Will private labels help rapid delivery firms reach profitability?
Two rapid delivery start-ups, Gopuff and Buyk, have announced plans to expand into private label in moves that promise to provide a competitive point of difference and support a road to profitability.
Gopuff, the largest rapid delivery startup with a focus on CPG essentials, is launching its “Basically,” label with bottled water, to be followed by cleaning products, batteries, paper products, cutlery and food storage. The company will introduce snacks in coming weeks and other products in coming months.
Jessica Glendenning, a Target veteran who most recently served as head merchant at Brandless, is guiding private label development.
Daniel Folkman, Gopuff’s SVP of business, said, “After over eight years of delivering instant needs, we truly understand what our loyal customers look for in everyday essentials — insights that have enabled us to create product lines designed specifically for them.”
Buyk, a grocery-focused platform that operates in Chicago and New York, is rolling out coffee, ice cream and candy under its own brand with plans for private label to account for 40 percent of its total sales.
“We are confident that this ever-expanding private label line-up will quickly become a fan favorite,” said James Walker, Buyk’s CEO.
The ultrafast-delivery space (most services promise 15-minutes delivery or less) continues to attract major venture capital. Typically, the start-ups use dark locations to drive pick and pack efficiencies and save money versus pulling goods from stores. Owning their own inventory promises to support margins. Most charge delivery fees under $2 with no service fees.
Profitability, however, has so far been elusive due in part to hyper competition that deters moves to raise fees. In just New York City, Gopuff and Buyk compete alongside Getir, Jokr, Fridge No More and Gorillas.
The push toward private label may create some differentiation to avoid competing mostly on price and speed. Private labels also typically offer bigger margins.
A Wall Street Journal article noted, however, that rapid delivery’s profitability going forward will likely be challenged by the limited inventory typically available in dark locations, the ultimate requirement for extensive infrastructure to support expansion and competition from larger delivery players. DoorDash entered the rapid delivery channel in 2020, and DashMarts and Instacart reportedly plan to test ultrafast delivery early this year.
- Gopuff Expands to Private Label with the Launch of “Basically,” – Gopuff/Business Wire
- Ultrafast Grocer Buyk Rolls Out Private Label, Signs Exclusive Partnership with Pat Lafrieda – Buyk/Business Wire
- Gopuff, the instant grocery startup, is raising $1.5B in a convertible note at up to a $40B valuation, ahead of going public as soon as mid-2022 – TechCrunch
- Fast Grocery Delivery Can’t Make Fast Money – The Wall Street Journal
- Inside Gopuff’s Ambitious and Costly Bid to Dominate European Instant Delivery – The Information
- Gopuff will now sell its own line of products, starting with bottled water – The Philadelphia Inquirer
- How disruptive is the rapid delivery model to grocery? – RetailWire
DISCUSSION QUESTIONS: Will private label offerings become a key strategy for shoring up differentiation and profitability among rapid delivery firms? Will adding private label make delivery services more of a threat to the local retailer?