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The latest apps promise fast service, but can they deliver?



NEW YORK (AP) – When Mahlet Berhanemeskel returns home from her 90-minute drive to her New York City home, she doesn’t want to cook. Instead she orders food like BLTs, Cheez-Its, and cookies from an app called Gorillas. It’s affordable and takes 10 minutes.

“This is instant gratification,” he said.

Gorillas are one of the few companies where venture capitalists have poured billions of dollars in the latest pandemic delivery spree: companies that promise to get you a bottle of Tylenol, iced coffee, hummus, cucumber, or a roll of paper towel in 30 minutes – or even 15 minutes – or less. They are usually delivered from mini warehouses in residential and commercial neighborhoods.

Experts say they are unprofitable. Still, larger companies are stepping in. Officials in European cities and in New York, which has become the US launch pad, are already starting to complain about how they work, saying it’s bad for employees and residents.

“The problem I see is that fast trade players will have to find a path to profitability at some point, despite the massive valuations they’ve achieved and the seemingly unstoppable flow of money they’re getting to grow,” said Bain partner Marc-Andre Kamel. co-author of a recent report on the online grocery market.

Services are already shutting down. One, 1520, closed at the end of December, and two more, Buyk and Fridge No More, closed in March, apparently running out of money. The Russian founders of Buyk were reportedly unable to raise money due to restrictions imposed during the Ukrainian war; did not answer questions. Fridge No More said in a tweet that it closed two years later “due to increased competition and other industry-related issues”. The founder did not answer questions.

Other delivery companies are experiencing growing pains. Gorillas have retracted their US marketing promise of “10 minutes” delivery – now just “in minutes”. Gopuff recently laid off 3% of its workforce – more than 400 people.

This is not a sustainable business model, says Len Sherman, an assistant professor in Columbia University’s business school. “There will be a lot of consolidation in some very painful circumstances.”

Getir, a Turkish company operating in Boston, Chicago and New York as well as in Europe, said that the key to profitability is to add more mini warehouses in the cities it delivers to.

“We’re here for the long term,” said Langston Dugger, Getir’s head of US operations.

The company has recently raised $768 million, worth close to $12 billion, and plans to expand in the United States. in the meantime,” he said.

Lee Hnetinka, founder of FastAF, a delivery company with a two-hour delivery model in New York, San Francisco and Los Angeles, said profitability is “not a priority” right now because he’s investing in customer experience, and that’s their strategy. It marks the long-term and early days when Amazon was unprofitable.

There are new competitive threats from established restaurant delivery companies DoorDash, Grubhub and Uber, and grocery delivery service Instacart, who are recognizing the appeal of fast delivery apps.

DoorDash has three “DashMarts” in New York that promise groceries and convenience store deliveries within 15 minutes and say more locations are coming; also Albertsons Cos. in more than 20 cities. It aims to deliver in half an hour from its markets. But its chairman, Christopher Payne, said at a recent conference that it may not be possible to make 15-minute delivery profitable.

Grubhub usually delivers products from 7-Eleven and other grocery stores in less than 30 minutes. Uber is partnering with Gopuff and FastAF, allowing people to choose these companies’ products on the Uber app. Uber also delivers from local grocery stores, although delivery times are often over 30 minutes. And Instacart plans 15-minute deliveries, starting with customers of grocery chain Publix in Atlanta and Miami.

It’s unclear how fast services might be outside of the busiest US cities like New York, or neighborhoods where they’re concentrated in the more sprawling cities.

“For this kind of model to work – 15 minutes, 10 minutes, 20 minutes, you name it – you need intensity, right?” Stanley Lim, a professor at Michigan State University specializing in supply chains. “You can serve these customers in a rural area, but you can’t be profitable. That will be a limit to the spread these companies can go.”

But in the bustling city, regulatory pressure may arise. New York City Council members opposed expedited delivery, saying they might be breaking zoning laws. The New York City Department of Buildings is working with other government agencies to “discover suitable zoning zones” for mini-warehouses. The agency’s spokesperson, Andrew Rudansky, said hubs are not mentioned in current city zoning regulations because they are a new type of business.

Alongside delivery apps like bodegas and convenience stores that offer discounts that will stifle local businesses, there are also concerns about the safety of deliverers. Manny Ramirez, organizer of Los Deliveristas Unidos, who works for DoorDash and a service called Relay and advocates for better conditions for app delivery workers, says he was badly injured by a car while biking twice last year. and still undergoing physical therapy. And the larger the queue, the more dangerous it is for the driver.

“We don’t have laws protecting cyclists,” he said.

Defenders say the lack of city-wide bike lanes, time pressure and fears for their safety are pushing delivery workers to the sidewalks. This worries city dwellers.

Deborah Koncius, who lives on Manhattan’s Upper West Side, said she felt her neighborhood was getting more dangerous, with deliverymen riding e-bikes on the sidewalk. While neither he nor any of his family members were hit, “I feel like it’s just a matter of time.”





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