Is the End at Hand for Quick Commerce?

Over the past year or so, we’ve had quite a bit to say about “quick commerce.” This business is largely associated, in the U.S. at least, with GoPuff. This Philadelphia-based quick commerce giant (Gopuff calls it instant commerce) will bring a liter of Diet Pepsi, a bag of chips, a pint of ice cream, and a pack of smokes (and now even CBD products) to your apartment door, faster than the average urban stoner can march from couch to fridge.

This race to the fastest-available delivery of snacks and sundries helps explain why the quick commerce space consumes cash as voraciously as Mötley Crüe consumed cocaine.

The infrastructure required for fast delivery — multiple micro-warehouse locations, purpose-built software, and a fleet of bicycle-mounted delivery associates — helps explain the burn.

The problem doesn’t seem to be on the demand side, at least not according to Gofpuff’s figures. In September, the company celebrated its 10 millionth order in Philadelphia since launching the service nine years ago.

The thing is, globally the quick commerce business model is apparently operating about as effectively as the neurons of much of its customer base. We’ve written extensively about how the business has essentially imploded in Europe. But not before torching billions in investor cash.

The Literal Zoom Meeting from Hell

We learned last week that Gopuff had laid off 250 customer support staff (apparently via the dreaded Zoom mass firing method). This move appears to be a down payment on previously announced layoffs. The company has also reportedly shelved plans for an IPO.

GoPuff also made a number of moves earlier this year that signaled both a clamor for respectability and a desperate effort to bring the economics of its business in line with contemporary investor expectations. We are now in the post-grow-at-all-costs era, after all. Today’s startups are supposed to make money, not light it on fire.

On the former point, back in April, the company recruited some corporate stars to beef up its C-Suite as it searched for a fresh billion-dollar infusion (and anticipated an IPO). As noted, quick commerce is a notoriously cash-hungry business. According to Crunchbase, GoPuff has raised about $3.4 billion since 2013. That year, college pals Yakir Gola and Rafael Ilishayev launched Gopuff in Philadelphia.

Amazon veteran Maria Renz joined GoPuff in May as the company’s Senior Vice President of North America. We noted that as of this week Renz has yet to include her Gopuff role on her LinkedIn profile. Renz has regularly engaged with Gopuff-related LinkedIn posts since her hiring was announced. And her comments certainly suggest she holds a senior role at Gopuff.

At about the same time Renz was hired, GoPuff tapped veteran Bryan Batista as SVP of its international business.

Adult Supervision

And in May the company managed to convince retired Disney CEO Bob Iger to invest his own money in the company and come on board as an adviser. This came amid growing reports that Gopuff staff confidence in the company’s young and inexperienced founders was rapidly waning. Iger apparently represented a much-needed infusion of adult supervision.

Back in May, The Information reported that a few employees openly questioned the founders’ business experience and acumen at an all-hands meeting that was not attended by the founders. Other at the meeting also acknowledged that the founders had strived to surround themselves with executives who brought business experience the young founders lacked.

Iger also invested in the Australian graphic design app Canva. The popular design app is reportedly worth about $40 billion. Investors set Gopuff’s valuation at $15 billion last year.

Gopuff has also reportedly closed multiple warehouses over the summer in a further effort to reduce costs. At that time it announced more than 1,500 layoffs could be forthcoming, so the recent round may only be the beginning.

Executive Diaspora

Things have taken a bit of a turn since Gopuff’s springtime classing up of its senior ranks.

In September, Gopuff CFO Josh Burke left the company after roughly two years in the role. Burkey had spent more than seven years at Under Armor before joining Gopuff.

He said on LinkedIn that he planned to reflect and spend time with his family before accepting a new role. His LinkedIn farewell post did not reflect on his reasons for leaving Gopuff. Though given all we’ve shared above, who would want his job?

Here is what Burke did say. “I’ve recently spent time reflecting both personally and professionally. After much thought, I made the difficult decision to leave Gopuff and take some time to consider my options and what’s next for me.” This is a pretty good example of “How to say next to nothing in 50 words or less.”

The Gopuff executive diaspora is starting to land in prominent roles. Last week, online booze marketplace Provi announced it has hired Danny Kevitch as its new VP of Strategic Partnerships. Kevitch had a brief stint at Twitch after leaving Gopuff in February this year, where she ran retail media operations. Krevitch joined Gopuff in 2020 after five years at Facebook.

GoPuff has tried to challenge the notion that it operates a fundamentally flawed business model, which remains the consensus view on Twitter and other platforms where observers regularly engage in schadenfreude. A recent article in Bloomberg by “The Everything Store” Author Brad Stone has fueled a fresh round of speculation that quick commerce is imploding.

So writes Stone. “Gopuff was supposed to crack Silicon Valley’s longtime obsession with one-hour delivery. Instead, the startup valued at $15 billion risks becoming the next flameout.”

Gopuff Pushes Back

In August, GoPuff posted an article on its blog titled. “The Financials Behind Instant Commerce.”

In the post, the company attempted to explain the KPIs that drive its business. And why the business model is not fundamentally flawed. The post argues that Gopuff’s better-than-reputed unit economics mean the company will turn a profit.

“Our unit economics remain strong because of our deep understanding of the business,” the company wrote in August, “and because of our relentless focus on two areas: Revenue Per Order & Cost Per Order.”

The post continued, “Revenue per order, or Average Order Value (AOV), must remain high to ensure profitability. Gopuff has steadily increased its AOV with expansions in assortment and use-cases to levels that allow for profitability.”

The company then tried to explain how it has worked to minimize its other KPI, cost per order.

“Providing the exceptional customer experience of an instant commerce platform in a cost-efficient way is not easy. One key to reducing our costs is leveraging technology. Because our routing, binning, and batching software allow for grouping of orders with similar destinations, there are increased efficiencies and driver partners are able to deliver a greater number of orders. Scaled processes allow our MFCs (micro-fulfillment centers) to operate at high levels of productivity, with benefits ranging from warehouse employees being able to pack orders in minutes efficiently, to how MFCs are laid out.”

Responding to the New VC Vibes

This is all well and good. But the company is still cutting staff and shuttering MFCs in order to adapt to new investor expectations. This is something that Gopuff acknowledged in its August post.

“We are coming off a time where VCs were funding growth and multiple companies were jockeying for market share. News articles speculated that instant commerce companies were losing a sustainable amount of money per order. All of this can scare media outlets and investors, and ultimately, force a seismic shift like the one we’re experiencing now.”

Now, nearly three months after posting the article, Gopuff still has to contend with the same “fear” that has everyone from investors to journalists to Twitter trolls doubting the sustainability of quick commerce.

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