In New York, Berlin and Madrid, start-ups are being fired and shut down in whole or in part, most of them having reached the unicorn category (a $1,000 million company) in just over a year. Gorillas, Jokr, Getir, Gopuff are the most famous names, others like Buyk, Fridge No More or Zero Grocery have disappeared as quickly as they appeared.
They were born nurtured on the neurosis of urgency and the comforts of captivity, and now they have lost their attractiveness. Leaving the house for a loaf of bread is no longer epic and can even be pleasurable. However, investors assumed certain lockdown habits are “here to stay”. Well, by 2022, we already know that happily, dystopias will go where they come from, and that part of the pleasure of consumption is exposure to chance, chance, and human contact. Great virtues of urban life.
The collapse of ultra-fast delivery heralds the end of the easy money that has funded tech startups over the past decade. According to The New York Times, investors have invested $8,000 million in six ultra-fast shipping companies based in New York over the past two years. Now they ask about profitability and utility, but there is neither one nor the other.
What happened, Harvard Business School professor Thomas Eisenman explained in a 2021 book presciently titled Why startups fail? (Why do startups fail?). His theory is that ultra-fast shipping companies share a pattern of vulnerability: early profits and growth are unsustainable. “The first wave of customers comes easily and for free because there’s always an audience willing to try a new service with a big promise behind it, but in order to keep that customer base and keep growing, you have to find a lot of people who will.” Regularly asking for ultra-fast deliveries.” That is, customers willing to pay a little more for a banana or a blister pack of ibuprofen to be delivered to their home in 10 minutes. When customers start refusing, they are offered very aggressive discounts. From there things are starting to go downhill because, according to Laureano Turienzo, “this customer is doped, subsidized with discount coupons and will never pay another euro again”.
Turienzo is President of the Spanish Retailers Confederation and has been closely monitoring the phenomenon. “In order for these businesses to deliver on their time promise, they need to have a dark store (opaque store) that is 10 minutes from all their customers, they would need city coverage, and that requires a large investment that only that would justify an enormous demand that doesn’t exist”.
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The opaque shops were installed in some neighborhoods of Spanish cities, in places left empty during the pandemic, their windows were covered, drivers collapsed the sidewalks… “There was an absolute rejection wherever they were installed,” confirms Turienzo . A video published by Business Insider shows the blistering speed achieved inside. To meet the 10-minute deliveries, once the order was placed, the person who received the order had one minute and 40 seconds to find the item, fill the bag, and place it in the driver’s backpack. In the video, an employee can be seen running between the shelves, reaching the checkout, going back to get something forgotten, and finally delivering the order to the driver, who has just over eight minutes to reach his destination. . According to Professor Eisenman, most ultra-fast broadcasters lose money on every transaction. It’s not always about complete purchases for 80 euros, consumption is also stimulated by the impulse of small whims. And the numbers don’t come out.
“For young consumers, startups have funded their lifestyles with money from mutual funds,” says Felipe Romero, partner at The Cocktail, a consultancy specializing in the development of digital products and services. “There’s a young customer with little money, practical and creative, looking for solutions and chasing discounts to remain chained to consumption: switch to Uber, jump from one streaming platform to another or just let yourself go be tempted by ultra-fast delivery,” he says. The expert believes there was a perfect collision between companies with money for aggressive advertising and a consumer looking for shortcuts. “But the link created is weak and tactical… as long as the promotion lasts,” Romero points out. Now the lean days are coming, marketing budgets will be slashed and the big problem for the surviving companies will be to “re-educate” the spoiled consumer who maintains his lifestyle with discount coupons and is used to playing with everyone. What is the actual price if you have dinner delivered to your home in 10 minutes? We don’t even want to know.
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