Throughout the pandemic, people have flocked to online grocery delivery services including but not limited to Instacart, Shipt, and Whole Foods. Many of these services promised delivery in as little as 1-2 hours. Workers for these platforms were praised as ‘Essential Workers’ and hiring skyrocketed. According to an article in CNN, in March 2020, with an increase in demand sparked by the pandemic, Instacart announced a plan to hire over 300,000 new workers. Now, in 2021, companies are coming to New York City and eclipsing the 1-2 hour mark. A new phenomenon has emerged: ultra-fast delivery. Companies like Buyk, FridgeNoMore, Gorillas, JOKR, and 1520 have been popping up all over the city promising 15-20 minute deliveries and are receiving millions of dollars in funding. According to an article in CNBC, Gorillas raised $1.3 billion and JOKR and FridgeNoMore raised $170 million and $15.4 million.
Traditional players in the space such as Shipt and Instacart send independent contractors to already established stores to pick, purchase, and deliver customers’ orders. The new ultra-fast companies have revamped the industry by purchasing mini ‘warehouses’ in retail locations throughout the city. Warehouses are situated all over the city to minimize delivery radiuses and help keep to the 15-minute delivery promise. As soon as a customer completes their purchase, a ‘picker’ selects the items from the shelves. Choice is limited on these apps to allow for a small warehouse and quick picking. For example, rather than having twenty brands of peanut butter for a customer to choose from, a typical ultra-fast delivery app will have one or two. After the picker finishes grabbing the items from the shelves, there is no need to wait to checkout as Instacart and Shipt shoppers do. A fleet of delivery workers immediately take the items and deliver them to the customer using electric bikes or scooters. Some delivery workers are classified as employees and others are independent contractors – depending on the company.
As these ultra-fast delivery companies emerged in the city, people asked why they were necessary. However, these companies may be beneficial in revolutionizing the way people shop. Rather than stocking up on groceries, customers can order what they need in the moment as indicated by the name of one of the companies: FridgeNoMore. This tactic aims to prevent food waste. The transportation of food is a very wasteful process and then once food enters a house, even more is wasted. According to an article in Vice, approximately one pound of food is wasted per person every day in the United States. In a country with 329.5 million people, that is a lot of food.
The fast-paced delivery industry presents an interesting case-study in market development. Many companies have entered the space in a matter of only a few months. All of these companies are engaged in similar promotional strategies, with advertisements on Citi Bikes throughout the city and aggressive discounts that aim to build customer loyalty. Multiple companies have handed out free snacks around NYU’s campus to attract new users as well.
Building loyalty may not be the primary issue that these companies face. The promise of 15-minute deliveries may create dangerous working conditions for couriers as they are pressured to get the groceries to customers at break-neck speeds. With the crackdown on Amazon’s unrealistic warehouse worker metrics, the fast-paced delivery industry may be next. Furthermore, this business model is limited to highly concentrated cities where population density near each mini warehouse is sufficiently high for operations to be viable. In a city like New York, people like to go out to the bodega themselves to buy a few items. Despite the excitement surrounding the business, it may not be a viable model.
The past few months were only the beginning for this industry. The story is far from over. We will have to wait to see if customers adopt this new way of shopping, if the companies can turn a profit, and if the labor model is sustainable. For now however, it seems like these firms offer the potential to shake things up in the fast changing groceries industry.