business news in context, analysis with attitude

The Information has an assessment of "instant-delivery startups, which last year raised billions of investor dollars to finance a rapid expansion across the U.S., Europe and Latin America," but now are "confronting a bleak fundraising environment … they’re continuing to burn through cash despite their efforts to cut costs, raising a question of how long they can keep operating.

"With prospects for hefty venture fundraisings looking grim, some companies have been looking to sell themselves but hitting dead ends for months, multiple executives and investors told The Information. Some startups have also been turning to their existing investors in an attempt to extend their runway … For now, instant-delivery management teams and investors are focused on cutting costs and ditching expensive locations. That means instant-delivery firms are unlikely to buy others in the sector, particularly those that don't fit in with existing services or locations."

The story notes that "bigger firms that might have an interest in expanding into instant delivery are also unlikely to pull the trigger right now. Amazon, for instance, last year had considered investments or acquisitions of several midsize Europe instant-delivery startups such as Flink and Zapp, but talks never progressed beyond exploratory talks, two people familiar with the discussions said. Amazon declined to comment when reached.

"Grocery-delivery company Instacart has been actively making deals - including the purchase of Rosie Applications it announced on Wednesday - but it hasn’t yet inked anything with an instant-delivery startup. Instacart has attempted to differentiate itself by reiterating a commitment to delivering groceries on behalf of retailers, rather than following the instant-delivery model of buying and delivering its own inventory. Any sort of deal in the instant-delivery market would rock the boat with the merchants with which it has partnered.

"'We have absolutely no plans to work with or partner with any online, quick-commerce players,' an Instacart spokesperson said in a statement."

KC's View:

While I am a big believer in grocery delivery as a business strategy (though less convinced that anyone has figured out the economics necessary to make it profitable), the argument here all along has been that so-called instant delivery companies haven't just been working against financial realities.  They've also been working against the laws of physics - or, to put it more simply, traffic.

For me, promising delivery in 10 or 15 minutes is problematic when you don't know if the traffic lights are going to break your way, or if a cab is going to block your ability to make a right turn on red.  In such cases, the result is going to be a frustrated or disappointed customer.  Better to under-promise and over-deliver than over-promise and under-deliver.

Then, when you add the problems created by an inflationary environment and a possible/probable recession, you have a scenario in which it may be very difficult, if not impossible, for any of these instant delivery companies to deliver anything but tsuris.

Not my idea of a strong business plan.