Technology

The Speedy Downfall of Rapid Delivery Startups Like Jokr

It just took eight months until Jokr, the super-fast delivery startup, becomes a unicorn, and just six months until its strategy falls apart. Jokr had plastered New York City with it sparkling advertising Promise to deliver groceries within 15 minutes – for free! Without minimum order value! — and raised a total of $430 million in venture capital to continue blitzscaling in cities around the world. From Boston to Bogotá, the turquoise-clad couriers whizzed around on motor scooters, carrying pints of ice cream and glasses of pasta sauce.

Jokr also bled money. In the first half of 2021, the startup generated $1.7 million in revenue but suffered $13.6 million in losses, according to data verified by The Information. In April it was closed in Europe. In June of this year — 14 months after launch and a year after announcing plans to build 100 microwarehouses in New York City alone — Jokr announced it was pulling out of the United States and laying off 50 employees. The company still operates in cities like São Paolo, Mexico City and Bogotá.

Other fast-delivery startups have also dwindled rapidly. In May, Gorillas and Getir – two of the biggest companies in the industry – laid off thousands of employees and pulled out of prime delivery cities across Europe. Gopuff, which was valued at $15 billion in 2021, vaporized 76 of its 500 distribution centers this summer. Those are the lucky ones. Others, like Buyk, Fridge No More and Zero Grocery, have already gone bankrupt and disappeared as quickly as they came.

The demise of super-fast delivery reflects the sobering mood of 2022. Over the past two years, venture capitalists have poured nearly $8 billion into the six competing New York City rapid-delivery startups fueling rapid growth and land grabs. Now investors are increasingly demanding profitability. The sudden turnaround reminds Harvard Business School professor Thomas Eisenmann of the dot-com crash of 2000, when buoyant start-ups like Kozmo – which promised hour-long delivery of groceries and DVDs – were just a few years after raising millions of VCs collapsed. “What has changed with these new companies?” he says. “It didn’t work then and it doesn’t work now.”

Eisenmann teaches a class on startup failure and last year wrote a paper on the subject entitled Why startups fail. He says rapid-delivery companies are prone to a common failure pattern where early profits and growth are unsustainable. The first wave of customer interest comes easy and free because people are willing to try a new service with an incredible promise. But to keep those customers and attract new ones, a startup needs to clarify its value proposition. For fast delivery, that means finding people who regularly need things like band-aids or a fast-delivered banana — and are willing to pay extra for them — rather than running to the bodega to get them themselves.

When new customer growth slows, Eisenmann says, “you start offering $20 free groceries with every order to attract new customers.” From there, the economy can quickly deteriorate. A deteriorating economic outlook and recent high inflation make it a bad time to try to convince people to embrace a new premium service.

https://www.wired.com/story/the-speedy-downfall-of-rapid-delivery/ The Speedy Downfall of Rapid Delivery Startups Like Jokr

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