'We're going to be there': Why direct-to-consumer brands are jumping on instant delivery
Need an adaptogenic soda, a keto-friendly cheesecake or a set of linen bedding in two hours or less? There’s an app for that.
One afternoon in November, Sam Oshins found himself doing some impulse shopping.
Instant delivery platform FastAF — which promises to deliver anything from exercise weights to luxury bed linen to your door in two hours or less — was running a 50% off promotion, so Oshins filled up his basket with three candles, a tube of toothpaste and a Sparkling Botanicals soda. One hour and 56 minutes later, a courier handed it over to him in a FastAF branded tote.
“Why did I do it? There was no need. In New York City, and in most major metropolitan areas, I don’t need to order anything. And I try not to — it’s easier, often cheaper and better for the world if I walk out my front door,” Oshins, a community manager at Shake Shack, reflects. But still, the opportunity to try out a bunch of brands he’d been following on Instagram (and at a decent discount) seemed like a fun thing to try.
Startups have been springing up across the U.S. and Europe to get goods to your door as quickly as possible. While grocery has been the main focus of this sector to date, a number of platforms now appear to be tapping into the potential for a broader range of consumer products (particularly those from digitally native brands) to grow their market share.
FastAF, launched by logistics startup Darkstore in November 2020, now stocks a curated selection of products from over 600 brands, which can be delivered to customers within two hours in Los Angeles, New York and San Francisco. Founder, Lee Hnetinka, says beauty and personal care items are the most popular on the platform, and that customers spend an average of $142 per order.
Earlier this month, it closed a funding round that put its valuation at $200 million.
Meanwhile, its competitor Ohi, which works with direct-to-consumer brands to offer rapid delivery through their own websites, closed a $19 million funding round in October. It has partnered with more than 50 brands, including beverage brands Olipop and Health-Ade and clothing brand Untuckit, and it plans to make its rapid delivery service available in 25 cities by the end of next year.
More established players are getting in on the action, too. Founded in 2013, Gopuff now has over 550 fulfillment centers serving over 1,000 cities across the U.S. and Europe, and has more than 4,000 products available for delivery within 20 minutes or less. It started in the grocery space, and now offers a number of direct-to-consumer brands such as prebiotic soda maker Olipop, adaptogenic drinks brand Droplet and men’s skincare brand Atticus. Last August, it announced a deal with cosmetics giant Coty, and in October it partnered with hot sauce brand Truff to launch a takeaway pizza through its Gopuff Kitchen arm.
Supply chain struggles have made the online shopping experience somewhat fraught for customers in 2021, particularly for those with a tendency to leave things to the last minute.
While brands have been advising customers to place their Christmas orders as soon as possible, for example, instant delivery apps (which only let people order items that are actually available at their nearest fulfillment center) are a good alternative for those looking to get hold of items last minute.
It’s a trend that’s been growing for some time, as e-commerce brands looked to replicate the in-store shopping experience as closely as they could (in the U.S., an estimated 70% of retail sales will still take place in stores for the foreseeable future). In store, shoppers can not only touch and test products, but they can take them away as soon as they’ve been purchased. Online, they’ll have to wait the best part of a week. Stores also normally stock products in much more manageable quantities — a single can of soda, say, rather than the case they might have to purchase on a direct-to-consumer brand’s website. Instant delivery apps bridge some of these gaps.
“Broadly what we’re trying to accomplish with fast commerce is to give people the ability to get as close to instant gratification as we can,” says Eli Weiss, head of customer experience at Olipop, which uses Gopuff, FastAF, and Ohi. “If consumers are looking for a drink late at night, we want to make sure it’s Olipop.”
It’s a less profitable way of shifting products than selling directly to consumers, but the platforms' pitch to brands is that, much like Uber and Lyft did with ride-hailing, they are encouraging consumers to engage in a new (and habit-forming) way of shopping. Ohi says that its platform can help brands increase repeat purchase rates by as much as 120% compared to longer delivery times. It charges customers a fee per delivery on top of other subscription fees, while FastAF and Gopuff work on a wholesale model.
These apps are still relatively young, and the brands Thingtesting spoke to are still figuring out what works best for their customers.
At the start of this year, keto cheesecake brand Wonder Monday ran a three-month trial with CloudRetail, a third-party logistics platform that sets brands up with their own storefronts on platforms like UberEats, DoorDash and Postmates. The goal was to understand how quickly Wonder Monday's products would move at different price points, and therefore what it might be like to enter a physical retail location.
To cover the costs of working with CloudRetail, Wu says she priced her cheesecakes at three for $24, compared to $75 for 28 on the Wonder Monday website. This works out as $8 and $2.68 per cheesecake, respectively.
“Inventory management was a challenge, because [CloudRetail is] managing a bunch of different orders,” says Candace Wu, adding that it wasn't always clear whether or not her products were still in stock on the platform. “But if you really want to experiment, it’s the only way to do it unless we open a store.”
“Customers will need to decide if having it now warrants the additional costs, versus having it shipped to arrive in one to five days,” says J.P. Mastey, the founder of deodorant brand Corpus Naturals. “It seems it’s a mixed bag at this point, [with] a lot of testing where the costs are being absorbed by brands and the platforms. The next phase is [to see] how much customers will pay extra.”
While brands, platforms and investors (who poured $14 billion into these apps between March 2020 and April 2021) are all pushing for ultra-fast delivery to become the norm, it’s not yet clear how much of an appetite for this there really is from consumers.
Some products make sense on these platforms — it’s feasible that one might find themselves short of eggs or milk, and not want to make the trip to get them. But do people really need scented candles and natural deodorants so badly?
“I’m probably not interested in going to other similar channels,” says Wu, explaining that while her instant delivery experiment was profitable, she ultimately sees these apps as appealing mostly to young adults who are after late-night snacks. “We don’t fit that category, and I haven’t seen any similar brands like us succeed on [those] platforms.”
Ohi’s founder Ben Jones agrees that for certain product categories, instant delivery doesn’t make too much sense. “Beverages, beauty and personal care products that people need right away are a natural fit. Heavy, bulky items like large appliances and furniture, or other items that don’t tend to move quickly, aren’t.”
For the brands themselves, there are also trade-offs that need to be made when letting a third-party platform present products to customers. Instead of providing a beautiful unboxing experience, like many direct-to-consumer brands prioritize, typically orders made via instant delivery platforms are handed over with the shipping packaging swapped out for shopping bags. “It’s better for us when we can control the experience,” Weiss admits.
Still, he believes instant delivery will continue to be an important way for Olipop to get its product into customers’ hands. “At the end of the day our goal is to be everywhere,” he says. “And if people are purchasing beverages on Gopuff, FastAF, Gorillaz, we’re going to be there.”