Profitability instead of expansion: express delivery services slow down

Profitability instead of expansion
Lightning delivery services slow down

Until now, investors have willingly put their money into ultra-fast delivery services like Gorillas or Flink. But a lot has changed in the meantime. Many companies are currently suspending their funding rounds. Instead of aggressive expansion, the focus is now on being in the black.

Their backpacks and bags are black, purple-yellow or pink and they tour Berlin, London and New York on bicycles and electric scooters. Express delivery services like Gorillas, Getir or Flink compete for the attention of customers who want groceries delivered by couriers in the shortest possible time. For this they need fast drivers, many small camps and good apps with interesting offers. That gobbles up millions, which investors have so far made available because of growth prospects.

But a lot has changed: Food delivery services are no longer the stock market darlings they used to be. With the expected interest rate hikes by central banks, capital will no longer be so cheap, high inflation and the war in Ukraine are holding back the economy. Multi-billion dollar startups need to rethink and adapt their aggressive expansion strategies. “We are now focusing on existing markets, also to achieve profitability,” says Gorillas CFO Elmar Broscheit.

Analyst Clément Genelot of investment bank Bryan, Garnier & Co. describes the new strategy that almost all companies are now postponing their funding rounds and laying off staff to control costs and buy time. He justifies the development with growing doubts that breakeven will ever be reached and concerns that current valuations are already too high.

According to experts at consulting firm Alvarez & Marsal, to break into the black, customers would have to spend more money per order, increase shipping rates, and improve utilization of individual locations.

Getir doesn’t have to worry about losing money

One of the services that has already had to draw conclusions from the cost dilemma is Jokr. The Berlin startup has turned its back on the Austrian and Polish markets and is concentrating on Latin America and the United States. “It was a matter of focus,” says company boss Ralf Wenzel, who once worked for Japanese tech investor Softbank. Jokr was only promoted to unicorn in December, later than Getir, Gorillas, and Flink.

“The money from our most recent funding round hasn’t run out yet. There are still hundreds of millions outstanding,” says Wenzel. He doesn’t want to spend this wholeheartedly, but wants to point the way to the black figures due to the better cost structure in Latin America: “In Latin America we are already generating positive contribution margins. Our goal is to do this in two to three months, including the US business. We would be the first grocery delivery service to do that.”

The gorillas are also trying to control their consumption of cash. “Now we want to make our core business, the warehouse, profitable. If we show that we are pursuing this rigorously, we will continue to have good access to capital,” says Broscheit, who worked for Macquarie for a long time and last year the Entrance of the Delivery Hero group from Berlin Dax in Gorillas.

Turkey’s Getir doesn’t have to worry about running out of money at the moment. The company alone raised almost $770 million from investors in mid-March and has since been valued at $12 billion, roughly four times more than Germany’s Gorillas and Flink. But the company, which was founded in 2015 and describes itself as a pioneer in the express delivery industry, now wants to slow down. “This year we are focusing on growing in the markets in which we are already present,” said the European head of Turancan Salur. Getir is currently active in nine countries: there are seven in Europe, Turkey and the US. To extend its dominance in the UK, Getir took over rival Weezy, and Gorillas recently acquired French express delivery service Frichti.

Niche providers want to benefit from development

Many experts assume that a wave of consolidation will take place in the medium term. According to Alvarez & Marsal, the large number of current suppliers will not be able to survive. However, the Genelot analyst is sure that the express delivery services will remain with us. During the Corona crisis, customers would have liked to receive the products as quickly and easily as possible.

Niche providers like halal food delivery service GetHalal or pharmacy delivery services like Mayd also want to benefit from this development. The boss and founder of the Mayd company, Hanno Heintzenberg, who previously created the real estate agent McMakler, even sees himself at an advantage: “We have two levers that we can use to be profitable. The shopping cart and the efficiency of the drivers. In contrast We don’t have warehouses or perishables for gorillas, agile and the like. We can also work well with time windows, which helps with capacity utilization. Medicines aren’t heavy either, so multiple deliveries can fit in one backpack. “


Leave your vote

Leave a Comment

Log In

Forgot password?

Forgot password?

Enter your account data and we will send you a link to reset your password.

Your password reset link appears to be invalid or expired.

Log in

Privacy Policy

Add to Collection

No Collections

Here you'll find all collections you've created before.