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The Speedy Downfall of Rapid Delivery Startups Like Jokr

by lacygibson
July 15, 2022
in Business
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The Speedy Downfall of Rapid Delivery Startups Like Jokr
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just spent It took 8 months for ultra-fast delivery startup Jokr to become a unicorn, and just 6 months for its strategy to start falling apart. Jokr smeared in New York City eye-catching ad Promise to have groceries delivered in 15 minutes – FREE! No minimum order! — and raised a total of $430 million in venture capital to continue blitzscaling in cities around the world. From Boston to Bogota, it zips past on scooters in turquoise-clad couriers with pints of ice cream and jars of spaghetti sauce in hand.

Jokr is also bleeding. In the first half of 2021, the startup posted a loss of $13.6 million on revenue of $1.7 million, according to data reviewed by The Information. In April, it closed in Europe. In June — 14 months after its launch, and a year after touting plans to build 100 micro-warehouses in New York City alone — Jokr announced it was pulling out of the U.S., laying off 50 employees. The company still operates in cities such as São Paulo, Mexico City and Bogota.

Other fast-delivering startups are also shrinking rapidly. In May, Gorillas and Getir, two of the industry’s largest companies, laid off thousands of employees and pulled out of major European delivery cities. Gopuff, worth $15 billion in 2021, has evaporated 76 of its 500 distribution centers this summer. Those are lucky. Others, like Buyk, Fridge No More, and Zero Grocery, have gone bust, disappearing just as quickly as they arrived.

The decline in overdrive reflects sluggish sentiment in 2022. Over the past two years, venture capitalists have poured nearly $8 billion into six fast-delivery startups competing in New York City, encouraging rapid growth and land grabs. Now, investors are increasingly demanding profitability. The abrupt reversal by Harvard Business School professor Thomas Eisenmann is reminiscent of the dot-com bust of 2000, when hit startups like Kozmo — which promised one-hour deliveries of groceries and DVDs — were swooping in from VCs. It went out of business just a few years after collecting millions of dollars there. “With these new businesses, what has changed?” he said. “It didn’t work then, and it doesn’t work now.”

Eisenman teaches a course on entrepreneurial mistakes and wrote a paper on the topic last year titled Why startups fail. Fast-delivery companies are vulnerable to a common failure model, where early-stage earnings and growth are unsustainable, he said. The first wave of customer interest came easily and for free because people were willing to try new services with incredible promise. But to retain those customers and win new ones, startups must define their value proposition. For quick deliveries, that means finding people who often need urgent deliveries of things like Band-Aids or bananas — and are willing to pay a premium price for it — rather than walking to the grocery store to get them.

When new customer growth starts to dwindle, Eisenmann said, “you start having to offer $20 of free groceries on every order to get new customers.” From there, the economy can deteriorate rapidly. The newly cloudy economic outlook and recent high inflation make now a bad time to try to convince people to adopt new premium services.



Tags: DeliveryDownfalle-commerceJokrlogisticsOn-demand economyRapidSpeedyStartupsventure capital
lacygibson

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