New York will become ‘Graveyard of Empires for rapid grocery delivery space’
New York City is killing rapid grocery delivery companies, according to Brittain Ladd, a former Amazon exec who these days works as a supply chain consultant.
In an online post, he says: “On the surface, launching a rapid grocery delivery business in a city with a population of 8.85 million people appears logical. The goal of each rapid grocery delivery company is the same as every other company in existence – create a customer.”
“With its densely populated neighbourhoods full of shoppers eagerly seeking groceries and other goodies to meet their needs, New York City is a grocery retailer’s paradise. Is it?”
Jokr, Fridge No More, Gorillas, GoPuff, Buyk, and several other rapid grocery delivery companies, launched operations in New York City in 2021.
“For most of these, this was a big mistake,” Ladd argues.
“However, I believe Buyk, founded by two men with experience working for Samokat, a leading RGD company in Russia, should do quite well in New York City as they have a more disciplined approach to controlling costs and seeking profits as quickly as possible.”
He adds: “In discussions with executives and/or associates from RGD companies operating in New York City, I can state that most of the companies aren’t breaking even nor are they close to being profitable.”
“Some of the companies are losing hundreds of dollars on every order they fulfill when discounts, promotions, waived fees, labour, and all other actual costs are accounted for. Reducing unit costs and achieving a profit is nearly impossible for most RGD companies.”
The biggest challenge faced by the aforementioned companies is covering the costs of their operations and expansion.
“Everything is expensive in New York City. Rent for dark stores continues to increase because demand is so high. I continue to recommend to all RGD companies that they must invest in an end-to-end supply chain planning and analytics platform that includes AI and machine learning.”
Raising capital is a full-time job to cover operational costs and scale to other states. Some of the RGD companies can’t raise enough capital, so they’re faced with a situation where they’re losing money in New York City without the ability to leave, Ladd reckons.
Also, with so many different rapid grocery delivery companies to choose from, people are constantly taking advantage of promotions and low prices. This has resulted in customers churning between companies.
As for the future of quick commerce in the Big Apple, Ladd expects Jokr and Fridge No More to merge, be acquired, or sell their operations and exit the market.
“I also believe it’s plausible that Gorillas and Buyk may merge or form some type of a strategic relationship. Buyk, Gorillas, and Getir may choose to consolidate or form a strategic partnership. The future of RGD is consolidation and acquisitions – there is no other way.”
Ladd concludes: “The cold hard truth is that New York City will become ‘The Graveyard of Empires’ for the rapid grocery delivery industry.”
“Some companies will achieve nothing more than a Pyrrhic victory, as they will be too weak to scale. Only a lucky few will survive. My advice to the rapid grocery delivery companies struggling in New York City is this – withdraw. Now.”
