents.
“The problem I see is that quick commerce players, despite the huge valuations enjoyed and the seemingly unstoppable money flow that they get to grow, at some point they will have to find a path to profitability,” said Bain partner Marc-Andre Kamel, the co-author of a recent report on the online grocery market.
Services are already shutting down. One, 1520, closed in late December, and two more, Buyk and Fridge No More, shut down in March, apparently having run out of money. Buyk’s Russian founders reportedly were not able to provide money due to restrictions put in place during the Ukraine war. Fridge No More, in a tweet, said it was closing after two years “due to growing competition and other industry related issues.”
Other delivery companies are having growing pains. Gorillas dropped its “10 minutes” delivery promise from its U.S. marketing — now it’s just “in minutes.” Gopuff recently laid off 3% of its workforce — more than 400 people.
It’s not a sustainable business model, says Len Sherman, an adjunct professor at Columbia University’s business school. “There is going to be a lot of consolidation on some very painful terms.”