From Boom To Bust In Rapid Time:
What’s Next For Quick Commerce?

Over the past two years, billions of dollars have been invested worldwide in rapid delivery or quick commerce startups like Gopuff, Gorillas and Zapp. With robust global economic performance and an explosion in online grocery sales, the quick commerce segment seemed like a great place to double down.

Written by: Barry Clogan, Wynshop’s Chief Product Officer, and Forbes Technology Council Member

However, it isn’t just food deliveries that are moving in rapid time. Just as quickly as the quick commerce area boomed, we are now seeing signs of a bust. Gopuff, Gorillas, Jiffy, Getir, Zapp and Buyk have all announced closures, shifts in strategy or significant layoffs. Meanwhile, online grocery leader Instacart took a 40% haircut this year on its previous valuation of $39 billion and is slowing down hiring ahead of its anticipated IPO. Likewise, shares of DoorDash barely stand at a third of their 2021 high at the time of this writing, foreboding a potentially chilly reception to Instacart’s IPO.As the era of easy money and hyper-growth draws abruptly to a close, many are beginning to ask, “Was the rush into quick commerce merely the latest instance of irrational exuberance?”

Sorry, Covid—history always repeats itself.

The recent misfortunes of delivery companies are often blamed on the end of the Covid-19 lockdowns. To an extent, that is true and mirrors the trajectory of “pandemic stocks,” including Zoom, Robinhood and Peloton. But if you ask me, we can’t put all the blame on the global pandemic. The rapid rise and fall of quick commerce is as much an outcome of wishful thinking as it is a reaction to recent market changes.

Did we learn nothing from WeWork? It once commanded a $47 billion valuation, and why—because it could sublet office space with nicer furniture, freeflow beer and a charismatic frontman? Today, WeWork has a market cap of less than $6 billion and a new CEO. It’s still a great company, but investors came to realize that the upside just wasn’t nearly enough to justify its formerly titanic valuation.

It’s about the fundamentals!

Similarly, one has to question the upside of the market’s grocery rapid delivery darlings. I mean, how many people really need popcorn and ice cream in under 10 minutes anyway? Gopuff, which was just a few months ago eyeing an IPO based on a $40 billion valuation, has scaled back its warehouse footprint and let hundreds of staff go. The U.K.’s Jiffy has ceased delivery operations and restyled itself as a software company. Germany’s Gorillas has laid off hundreds and is making for the exit from multiple countries. Turkey’s Getir has slashed its global workforce by 14%.

And then there’s Instacart. In the easy money era, Instacart used buckets of venture dollars to rapidly acquire customers and made use of grocers’ unpreparedness for the growth of online ordering. However, the startup has since seen high-profile leadership changeovers, failed in its effort to be acquired, pivoted its business model and now faces a most uncertain path to IPO.

No longer viewed through the Covid fog, it turns out that “convenient delivery” may not be enough of a value-add to achieve a return on the billions invested. Irrational exuberance, indeed.

Rapid delivery startups’ loss might be grocers’ gain.

So what have we learned? While grocers’ latent adoption of online may have helped create the gaps in the market and encouraged an extraordinary bloom of disruptive players, the lion’s share of value is still held by conventional food service companies. I predict that we will continue to see some very open public wounds in the next few months as the delivery unicorns flutter back down to earth. We can expect an underwhelming IPO or two (because late-stage investors do not really have any other viable exit), and we may even see some high-profile consolidations and failures within the year.

But that’s not the end of rapid delivery. Market expectations have been set, and there’s no going back. Failing the quick commerce startups’ ability to pull some major rabbits out of their collective hat, I expect grocers themselves to claw back direct sales and start filling the gaps between venture-fueled pipe-dreams and economic reality.

Over the course of the bear market, grocers will develop better digital and delivery capabilities. They will leverage their strengths in supply chain access, geographic proximity to shoppers, customer loyalty and merchandise variety. Some will create new business propositions that take advantage of the market expectations set by quick commerce, perhaps even reversing, to their benefit, the “master-slave” relationship they now have with the last-mile players. By the time the bears have gone into hibernation, I expect to see a renewed grocery industry, emboldened by freshly developed digital capabilities, with moats around their businesses too deep for the next wave of easy money to ford.

The big winners of this turn of events will be consumers, who will be able to have their Ben & Jerry’s Strawberry Cheesecake before it melts and eat it, too, without any extra apps or accounts. Now that’s something I can be a little more exuberant about.

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