Go Puff: Can they be an everything store?
It's time for quality and curation to meet convenience. Even Emma Chamberlain would agree.
Introduction: The expectations for GoPuff
If you look at #techtwitter it is easy to find people thinking Go Puff will inevitably be the next 100 billion dollar company, believing it stands on the precipice of logistics & product innovation that the world supposedly has never been seen before. (Hint: travel to Europe and Latin America and there are similar services that have been operating for years)
Go Puff though is a useful service that’s impressive in its execution and its number of almost 450 fulfillment centers- significant considering its humble roots as a Drexel University delivery service with 50 items that were often delivered by the founders themselves. But even with its inspiring story and remarkable growth, Go Puff can’t be everything for everyone. To put its sky high expectations into context, Go Puff raised money at a $15 billion dollar valuation in a recent funding round, and that was based on a 2020 revenue of $340 million. Go Puff, partly through its acquisition of BevMo, optimistically projects its 2021 revenue will reach nearly $1 billion.
By having micro-fulfillment hubs near their customers, which also includes West Coast Bevmo locations (a huge California liquor store chain it recently acquired), Go Puff can carry out lightning-quick deliveries in under 30 minutes, which costs the customer only $1.95 plus the driver tip.
Go Puff is said to be “thriving” despite the reality that the quality of their current products (outside of alcohol) leaves much to be desired, especially for pre-packaged food and quick meals. Also, it is unclear to me if consumers have any real attachment to their brand. Moreover, their current mediocre food options may spawn a negative association in higher-income areas that demand healthier items and higher levels of curation.
Editor’s market update Spring 2022:
See the market update at the bottom of this article, but a lot of our original observations of GoPuff’s weaknesses have proved to be very real and seriously hampered their quests for profitable growth.
Branding as GoPuff vs. letting others white label its platform:
Go Puff is far outperforming other on-demand delivery services from a logistics and organizational processes perspective, and their sub-30 minute delivery times speak for themselves.
However, there are swathes of people (especially in major coastal cities) with whom their brand may never resonate. After all, Go Puff narrowed its focus on alcohol and cigarette delivery for years. Even now, with their wider focus, they are trying to be everything or every product to everyone, and this creates problems with brand identity and complicates the development of a loyal following. Heck, even their core email marketing cadence just repeats that they have everything without providing any specifics…
One intriguing alternative could be letting influencers/brands build their own independent stores and apps that are simply fulfilled by the go-puff network of fulfillment centers and drivers. Everyone from top DTC brands and local food trucks to influencers could have their own store and or app and it would be much more seamless for them to market their products sans the noise and haphazard mishmash of product types crowding the Go Puff general app. Plus, they could set their own expectations for customers and run their own digital marketing campaigns (an approach that is not as feasible tied to the Go Puff app, although it is possible with the recent Go Puff ad platform launch).
For example, I am curious if Emma Chamberlain and her team have thought of simply connecting the back end of Go Puff fulfillment to their own Chamberlain coffee store or app rather than relying so heavily on the Go Puff app as the main “on demand” ordering channel. Go Puff will likely not promote them consistently on the front page like they are currently (especially as they launch more food brands).
At least for front page featured brands who have a “store within the greater go puff store” it is a more direct user experience rather than the overly broad and meandering ordering experience that their app layout can feel like at times.
The downside of a second tier city approach:
Interestingly Go Puff, primarily exists in what could be defined as second tier cities. It has a presence in New York City, London and Los Angeles with plans for expansion and storefronts, but its offerings there are more limited. In playing around with the app, I discovered that there are major neighborhoods where it doesn’t do delivery service at all, including top hotels. I also found that even with its deep presence in Miami, it has no service in much of South Beach. This is odd given the potential goldmine there due to the large number of late night partiers and hotels which would be easy enough to form partnerships with.
It should be noted too, that there is wide gap between what appeals to someone in Kenosha, Wisconsin vs. Santa Monica, California and having to constantly manage these differences by updating the store offerings in each market seems operationally intensive.
Also, consumers in high-end markets like NYC, LA, and London have much more to spend on high dollar product offerings, so Go Puff may be missing out on a bonanza there. For comparison, the upscale LA grocery store Erewhon, which only has six locations in Los Angeles and typically closes at 9PM, did almost three quarters ($250 million) of the revenue Go Puff did ($340 million) across their 450 locations last year. Arguably, such markets are saturated with the highest quality of local food businesses that would be worth partnering with (and often have no late night options) and could be brought to other markets in some form.
Lastly, a saying exists that almost all cultural trends start in LA and New York City, and even in the age of social media, I believe this to be largely true especially with all the digital creators who still live in those places. For a company needing to build its brand and cool factors, failing to prioritize these markets carries a huge hidden opportunity cost. Perhaps, they are just waiting until they can provide a better selection of prepared food and curated consumer products as they realize their current offerings are just not up to par for the consumers in those areas.
Like they say if you can make it Kenosha, Wisconsin or Manhattan, Kansas you can make it anywhere
Their lack of community problem:
BevMo liquor and their related dark stores are not exactly known for fostering a tight knit community. Relatedly, Go Puff lacks a community integrated pickup option, which is almost as popular as delivery for online orders in everything from grocery items to prepared food.
Again, without emphasizing real community integration, they are going to struggle to reach their potential. One-off influencer Instagram posts and social media ads are mostly ineffective in building a deep and tight-knit community insofar that they are superficial and fleeting.
