The downfall of superfast delivery reflects the sobering mood of 2022.
Margins are already razor-thin for services that deliver groceries in hours or longer. On a $100 online grocery basket, about $70 goes toward the wholesale cost of the goods a customer ordered. The other $30 gets devoured by overhead costs like refrigeration and storage, the wages of in-store workers who pick items from the shelves and pack them into bags, and the cost of delivery.
Rapid delivery startups might be able to improve their businesses by keeping items in “dark stores,” microwarehouses designed to make it faster for a worker to pick out and pack a basket of goods than is possible in a conventional retail store designed for browsing. They can also pass on more costs to customers, selling a $4 loaf of bread for $6, for example. But building enough dark stores to serve all parts of a city within 15 minutes still requires massive investment.
Rapid delivery startups also tend to spend more on delivery costs for each order than more conventional companies. When you can get what you want in minutes, people can feel empowered to make impulse purchases, like a late night candy bar. But a delivery driver or a bicycle courier costs the same amount, whether ferrying a $75 bag of groceries or a $5 pint of ice cream.
Many rapid delivery companies have made their punishing economics still worse by offering generous promotions to try to lure new customers. New York-based startup 1520 offered 15-minute delivery with no minimum order or delivery fee in 2021. Cofounder Maria Daniltceva
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