Amid rising inflation, sliding GDP and warning signs of a recession, one economic factor has left experts perplexed: job growth. Economists, investors, and business owners alike are struggling to reconcile how an economic downturn and potential recession could occur at a time characterized by widespread labor shortages. Further complicating our economic environment is the fact that the housing market is on a fast track-cool down.
The fact is companies across industries are grappling with these mixed signals. It’s especially true for the businesses that experienced tremendous growth because of shifting consumer preferences due to the COVID-19 pandemic. Now as we enter the endemic stage of this nightmare, companies are struggling to meet the needs of a changing consumer while balancing what a recent INC. analysis dubbed a “different” kind of recession.
The instant-needs delivery sector is among the industries that finds itself in a precarious situation. While many companies in this space have had to walk out, it would be off the mark to write off the industry at large.
The instant delivery sector can survive this economic uncertainty by diversifying revenue through customer diversification, sector diversification and vertical integration. These mechanisms for diversifying revenue — outlined in the INC. analysis — provide companies with a multitude of opportunities, at different time intervals, to generate a profit. There’s a safety net here — if one revenue stream collapses in the wake of an economic downturn, there would be other streams in place to mitigate the loss.
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This is where most instant delivery platforms have failed.
In April, Jokr shut down its operations in Europe after what was a botched attempt at customer diversification. This predated the company pulling out of the U.S in June.
Getir is notorious for responding to problems with short-term solutions that increase cash burn, as opposed to altering its business model to include sectorial diversification.
Many fast delivery companies are even more vulnerable because they rely on local infrastructure and local operations, which requires an abundance of cash to start.
Many are asking: will anyone make it out alive? Yes.
For evidence, in March of this year, DoorDash announced a partnership with Wix, a website building platform, in order to integrate the DoorDash Drive white-label fulfillment platform into Wix websites and apps used by restaurants. This vastly expands DoorDash’s customer base and provides an additional stream of revenue.
Or take Uber Eats, which recently partnered with British co-operative group Co-op. The two have teamed up to launch a grocery products instant delivery service across the UK.
Gopuff also has prioritized revenue diversification through Gopuff Ads, which grew in revenue almost 170% year-over-year in July. Additionally, the company created Basically this year, its first private label line.
Experts in the field explain that fast delivery companies will need to adjust given the current market dynamics. Companies with a solid runway and diverse revenue streams will likely be the ones to come out of the current economic downturn because of their long-term value, not their ability to grow at a rapid rate as seen during the pandemic.
An unprecedented recession may be coming our way and some instant needs competitors are failing to innovate accordingly. Through sector diversification and vertical integration, companies like DoorDash, Uber Eats and Gopuff seem to have built the necessary revenue streams and infrastructure to keep the kitchen running through what could be a long period of uncertainty.
Eric Miller is a Global Fellow at the Woodrow Wilson Center in Washington, D.C. and a Fellow with the Canadian Global Affairs Institute in Ottawa/Calgary. He has been published in and/or interviewed by an array of leading news outlets including the Wall Street Journal, Financial Times, BBC News, The Guardian, Bloomberg and The Globe and Mail. He also is President of Rideau Potomac Strategy Group, a consultancy that advises private and public sector clients on North American, Asian and Latin American trade and business matters. Miller works with clients on trade and economic policy challenges, market development, resolving supply chain and regulatory issues, improving their government relations, understanding technology trends and navigating geopolitical developments.