Over the course of 2021, a host of companies offering delivery of snacks, toiletries and other typical convenience store fare in as little as 10 to 30 minutes popped up across major cities in the U.S. In contrast to Instacart and other hyperlocal delivery services that offer same-day delivery by fulfilling orders from stores operated by legacy retail partners, these new ultrafast delivery services operated their own fulfillment centers, commonly referred to as “dark stores.” These dark stores are located close to end consumers, enabling orders to be fulfilled and delivered within a matter of minutes. 

The ultrafast delivery players concentrated their focus almost exclusively on urban centers, as these areas boast the necessary logistics infrastructure and population densities to support rapid delivery. New York City emerged as the epicenter of the ultrafast delivery boom, with companies such as Gorillas, Getir, Jokr and Buyk all planting their flags in the metropolis. With their short delivery windows, these services allowed urban consumers to utilize online ordering for something novel: impulse purchasing. Now, consumers could use the internet to obtain groceries and other household essentials almost instantaneously, in much the same way they may have picked up a candy bar or soft drink in the grocery store checkout aisle in the past. Convenience store operators and other legacy retailers that found themselves forced to compete head-to-head with these upstarts braced themselves for the coming ultrafast delivery revolution.

Yet ultrafast delivery has since hit an unexpected speedbump. In December 2021, ultrafast delivery startup 1520 ceased operations. In March 2022, both Buyk and rival player Fridge No More completely shut down. Meanwhile, Jokr was rumoured to be in talks to sell its operations in New York City after reportedly sustaining massive losses (although Jokr disputes this claim). Also in March, Gopuff – the first mover in the domestic ultrafast delivery space and by far the largest operator in terms of sales and geographic reach within the U.S. – announced plans to lay off 3% of its workforce globally, formally shutting down speculation that it would go public any time soon. 

Clearly, the ultrafast delivery industry failed to sustain the momentum it appeared to have on its side just a few months prior. Some of the players in this space found themselves in unfortunate circumstances due to unique factors. For example, Buyk and Fridge No More were both backed by venture capital from Russia and were forced to suspend operations in the wake of Russia’s invasion of Ukraine. Yet there are several other systemic reasons contributing to the overall slowdown in the industry. After two long years of dealing with COVID-19, U.S. society is finally daring to look beyond the pandemic. As a result, a huge segment of the consumer base is eager to return to pre-pandemic shopping behaviors, which often means prioritizing shopping in brick-and-mortar stores over making purchases via the internet. Some consumers who may have been happy to experiment with a novel type of online retailing even a few months ago may now be more reluctant to do so. 

Additionally, with inflation hitting levels that have not been seen in the U.S. in 40 years, consumers who are looking to mitigate price increases on groceries and other household essentials are more hesitant to pay a premium for ultrafast delivery than they would have been last year, especially when products can still be easily obtained in person from a convenience store without delivery fees. Most importantly, the fact that none of these ultrafast delivery companies currently show signs of profitability in the U.S. is raising more concerns with investors now than it did a year ago, when e-commerce sales were growing by leaps and bounds. Margins on grocery delivery are already thin to begin with, and with a darkening outlook for the industry, venture capital has suddenly become harder to come by for many players in the space.

Despite these setbacks, ultrafast delivery is clearly not going away. Due to the COVID-19 pandemic, millions of U.S. consumers are now much more comfortable with on-demand commerce than they were previously, and a significant share of grocery sales that migrated online over the last two years will remain there for the foreseeable future. However, the ultrafast delivery landscape will look far different than it did during the heady days of 2021. With many smaller players struggling, there is certain to be consolidation within the industry, which will benefit the larger, more established operators. 

Gopuff, especially, appears to be in a strong position. While most of Gopuff’s rivals have concentrated exclusively on large metropolitan markets such as New York and Chicago, Gopuff has a long track record of operating in university towns and other tier-two cities, which gives the company a substantial head start in smaller metro markets. Indeed, Gopuff’s most significant competition – in the short-term – is likely not to come from Gorillas, Getir, or any other company originating within the ultrafast delivery space, but from DoorDash.

DoorDash got its start as a third-party aggregator for foodservice delivery, but it has rapidly expanded its ambitions into other areas of delivery since the start of the pandemic. In 2020, DoorDash launched DashMart, a virtual convenience store that allowed DoorDash to sell its own product inventory for the first time. DashMart operates much like a typical ultrafast delivery service, with orders fulfilled from DoorDash-operated dark stores. Additionally, in 2021, DoorDash announced that it would service DashMart orders in New York City in 15 minutes or less. 

Gopuff and DoorDash must be aware that e-commerce behemoth Amazon – with its massive scale, unparalleled U.S. logistics infrastructure, and ridiculously deep pockets – could encroach on their turf if it really wished to do so. For now, Amazon may be biding its time, waiting for the ultrafast delivery industry to show signs of profitability. If that time comes, Gopuff and DoorDash will need to watch their backs. For now, though, despite the hype around ultrafast delivery subsiding, Gopuff and DoorDash look to be poised for future success within the space.