Grocery delivery startups surged during the Covid-19 pandemic, but now they are all folding up.
It took Jokr, a superfast grocery delivery startup in New York, only eight months to become a unicorn. Its grocery-delivery services were launched in 10 cities globally. But according to internal data from The Information, the first half of 2021 saw the start-up suffer $13.6 million in losses with just $1.7 million in revenue. The company has shut down offices and laid off employees in almost all the cities.
Other grocery delivery startups are also shrinking or folding up. Fridge No More, a grocery startup launched in October 2020, told employees in an email that it was shutting down after a deal with a potential buyer fell through.
Buyk, a super-fast grocery delivery startup, confirmed to CNN Business that its 870 employees were laid off. Also, Instacart, a grocery delivery startup that experienced very slow growth after the year of explosive growth in the pandemic, said it was slashing its valuation by 40% to $24 million.
“People have gotten much more used to ordering food and other products through delivery services. Some of that will decline once it’s safe to do things in person, of course,” said Scott Duke Kominers, an associate professor at Harvard Business School. It seems like after a few years of explosive, pandemic-driven growth in the grocery delivery business, people are returning to grocery stores themselves. This must have been the kiss of death for start-ups that are expected to grow very fast in the future.
Most of the companies had business models that were flawed from the start because the cost of the service they provide is not covered by fees consumers pay. Many were losing money on every delivery. To sustain themselves, these companies would need to raise prices, which would likely cause customers to go elsewhere.
What business models will survive if any?