With its flat $2 fee for 30-minute deliveries of junk food and booze, GoPuff is having a very good pandemic. Orders are up four-fold at the SoftBank-backed startup but hypergrowth comes with problems: high costs, low margins and unreliable drivers.
ushing through their empty offices in a resurgent section of industrial Philadelphia, Rafael Ilishayev and Yakir Gola, the cofounders and co-CEOs of GoPuff, are a blur of activity amplified by
GoPuff got its start on college campuses, where student ambassadors like Arya Murthi at Boston College recruited 2,000 customers in a single semester by handing out branded shot glasses, t-shirts and shorts. However, college campuses now represent just 20% of its business.
It is not a new idea—and not necessarily a good one. Essentially the same model was tried out in the first dot-com bubble. In 1998, two ambitious investment bankers founded a company called Kozmo.com, with the goal of delivering DVDs, snacks and drinks to what were then called “web surfers” in under an hour. They raised $250 million and went bust in less than 3 years. Turns out super-fast delivery of low-cost groceries is a.
GoPuff’s investors aren’t concerned. Three quarters of its warehouses now break even or turn a profit, the company claims, up from 50% at the start of the year; that includes all locations that have been open at least 18 months. “We love the model.
By 2015, the business had 25,000 customers in the Philadelphia area, so during their senior year they expanded to campuses in Boston, Washington, D.C. and Austin. Within a year they had completed 500,000 orders in nine cities. They raised nearly $70 million over the next three years in three separate funding rounds.
A few cities were money pits, particularly pricey real estate markets with good late-night options like New York City, where they opened in 2015 and lasted less than two years. And there was the ongoing issue of recruiting and retaining drivers. “The number one issue in running that place was drivers,” says Kevin Moriarty, a former regional operations manager for GoPuff who came from Amazon. “It was absolutely maddening.
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