The rapid grocery delivery apocalypse is upon us. Here’s how to survive it
These are challenging times for the rapid grocery delivery space.
Gorillas is laying off 300 staff and exiting Italy, Spain, Denmark and Belgium.
Gopuff cut 400 staff in March.
Avo slashed its workforce by a third, then ceased Israel and New York operations.
And Jiffy has shifted from grocery delivery to providing software for other delivery apps.
So, is the sky falling? No, it's just an adjustment, argues Viv Craske, Founder of Geeky Foody, a consultancy working with FoodTech and retail tech startups at seed, Series A and B stages.
In a LinkedIn post, Craske points out that Gorillas and goPuff are still raising funds.
“The money is no longer flowing in the billions for unchecked growth. VCs expect a path to profitability. The SoftBank model of 'back the winner with insane amounts of cash' is being reigned in. Now it's about backing business models that work,” he says.
Here, according to Craske, is what companies need to do if they are in the FoodTech/grocery e-commerce space.
1. Cut costs and extend the run rate
Past: Hire as fast as you can to drive growth.
Now: Run as lean as you can to maximise revenue per head.
2. Find a profitable model
They do exist - even in grocery. Gosuper has one in the UK.
Dark store models are much tougher. Models based around partnerships with existing retail operators make more sense. No need to disrupt what's already working.
Alternatively, recognise what Jiffy has, and which the grocery delivery market will likely split in two:
a) Food delivery brands solving to meet people's missions and needs
b) Software and logistics companies solving the hard problems of profitable last mile
See also, Ocado Retail vs Ocado Technology or Instacart’s pivoting from consumer service to B2B technology offering.
3. Improve your strategy
If you are looking to raise, it may be easier from existing investors.
But either way, that strategy had better not say 'grow fast and figure out profit much later on'. The business model needs to actually deliver a profit at some point.
Agree? Disagree? Let us know your thoughts in the comments section below.
