US rapid delivery company Gopuff has turned to rivals Uber and DoorDash to deliver some of its orders, as it becomes the latest group to be hit by a fall in demand following the sector’s lockdown-driven boom.
Philadelphia-based Gopuff, which was valued at $15bn in July 2021, has been using Uber couriers to fulfil a small proportion of orders placed on its app since late last year, plugging a gap in its own driver workforce.
At least 4 per cent of all Gopuff orders in the US are being handled by Uber couriers, Gopuff and Uber confirmed.
That amount could increase further, a person familiar with the deal said, with the companies in talks to have Uber provide more delivery support, by using Uber couriers for Gopuff orders placed through the Uber Eats app as well.
The move comes as the once booming rapid delivery grocery market, which aims to deliver groceries and convenience store items via courier in as little as 10 minutes, has come under pressure as demand has fallen amid rising inflation, competition and the end of a lockdown-driven expansion.
After more than a dozen rapid grocery apps launched in the US and Europe by mid-2021, only a handful of independent participants now remain. Getir, the Istanbul-based online grocery start-up, acquired its German rival Gorillas last year, while several smaller companies have either significantly scaled back operations or gone out of business entirely.
According to industry research by YipitData, Gopuff’s sales fell 17 per cent in January 2023 compared with the previous year. In that time, the company’s market share of US rapid delivery shrank by 7 percentage points.
While demand appears to vary geographically, three Gopuff drivers speaking to the Financial Times, as well as others posting on social media, have complained of too few orders coming in that makes waiting around less worth their while compared with working with other delivery platforms.
Gopuff denied it had an issue with driver supply, saying that 80 per cent of its warehouse locations had a waiting list for drivers.
Gopuff’s model commits to paying an hourly fee to scheduled drivers if the commission earned from deliveries does not reach a minimum threshold of about $18-$22 an hour, depending on the market.
A separate partnership has seen Gopuff list BevMo, the alcohol retailer it acquired in 2020, on its rival DoorDash’s app, with orders fulfilled by DoorDash drivers.
Previously Gopuff had held off listing BevMo on DoorDash, which, with its own network of warehouses known as DashMarts, is Gopuff’s leading US competitor.
Founded in 2013, Gopuff quickly became one of the leaders in the fast grocery delivery market, as well as one of the most heavily funded.
The US-based group was valued in July 2021 at $15bn after a $1bn funding round. Last year, it raised $1.5bn in debt, bringing its total funding to slightly less than $5bn, according to data from PitchBook. Investors have included D1 Capital, Guggenheim Investments, SoftBank and Disney chief executive Bob Iger.
Gopuff has long touted the strength of its business model, which involves having its own inventory, building out small warehouses or “dark stores” in urban locations and hiring gig worker couriers to fulfil orders quickly.
But the bold bet on changing shopping habits, a gamble that consumers would pay a premium for extremely fast delivery, has shown signs of strain over the past year amid a cost of living crisis and a tech downturn.
Gopuff has put on hold plans for an initial public offering. Last July, it announced it would lay off 10 per cent of its workforce and close 76 of its warehouses. Earlier this month, the company said it would cut a further 2 per cent of jobs.
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