Can ultra-rapid grocery delivery companies maintain momentum?

A Gorillas U.S. rider darts off from the grocery warehouse in the Lower East Side of Manhattan to deliver groceries to a customer.
A Gorillas U.S. rider darts off from the grocery warehouse in the Lower East Side of Manhattan to deliver groceries to a customer.
(Photos: Amy Sowder)

NEW YORK — A helmeted e-bike rider with a black backpack full of groceries bolted from a building’s double doors on a Thursday morning on the Lower East Side.

Inside, Jay Schneider navigated the grocery aisles where Gorillas U.S. customers can't  browse in person, although they can pick up their online orders at the front desk. Formerly dubbed a “dark store” until the click-and-collect option was added,  it’s where picker-packer Andrew Cummings shopped for the order he received on his handheld device, organized by zone for efficiency.

“Produce is the last thing they pick, so it doesn’t get crushed. It’s as intuitive as possible for the picker," said Schneider, head of buying and marketplace. And you won’t see like items next to each other, to avoid mispicks.

Jay schneider of gorillas u.s. holds apples and bananas
Jay Schneider is head of buying and marketplace at Gorillas U.S., based in New York City. Photo: Amy Sowder

Despite the lack of foot traffic within these 2,500-3,000-square-foot walls, this is the busiest of Gorillas’ 22 mini-warehouses cropping up in the city within the past year.

Rollercoaster of rapid

Founded May 2020 in Berlin, expanding across Europe and launched May 2021 in New York, Gorillas offers consumers the ability to order an avocado on the app and expect it on their doorstep “in minutes.”

So far, this ultrarapid grocery delivery service has withstood a roller coaster late 2021 and early 2022 with waxing and waning competition, venture capital investment, intermittent worker strikes across the industry in this city and Berlin, and yes, the same labor, inflation and supply chain challenges that classic grocery retailers face.

These rapid groceries are fighting to scale up with capital investment to become profitable. In August, one investment partnership didn't pan out, according to Bloomberg, but in October, Gorillas secured almost $1 billion in Series C funding, the company said.

Unlike the warehouses of behemoths such as Amazon and supermarket chains, most of  these ultrafast grocery startups use dark stores, or micro-fulfillment centers, every couple miles.

“Our warehouses are about a mile and a half- to two-mile radius for our riders to go around. And that's how we deliver. Sometimes, you can get it in 10 minutes, 11 minutes, 12 minutes,” Schneider said. “You can boil water, run out of pasta, order from Gorillas and, by the time the pasta comes, your water will be boiling and ready for the pasta. So, it's a fascinating model.”

This is a need that will extend beyond the pandemic, when the demand for delivery exploded, he said. For fresh produce to work in this model, Schneider looks to partner with suppliers with great flexibility getting in and out of the city for frequent deliveries.

“It's not like you just go up there and say, ‘Hey, I need 10 loads of strawberries or this, that and the other,'" he said. "It's very precision-based. It's very strategic.”

Gorillas U.S. Lower East Side warehouse and store operations supervisor Fawzul Mustafa
Operations supervisor Fawzul Mustafa places a bag of groceries into a backpack for a rider to deliver from the Gorillas U.S. Lower East Side, New York location. Photo: Amy Sowder

Schneider said Gorillas has to closely monitor waste numbers and keep recalibrating the assortment as 2,300 stock-keeping units go in and out. There are 80 to 90 produce SKUs.

In previous decades, Schneider was produce director and then director of merchandising at Acme Markets for Albertsons Cos., accustomed to dealing with 80,000 SKUs. Now, his inventory is "highly curated for a balance between big brands and higher-end brands, and there’s a big emphasis on local here,” Schneider said.

Also, New York's Gorillas strives for sustainability, offering workers health care and rescuing more than 95% of its unsalable but edible food for local hunger programs.

Beyond the starting line

Istanbul-based Getir is the 2015 pioneer of this instant grocery wave that may — or may not — have crested during the pandemic, according to Reuters.

The company has since expanded to 48 cities in Europe, the U.S. and all major cities in Turkey. The U.S. launch began with Chicago in November 2021, with sights set on Boston and New York next. By March 2022, Getir closed a $768 million Series E funding round, valuing the company at about $12 billion.

Several ultrarapid grocery delivery startups zeroed in on New York in late 2020 and throughout 2021, according to CNN Business: Fridge No More, Jokr, Gorillas, Buyk, DashMart and GoPuff are a few.

Listen: "Tip of the Iceberg" podcast episode with Jay Schneider of Gorillas U.S. podcast episode iceberg lettuce floating in water pmg

But the crowded market for this almost-instant service is winnowing down in 2022.

In March, Brooklyn-based Fridge No More folded after a deal with a potential buyer fell through. And St. Petersburg, Russia-based Buyk laid off its 870 employees, citing financing challenges during the Ukraine-Russia war.

It’s a city thing

The ultrafast model doesn’t work well outside big cities.

That includes most of Canada, which is sparsely populated outside its few major cities, said Mike Mauti, managing partner of Execulytics, a produce analytics firm based near Toronto. Tiggy launched in Vancouver and then Toronto, also home to Ninja.

“It’s interesting. I'm not 100% sold on it yet,” Mauti said. “I don’t know why anybody would need their groceries that fast. It’s pretty outrageous.”

Andrew Cummings, a picker-packer at Gorillas in NYC
Gorillas U.S. picker-packer Andrew Cummings selects the items from a customer's order he sees on his handheld device. Photo: Amy Sowder

Mauti and other industry experts wonder how sustainable this ultrafast grocery business model can be with growing competition, labor issues and transportation costs.

The surviving ultrafast grocery startups also now face competition from the big guns, according to company news releases:

  • In February, San Francisco-based DoorDash launched 30-minute fresh grocery delivery from more than 330 Albertsons banner stores — including Safeway, Vons, Acme Markets, Jewel-Osco and Tom Thumb.
  • In September, Cincinnati-based Kroger and San Francisco-based Instacart launched Kroger Delivery Now to offer 30-minute delivery nationwide.
  • Also that September, Carlisle, Pa.-based The Giant Co., created Giant Instant Delivery with Instacart.
  • And in March, Instacart launched Instacart Platform to introduce to retailers three new omnichannel solutions, including the Carrot Warehouse, to help retailers create more flexible, local fulfillment models such as 15-minute ultrafast delivery.

Publix will use the Carrot Warehouse solution in Atlanta and Miami in the coming months for 15-minute delivery.

Also read this: Gorillas teams with anti-dieting nutrition app Wellory

Time will tell how this ultrafast-paced sector will evolve.

On that recent Thursday at the Gorillas New York store, operations supervisor Fawzul Mustafa stayed busy. “Orders come through and populate on this map,” Mustafa said, pointing to the standing-height monitor. “The rider captain assigns the order to the rider with customized delivery directions.”

At the produce aisle’s endcap, inventory associate Melaynie McGee examined hass avocados. Besides quality checks, she scans barcodes to ensure that the quantity in the system matches what’s on the shelf.

“Because you don’t want a customer to have what they ordered be out of stock. No one likes that,” McGee said.

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