Ultrafast grocers: dash to delivery means consumers ultimately win

The idea of same-day grocery delivery was once considered revolutionary. Then companies such as FreshDirect and Instacart made two hours the norm. A new front has opened up in the delivery arms race: the 15-minute shipment.

Ultrafast delivery service is having a moment. In the US, at least a dozen start-ups — with names such as Buyk and 1520 — promise to deliver everything from a single gallon of milk to a full grocery basket to your door in 15 minutes or less without extra fees.

This sales pitch will appeal to everyone’s inner sloth — and to investors. US instant delivery apps, most of which are less than two years old, have collectively raised more than $5.7bn this year, according to PitchBook. That is a 10-fold increase from the whole of 2020.

Gopuff, the granddaddy of these apps, most recently raised $1bn at a $15bn post-money valuation. It claims to have achieved profitability in markets where it has operated for more than 18 months, but gives few details.

Ultrafast grocers depend upon “dark stores” — small, local fulfilment centres — used to service homes within a tight one-mile radius. Buyk, which just launched in August, believes these microhubs save money. It spends less on rent, uses the space more efficiently and has fewer issues with food spoilage. Buyk has reached about 1,400 orders per day across its 20 sites. It reckons it hits break-even once it achieves 400 orders per day per site.

Actual profits arrive much later, it seems. Like other on-demand services (hello Uber and DoorDash), ultrafast delivery start-ups all depend upon their latest venture capital to snatch market share with flashy branding, aggressive marketing and steep discounts. One should also question how sustainable rapid delivery is outside big cities, given the importance of high population density to achieving economies of scale.

Without a doubt, lazy consumers win big under this business model. They should enjoy their venture capital-backed free deliveries of soda and ice-cream while they can.