Gopuff: Delivering Everything You Need Ultra-fast
The world is moving toward instant, and there's one rapid-delivery startup at the forefront—Gopuff.
One of the key learnings from the global pandemic is that time is limited. We'd rather spend our time on things and people that are most important. Rapid delivery is the differentiator for many shopping decisions since it saves time. And, for grocers, rapid grocery delivery is essential to remain competitive.
Gopuff is an on-demand solution. With the Gopuff app, you can order from among thousands of products stocked in the company's micro-fulfillment centers. Your immediate everyday needs are delivered within minutes in return for a flat delivery charge.
The company started in Philadelphia as the brainchild of two Drexel University students, Yakir Gola and Rafael Ilishayev. As students, Yakir and Rafael wanted a way to get late-night snacks and beverages without driving to a store. Prompted by their last-minute cravings, in 2013 they began Gopuff, by delivering the things college students craved, including their favorite snacks and drinks, tobacco, and hookah.
Let's plunge in to unravel the entrepreneurial journey of two best friends whose business idea became a $15 billion company in less than a decade.
The Game Changers
Both founders are spearheading the company as co-CEOs to date. Both have entrepreneurship practically racing through their blood from a very young age.
Yakir is a first-generation American. His father is from a low-income family and immigrated from Israel 45 years ago. Yakir learned a lot about running a small business from his self-starter, ambitious father.
He assisted his parents in running their jewelry business during his high school and college years. His most significant contribution to the business was building the online jewelry store at just 16. By the time he turned 18, the business was making millions of dollars in revenue.
In 2011, Yakir met Rafael on the first day of their Business 101 class. Rafael is a first-generation American whose Middle Eastern family moved to the United States when he was two. His family had moved from Soviet Russia to escape communism.
Rafael worked with his entrepreneur parents from the very young age of 11. His father had a restaurant business and later a banquet hall, and his mother ran a medical supplies enterprise. Growing up, he gained a lot from these diverse experiences. He credits his parents for making him an extremely focused and hard worker.
Yakir and Rafael had much in common, including their mother tongue and entrepreneurial family backgrounds. They became close friends during their two years together at Dexter University. During those fun years, Yakir was the only one among their friends with a car.
Known to be the nice guy, Yakir drove everyone around to fulfill their late-night cravings for snacks and drinks. He'd always go through the hassle of stopping at multiple stores to ensure all his college friends got what they wanted. But, he felt there needed to be a better way.
Inception of a Disruptor Brand
One day, while doing the pickups, as the hassled designated driver, Yakir stopped to think there must be a better way of doing this. So, he and Rafael sensed a unique business opportunity and mocked up their original idea on the back of their business class notes.
Their idea was to order those items via the internet and get them delivered instantly to your dorm or apartment.
Bringing that idea to life would help students quickly get their favorite snacks and soda late at night without a car and a trip to the convenience store.
Everybody, Yakir and Rafael shared their idea with thought it was absurd. No one offered to pitch in and be part of the venture. Yet, with the firm belief that their idea would work with college students, they decided to push on with it.
For the next few months, the duo resorted to selling office furniture to gather funds for their big business idea. Through the furniture sales, the co-founders were left with a net cash influx of $60,000. This amount helped them buy initial inventory, set up their warehouse, and develop the envisioned app.
Yakir and Rafael launched Gopuff in December 2013 from Philadelphia, Pennsylvania. They started by going live with the initial version of the Gopuff app. Their next challenge was to push the business to get sales. Since they could not afford to pay anyone, they initially did everything themselves.
They exaggerated the size of their customer base to convince manufacturers to give them inventory on credit. They offered free bottle openers, lighters, and magnets to every student that tried the Gopuff app.
When the orders finally started coming in, the co-founders ran the deliveries themselves for the first six months using the back of their Plymouth Voyager. They also did the marketing, bookkeeping, customer service, and everything else themselves.
