The Rapid Downfall of Rapid Delivery Startups
The rise of Jokr from a startup to a $430 million dollar company only took eight months. Starting in New York, it quickly expanded its operations around the world. Come 2021, the company was taking huge losses, which led to the closure of its operations in the US and the laying off of about 50 of its US employees.
The rapid rise and subsequent fall of Jokr is not an isolated phenomenon. The two largest delivery companies, Gorillas and Getir, also closed their operations in major cities in May. Gopuff is another delivery company that contracted this year, closing 76 of its 500 distribution centers. Delivery companies that have already gone bankrupt include Buyk, Fridge No More, and Zero Grocery.
Data shows that online grocery shopping increased 50 percent in 2020. So, the reason for the closure of delivery companies is not a drop in demand, but bad economics. According to a McKinsey report, a brick-and-mortar store makes a profit of about 4 percent from in-store shoppers but loses 13 percent on an online sale. Delivery companies have yet to find an agile model that is cost-effective and results in profit. As of now, the storage, transportation, and packaging cost are too high for most delivery service models to be financially viable.