Instant-delivery startups took over in 2021—but challenges remain for the long haul

They’re eyeing expansion plans beyond big cities, but larger players like DoorDash also want in on quick commerce.
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· 4 min read

Biking hastily beside the sidewalks of Manhattan are countless delivery workers rushing to drop off snacks like a pint of ice cream in under 15 minutes. Not (only) because it might melt, but because of the promise of instant delivery.

These startups—from Fridge No More to Gorillas to Jokr—have popped up across American cities seemingly overnight this past year. And more are on the way: Turkey–based Getir hit New York City this month, and also expanded into Boston.

  • Funding has come in step: “Dark convenience stores” raised $5.8 billion via VC investments in the first nine months of 2021, according to CB Insights.
  • Jokr became a unicorn less than a year after it was founded.

In population-dense areas like New York and San Francisco—where the need for speed dominates—these options can make sense.

“Big cities are not only easy to navigate for fast delivery, but often have a higher share of younger population, smaller households, [and] preference for ready-to-eat foods and snacks versus cooking a family dinner every night,” Inna Kuznetsova, CEO of 1010data, told Retail Brew.

But long-term success for these instant-delivery startups isn’t guaranteed—especially as they eye expansion plans beyond big cities. They’ll have to consider factors including regions, demographics, and if a household prefers the savings of a traditional store to fast delivery, Kuznetsova said.

Corner store: Tyler Trerotola, who helps lead Jokr’s US operation, stressed the importance of personalization when Retail Brew stepped inside its Williamsburg warehouse over the summer.

“One of the ways we’re going to differentiate is at the neighborhood level. We’re looking at the data every day, seeing what’s being bought,” Trerotola said. “What do the customers care about? Who is the target in that neighborhood? Williamsburg is a different customer than Union Square.”

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Will that be enough?

Despite new entrants, Instacart still dominates the same-day delivery market, growing 19% this year (through October), per 1010data; that figure was 15% in 2020 over the same time period. Meanwhile, transaction values on the platform have grown four times since the beginning of 2020, CEO Fidji Simo said at an October conference.

Delivery giants also want in on quick commerce. DoorDash introduced 15-minute delivery in New York this month, while Amazon and Uber have both expressed interest.

“On the wider point of rapid delivery, the substantial order volumes and pace of growth in the sector confirm that consumer demand for rapid fulfillment is there,” John Mercer, head of global research at Coresight Research, told us.

  • Coresight estimates quick commerce retail sales, predominantly in grocery and essentials, will total $20 billion to $25 billion in the US this year.

Looking ahead...Companies like DoorDash not only have the experience, but additional resources to sustain and develop their own solutions, explained Ashley Rocha-Rinere, manager in the consumer practice at Kearney, in an email. That could leave ultrafast-delivery companies in a precarious position.

“These companies have zeroed in on too small a use case that is easily solved by players already in the space,” she said. “Fifteen-minute players with scale today should begin to position themselves for acquisition before the delivery incumbents develop their own solutions and win the day.”

Some startups, like 1520, which reportedly ran out of cash a few weeks ago, have already been squeezed out. Mercer expects that trend to continue.

“The instant-needs space is looking unsustainably over-supplied and profit-challenged,” he said. “Consolidation, with some nascent players falling out of the market, looks inevitable given the glut of businesses competing on such similar unique selling points and often on the same turf.”

Retail news that keeps industry pros in the know

Retail Brew delivers the latest retail industry news and insights surrounding marketing, DTC, and e-commerce to keep leaders and decision-makers up to date.