Optimus Prime: How Gopuff is transforming home delivery

What do you do when it's only the second quarter and you're already out of chips? 

Or it's Valentine's Day and someone was expecting flowers three hours ago? 

Or you've got a Zoom pitch to a new client starting at noon and you haven't shaved in a week because you haven't shopped for razors in a month?  

These days, even two-day free delivery seems like a relic from the 18th century. For so many everyday situations it just doesn't work.

That's why "instant needs" delivery services like Gopuff were becoming so popular even before the pandemic. And why, once the pandemic led to major shifts in how we live and work, they started growing even faster. 

Today's consumers don't just wish the real world could be as seamless and responsive as the apps on their smartphones – they expect that it will be. And they want a lot more than just pizza delivered to their doorstops in 30 minutes or less. They want batteries, pet food, Tylenol, toilet paper, beer, ice cream, Covid tests, makeup, phone chargers, office supplies, etc.

But while the use cases for rapid delivery may be growing, actually mastering the technology and logistics that create great customer experiences in this realm is still extremely difficult.

That's why Gopuff stood out to me in a crowded field – so much so that Reinvent Capital, where I'm an advisory member, ended up investing in Gopuff's 2021 funding round.

Like most of the players in the instant needs market, Gopuff exists as an app on your phone that enables rapid delivery. If you live in one of the 1000+ cities that it now serves, you can get 20-minute delivery for more than 2500 different items. 

But it's what happens behind the scenes that makes Gopuff so intriguing. Unlike much of its competition, Gopuff is a first-party vertically-integrated company. That means it controls all aspects of the orders that occur through its app and never plays middleman for other merchants or restaurants. 

Compared to a third-party model like DoorDash or Instacart, this model adds complexity. But it also enables Gopuff to achieve far more control over order quality, delivery consistency, and the quality of service that customers receive and ultimately come to rely on. When literally every order is a rush order, operations can't just be good – they have to be excellent, adaptive, and geared toward constant learning and improvement. 

The foundation of Gopuff's model is a physical ecosystem. It currently operates ~600 micro-fulfillment centers (MFCs), averaging around 5000 to 8000 square feet in size, with an inventory of ~2,500 products. 

By purchasing products wholesale, Gopuff gets its profits from product margins rather than imposing high delivery fees on its customers. And because it controls all aspects of its business, it's also able to modify its product assortment and pricing to stay inline with actual instant-needs customer demands. Finally, since all Gopuff orders are fulfilled from a central location, operational efficiencies are much easier to hone through technology and execution. Currently it can pack the average order in just 90 seconds.

Under Gopuff's approach, the efficiencies of vertical integration ripple outward, benefiting all participants in the Gopuff ecosystem. Orders arrive quickly. Customers know that the products they've chosen are the ones they'll actually receive, with no last-minute substitutes, because Gopuff doesn't have to rely on whatever's in stock at the nearest Walmart. Centralized fulfillment means Delivery Partners can deliver more orders in less time. And Gopuff is able to continually strengthen its contribution margin per order (currently $4+ across the entire network and rising).

One irony of the instant needs market is that building highly optimized logistics and distribution networks is not an overnight proposition, much less a 20-minute one. Gopuff entered this space in 2013 and has been strategically iterating on and refining its model ever since. In its early years, it spread from college towns to mid-tier cities, and when the pandemic hit, it truly started blitzscaling to meet the needs of the moment.

Now Gopuff has more than 15,000 employees and serves more than 1000 cities. And I believe it's on track to establish itself alongside the likes of Airbnb and Uber as a digital-first, category-creating platform that's changing how we live in the 21st century. 

In this respect, Gopuff isn't just a 7-Eleven on wheels. It's an even more transformative platform that occupies a hybrid zone between bits and atoms. 

Consider how it has helped social media influencers like Mr. Beast and Emma Chamberlain roll out new product lines overnight. Or how it gave a lifeline to local retail businesses that were unable to maintain their usual walk-in businesses in the face of city-wide Covid restrictions. Or how it was able to instantly observe and track the spike in Pringles sales across its platform just moments after the potato chip brand aired an ad during the Super Bowl.

Data-driven and highly adaptive, Gopuff is perfectly positioned to bring new levels of convenience, utility, and delight to the instant needs market. Or to put it another way: Yes, Gopuff will always have what you need, when you need it – even as your needs shift at the pace of TikTok memes and Twitter timelines. Place an order and see for yourself. The future could be at your doorstep in 20 minutes.