Losses Mount for Startups Racing To Deliver Groceries Fast and Cheap

A venture capital-backed battle is raging in New York City in the burgeoning field of instant delivery. From a report: At least six startups, including Gorillas, Jokr SARL, Getir Perakende Lojistik and Buyk, are vying to win the chance to ferry groceries to customers within 10 to 20 minutes of their order placement on an app. Prices are similar to grocery stores, discounts are plentiful, and many services don't have a fee or minimum order, allowing consumers to request a single pint of Ben & Jerry's delivered to their doorstep. Food-delivery app DoorDash, based in San Francisco, also recently entered the fray in New York City. While these consumer-friendly offerings have brought surging sales, losses are heavy given the high cost of prolific advertising and paying couriers to hand-deliver potato chips, soap and eggs in a short time frame, industry investors and executives said. Some of the companies are averaging a loss of over $20 per order when factoring in costs like advertising, those people said. "The economics are brutal," said Damir Becirovic, a principal at venture-capital firm Index Ventures, which hasn't invested in any of the startups. He added that if any of the companies can build a giant business with efficiencies from scale, that picture could change, but the short-term challenges seem daunting. Take for example Fridge No More, a New York-based company that launched in 2020. As of September, its average order value was $33, according to a 2021 investor presentation viewed by The Wall Street Journal. After paying for the products, the people packaging them, delivery riders, waste and other expenses related to storage, it lost $3.30 on every order. That doesn't include marketing costs. Fridge No More spent $70 on advertising to win the average customer, an investment that resulted in a $78 loss for every customer that stayed in the 10 months through September, according to the presentation.

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