Go Puff Kitchens & The current lack of high quality pre-prepared options:
When going on the Go Puff app here in San Diego there are scant products that I could see myself having to order urgently. It is great they have Olipop ,but Olipop has distribution almost everywhere already around here and I am not going to pay to have just a Olipop delivered. Granted, my diet is pickier as a vegan on a relatively whole foods diet.
It is hard for me to believe that anyone is excited to see Dole sliced peaches and lunchables as the top pre-packaged food options (SEE BELOW). Such options scream being in my elementary school cafeteria in 1999 rather than suggesting innovation, health or progress.
Ramen, pizza rolls, and “powdered” kraft mac and cheese as the top easy meals options also throw me back in time, but more so to my college dorm days and not in a way that induces happy nostalgia.
Given that there is substantial demand for healthy pre-packaged food and easy meals on demand it is rather sad that these are the top options. Near me, almost all the good restaurants remaining on delivery apps (not that many anymore) shut down by 9 P.M, even on weekends. This means there is an opportunity that they are failing to take advantage of, especially as it relates to late nights and early mornings.
It should be noted that Go Puff is trying to work on all of this, seemingly by breaking into prepared food and calling this new vertical “Go Puff Kitchens.” Yet, the screenshots below show how this a major work in progress. With rising food costs it also is not the easiest time to be launching a vertically integrated food service.
Hundreds of positions on their website are for this yet to fully launch Go Puff Kitchens vertical. Doordash has tried a similar vertically integrated effort in certain areas only to be met with average yelp ratings between 2 and 3 stars. While a great concept, building out customer awareness from scratch for prepared food even with a seemingly unlimited marketing spend budget will take time.
And in the markets where they currently offer prepared food, their primary focus is on traditional fast food items from Sizzle Pie (which was originally a food truck) like chicken tenders, breakfast sandwiches, pizza, milkshakes, ect. Conversely, any kind of serious effort to provide healthy and high quality cooked food remains to be seen.
In a way, this makes sense given that they are just getting launched, and those “fast food” items are probably higher margin while being infinitely easier to prepare and source ingredients for. Much to my dismay, the only healthy item I saw was bottled pressed juices.
To be fair their grocery vertical is somewhat more built out including for some specialty diet friendly products (keto, gluten free, vegan, ect.). Also, according to hngry.tv they are curating more and more local products, though this may be misleading insofar that their products aren’t locally sourced but rather catered to local markets. For somewhere like Dallas, this comprises everything from frozen empanadas and tamales to salsas and dips.
The promise of more niche versions of GoPuff; GoPuff for “BLANK”
Someone (perhaps even us at the three3 eventually for plant based food) is going to create a much more niche version of GoPuff in geographies that actually make sense (hello dense city centers and college campuses) as there is a huge untapped opportunity in delivering (or having convenient smart fridge & outpost pickup locations) of high quality products in a very hyperlocal area.
Comparatively, as noted Go Puff and other rapid delivery startups are trying to be “everything to everyone,” which may align with VC growth expectations but comes at an opportunity cost of optimizing for real curation and quality and in turn lasting demand. Go Puff’s recent launch of an in-app ad platform for brands seems to squash any hope of curation being prioritized over growth, at least directly within their app. Again, if I was someone like Emma Chamberlain, I would explore more curated options to grow my on-demand delivery options.
I believe there are a range of verticals, diets and interest areas where the “Go-Puff” for “BLANK” could theoretically work. If Go Puff can integrate with liquor stores, smaller footprint services could partner with their own multitude of community wellness studios, coffee shops, and cafes.
Heck I could even imagine upstart brands on the rise- like Andrea Hernandez’s Snaxshot-- one day creating their own Go Puff of curated snacks through the right fulfillment and pickup space partnerships in major metro areas. Her completely bootstrapped content operation (with a soon to launch product operation) arguably already has as many top fans as Go Puff does in major markets like LA, NYC, and SF. I doubt Go Puff could get as many people to sign up for “cult” snack offerings as she hosted recently in such places. As we continue developing our own platform, Snaxshot and brands like it provide more inspiration than the occasional late night, drunken mirage of Go Puff.
Market Update Spring 2022 From The Information:
“Gopuff Founders Ambitions Falter as Startup Bleeds Cash”
Lacking financial numbers:
“Gopuff’s heavy losses have turned off investors. Last fall, Gopuff talked to some investors about raising new equity at a valuation of more than $20 billion, said two people familiar with the deal talks. Some investors weren’t interested due to concerns that Gopuff had failed to show it could be profitable in most major American metropolitan areas outside Philadelphia, the company’s oldest market, one of the people added.
The freewheeling funding environment that allowed Gopuff to raise over $2 billion in cash last year to back its money-losing expansion into Europe and large U.S. cities like New York and Los Angeles has ended. It has already delayed plans for an initial public offering, which had been expected for the second half of this year, amid a sharp sell-off in technology stocks. Investors in both public and private tech companies are now focusing on backing companies with more-predictable revenue streams and lower costs.
Gopuff hardly fits that profile where costs are concerned. Last year, the delivery service lost $500 million in cash before one-time expenses like stock compensation and acquisition costs, while the Gopuff app generated around $1 billion in sales, said two people with direct knowledge of the matter.”
Faulty business model:
“Gopuff’s high rate of cash burn comes from its business model. Unlike rivals such as Instacart, Gopuff purchases its own inventory and pays to lease and operate hundreds of warehouses across the U.S. and Europe. The capital-intensive nature of the business has put a strain on smaller instant-delivery rivals amid the tougher fundraising environment. Jokr, last valued at $1.2 billion, initiated talks to sell its New York business in January to reduce losses, while New York–based Fridge No More went out of business in March after failing to raise cash from outsider backers.”