Years later, their game-changing business idea and the catchy name stuck. Although the name 'Gopuff' evokes the hookah pipe, the company doesn't sell tobacco products today. Instead, the basis for the name is creating curiosity. As a result, the name is a hit among Millennials, who also love the edgy product descriptions.
The duo worked hard, often up to 16 hours daily. But the hard work paid off. Less than a year after the inception of Gopuff, they had 25,000 customers and 25 drivers.
With the initial growth, the duo decided to expand their focus. So, they turned the business into an on-demand convenience store for everyone.
The pivot meant they had to alter their marketing strategy to cater to a broader audience. As a result, the average customer's age was boosted from 18-22 to 25-34. With that, Gopuff was well on the way to witnessing massive growth.
Gopuff’s Business Model
Gopuff disrupted the market by operating on a unique inventory-based e-commerce business model.
The company buys products directly from various manufacturers and stocks them in warehouses. In addition, the company has hundreds of micro-fulfillment centers (also called dark rooms). Due to this, instant delivery is possible— orders are fulfilled within 15-20 minutes.
By the end of 2022, Gopuff has an extensive network of delivery partners across its locations, which include over a 1000 cities.
The company purchases, stores, and sells its products directly to customers. Since there are no middlemen involved, customers benefit by saving through low delivery fees and low pricing of items.
Gopuff makes money by selling products and making revenues from running ads on its platform. The Gopuff delivery fee is $3.95 per order (increased from $2.95 earlier), with an additional $3.95 added for orders containing regulated products like alcohol. The company has recently started making money through better placement on its app.
Achieving Growth in a Crowded Field
Due to the pandemic, Gopuff earned $1 billion in revenue in 2021, which is three times the amount made in 2020. Still, the company isn't profitable in a quarter of its 18 months and older centers. But, Yakir and Rafael credit this to their spending on the company's hypergrowth.
The company is known for pioneering the "instant needs" category. Yet, today, it's part of a crowded field in which companies compete on delivery speed, variety, and pricing.
Gopuff sells more than 4,000 items, from pet food and baby products to alcohol and a lot more. Orders are collected from the micro-fulfillment centers by contract workers and then delivered to the customer's doorstep within 30 minutes.
As enterprising co-founders, Yakir and Rafael left no stone unturned in making their idea perform. In fact, Gopuff's incredible performance is credited to the fact that about 30% of Americans are within a mile and a half of a Gopuff fulfillment center.
The relentless growth attitude of Yakir and Rafael has helped take the company places.
In 2021, Gopuff was named on CNBC's Top 50 Disruptors list. This list features companies transforming the economy, disrupting technology, and changing the industry.
Today, the speed delivery company has about 13,000 employees and locations in over 1,000 cities across the U.S., Spain, the U.K., and France.
The two hardworking co-founders have been adding 40 to 50 micro-fulfillment centers monthly. They've also been consistently introducing new categories. For instance, in select locations, Gopuff recently started delivering freshly prepared foods like coffee, sandwiches, and pizza delivered hot.
More recently, Gopuff has partnered with the food courier platform Uber Eats in the UK. The strategic tie-up allows customers to use Uber's food courier platform to purchase Gopuff's curated range of alcohol, snacks, and groceries.
Gopuff’s Valuation, IPO, & Future Plans
According to Gopuff, they've raised $4 billion at a $15 billion valuation up until now. For the time being, the company has postponed plans for an IPO it targeted to happen around mid-2022 due to unfavorable current market conditions.
In March 2022, their product line in the U.K. was extended through a tie-up with the supermarket chain Morrisons there. In addition, there were plans to collaborate with retailers in the U.S. to boost profits further.
Contrary to those plans, there have been four rounds of layoffs in 2022 amid a slowing economy. Over the past 10 years, Gopuff is one of the fastest-growing startups to emerge from Philadelphia. Yet, the co-CEO’s bold yet uncomfortable steps, such as the layoffs this year, align with the company’s target to get back to profitability by 2024.