Personal View: Creating the “Netflix” of Food Delivery

” I’ll go shopping. You want something ?

In pre-pandemic times, whenever my wife asked this question, it was my cue to join her on a trip to the supermarket to walk the aisles, put items in the cart, wait in the long queue, load the groceries into the trunk car and unpack the bags at home. It is an experience that I do not miss.

Today, “shopping” is more often a virtual experience, as she sifts through endless lists of online possibilities and arranges to have her picks delivered to our doorstep by services like DoorDash and UberEats. Similarly, “going out” to dinner at a restaurant usually means opening the front door and collecting our meals – if we’re lucky, still hot or even piping hot! — the delivery driver.

For retired couples like us – not to mention the frantic moms and dads who manage busy households – the growing phenomenon of door-to-door and on-demand food delivery is one of those cultural shifts that suggests concurrent business opportunities. It’s fair to put it on par with streaming services and cellphones.

So who will be the Netflix and Verizon of food delivery?

Not so fast, say industry insiders. According to a recent Wall Street Journal article, the early adopters of the food-at-your-door game have plateaued, despite early adopters like my wife and I continuing to spread the news and gain new followers of the game. delivery. Instacart is currently the apparent favorite, and perhaps smaller competitors like DoorDash and Uber will end up being consumed in the – pardon me – feeding frenzy.

But isn’t there enough business to satisfy everyone’s hunger? After all, there seems to be a store selling T Mobile, AT&T and Verizon phones on every corner. And for every Netflix and HBO, a new Apple+ or Amazon Prime Video emerges, and investors are quick to jump on board.

Here’s the catch: all of these services make the products they ship.

While the dramatic shift in consumer shopping habits caused by the pandemic has had a transformative impact on grocers and restaurant owners, this impact has yet to lead to large-scale vertical integration initiatives – from delivery who directly deliver the food they bring to our doorsteps.

Given its vertically integrated business model, Gopuff can not only provide us with our food, but also provide the answers to the questions posed by the Wall Street Journal and others: “Growth rates have normalized. Now everything the world is trying to figure out – where did this just go? How do we do it profitably?”

Gopuff is different because it doesn’t rely on restaurants and stores. They already own all the goods they provide. Based in Philadelphia, the company operates from approximately 600 micro-distribution centers (up from 380 in 2020) in some 650 cities across the United States. Plus, drivers are able to fulfill orders around the clock at a lower price than the competition.

Translation for retirees and families: pay less, get it fast and make it hot!

Competitors are clearly taking note of this. Instacart recently launched Instacart Platform, a suite of technologies and services for retailers that includes 15-minute delivery powered by nano-fulfillment centers. DoorDash also recently announced a vertically integrated offering with the establishment of more than 70 DashMarts in approximately 50 cities. It’s a classic case of the modern proverb: When you can’t innovate, imitate.

Gopuff founders Yakir Gola and Rafael Ilishayev, who started the company from a van while attending Drexel University in Philadelphia, have used a vertical integration model since the company’s inception . In a recent New York Times interview, Gola said, “Having warehouses and inventory is the only way to make a profit over time…because it allows the business to make money selling goods. and not just by charging delivery costs.”

Gopuff certainly has an edge over its competitors, which is not overlooked by investors who have been quick to pump money into the fast delivery market despite experts questioning the outlook. of profitability. Still, Gopuff appears to have created a pattern of success, a promising sign for the company’s future in a highly competitive industry.

A recent report from Axios found that Gopuff’s investor pitch charts a path to profitability, a goal that all market players continue to pursue. The materials claim, Axios notes, that all of Gopuff’s micro-distribution centers (MFCs) launched in 2017 or earlier generate at least 10% quarterly EBITDA (more than 15% in Philadelphia). This figure is 66% for MFCs launched in 2018, 34% for 2019 and 26% for 2020. It also claims a profit of 14.2% per order for the 2017 and earlier markets, which brings in $3.67 per order. . For 2020, those numbers are 4.9% and $1.32, according to the report.

Meanwhile, retirees and families in places like northeast Ohio are eager to cut a few dollars off their food bills and enjoy fresh food from the (potential) local micro-center. And the next time my wife mentions the grocery store, I’ll happily accompany her – to our favorite chairs.

Osborne is a retired journalist and school administrator.