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Rapid Delivery Apps in Los Angeles Are Facing a Reckoning
04:24 PM | July 27, 2022
After a couple of years where pandemic lockdowns made lightning-fast, app-based delivery essential, the industry is facing a shakeout—and apps that promise delivery under 30 minutes are facing an existential crisis.
The so-called “dark store” model – which forgoes the traditional corner store for a sprawling warehouse that delivers through mobile apps – exploded during the pandemic. But many of those companies are now struggling to become profitable, largely because of rising overhead costs.
The Industry and the Challenges
At stake is a multi-billion industry aiming to deliver everything from groceries to convenience items and hot food, through bikes, cars, drones and even robots. Operating from a number of competing platforms, those companies saw sales more than double during the pandemic. Few experts see the industry disappearing entirely, but the sector is widely expected to shrink. The coming months and years will determine which model wins out.
Celia Van Wickel, senior director of digital commerce for analytics and brand consulting firm Kantar Group, told dot.LA she expects the bubble to burst—and soon, as venture firms become more discerning about their investments.
“Valuations are declining [and] money is not being forthcoming to rapid delivery companies,” Van Wickel said. Even as the economic climate becomes more challenging, some companies do have the chance to rise above the fray and gain market share – and satisfy investors – while others could be destined to go bust.
“[Investors] really want to see a profitable model, kind of akin to what we've seen in the dot-com era, where the bubble burst on ecommerce,” Van Wickel said. A lot of money was thrown into these new companies, they weren’t really profitable and then all of a sudden a lot of them collapsed.”
Some venture capital firms were “just investing to invest,” Van Wickel added, to see how the delivery market fared. She predicts they’ll soon become more judicious about who they fund. Burning cash without turning a profit isn’t going to be acceptable in the long term, she added.
Along with slackening consumer demand and less VC investment in the space, nearly every fast delivery company that relies on fulfillment centers, even Amazon, is going to face steep real estate, upkeep and staffing costs. Rapid delivery firms will need to spend big on real estate to operate fulfillment centers across cities that enable them to get to consumers fast.
Image courtesy of Duffl.
Philadelphia-based GoPuff, one of the largest new rapid delivery services to enter in Los Angeles alongside DoorDash, Instacart and Uber (which also offer convenience delivery in addition to food) depends on having quick access to warehouses throughout the region. It bought liquor store chain BevMo in a bid to gain access to lucrative (and hard- to- get) liquor licenses and warehouses. It aims to save money by installing micro-fulfillment centers “within almost every” BevMo store that can service deliveries, its CEO told the L.A.Times. Still, it laid off 10% of its workforce in July after cutting about 3% in March, and shut 76 warehouses. GoPuff originally had plans to go public in mid-2022 at a $15 million valuation, but shelved them.
But GoPuff is not alone. Instacart cut its valuation forecast by 38% in March citing “poor market conditions,” and international rapid delivery startups like Gorillas, Getir and Zapp have also cut staff recently.
The layoffs suggest that rapid growth may no longer be enough.
“The GoPuff CEO basically said, ‘hey, we were getting a lot of investments by just showing top line incremental growth,’ they were growing customers and growing markets and that was okay enough for investors in 2021,” Van Wickel told dot.LA. “But now they're being pressured to really look at how their company is profitable [and] they're being asked to do this very quickly, or their investment will not be forthcoming.”
GoPuff pointed dot.LA to a recent shareholder letter that said it is “already driving 76% [year-over-year] sales growth for the core business.”
“GoPuff is the only company in this space that has proven it can be profitable at a city and regional level,” co-founders Yakir Gola and Rafael Ilishayev wrote. “We are now targeting full company profitability in 2024 while maintaining a strong cash balance throughout.”
An URB-E rider hauls deliveries in Santa Monica. Image courtesy of URB-E
Despite the headwinds, the rapid delivery industry “feels like it's here to stay,” said Alex Vasilkin, co-founder and CEO of Cartwheel, a Hollywood-based startup that makes delivery management software and recently raised a $3 million seed round in April.
“There’s all these dark kitchens opening, there are all these different startups popping up with drone delivery, and scooters delivery and hyperlocal, 15-minute delivery so I feel like there’s more options for customers and so far, we've seen it getting bigger and bigger,” Vasilkin said. Cartwheel works mainly with restaurants, but is looking to find “very big partners in mostly the alcohol space,” its co-founder Magdim Metshin told dot.LA.
The need for rapid delivery isn’t likely to disappear so long as people decide they need items fast and can’t make the trip themselves. The question is now “which companies can iron out their paths to profitability before they’re forced to go bankrupt?,” Van Wickel said.
“I think there's a balance between what the consumer wants and what behavior’s going to change,” she added. “To me, it's all about on-demand. So we're changing the model to an on-demand model… it’s changing the trip occasions out there from stocking up to more grab-and-go convenience models.”
Startups that seem poised to weather the storm are the ones that can control every aspect of the business – including supply, warehousing, distribution and, crucially, their apps. Usually, they’re seeking buyouts from larger companies that have existing infrastructure in place for this exact reason.
“I don’t think we have quite a winner yet; I think there’s [companies] that are more set up to win,” Van Wickel said, adding that it’s mostly “the companies that do have some cash on hand today to continue to iterate their business models.”
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07:08 AM | November 13, 2020
Shahid VIP launched in the Middle East and North Africa in January 2020. The timing couldn't have been better. With so many people stuck at home during the pandemic, the Arabic streaming service racked up 1.4 million subscribers, making it serious competition for Netflix in the region. Now, it's eyeing the U.S. and Canadian market with its six million or so Arabic speakers.
Los Angeles, home to Tinseltown and where Netflix has a massive footprint, will be the epicenter for that effort, which began in November.
Owned by one of the Middle East and North Africa's largest broadcasters, Dubai-based media conglomerate MBC, the streaming service will carry live channels, regional versions of shows like "Arab Idol" and "The Voice," sports programming, movies and television series. It costs $8.99 per month or $79.99 per year and will be free for the first 30 days to U.S. subscribers who sign up in November.
Sadek Sabbah, chairman of Sabbah Brothers group, a media company started by his grandfather in the 1950s, will be one of the creators filling Shahid VIP's pipes. The service has an exclusive deal with Sabbah's production company, Cedars Art Production, which will include new seasons of two of MBC's most popular shows, "Al Hayba" and "Aswad Fateh"; past seasons of the former are already available on Netflix. Cedars shoots primarily out of Lebanon, Morocco and Egypt and has garnered awards from Cannes, Toronto and Venice film festivals.
In addition to serving the Arab diaspora, Sabbah hopes to reach non-Arabic speakers, particularly young adults, by sharing stories that have a ring of familiarity. He cites Aladdin, Lawrence of Arabia, Cleopatra and Ali Baba shouting "Open Sesame!" as examples of well-known storylines and themes rooted in the rich heritage of the region, which he hopes will be a complement to exposing viewers to the varied and exotic sceneries and communities of the Middle East.
dot.LA: Tell me about what working with Shahid VIP does for you as a producer.
Shahid VIP platform has liberated us from the constraints of linear TV and catering to the taste of the majority. We now have the ability to unleash our aspirations by producing cutting-edge series and films that tell universal stories with a twist of exotic.
We'll also bring new ideas to better attract certain audiences, especially young adults in the U.S. and Canada. We have the opportunity to tell good, important stories that may be exotic for them but at the same time, especially for Arabs, stories that will remind them of their roots.
Sabbah Brothers chairman Sadek Sabbah will be producing several shows for Shahid VIP.
How does streaming on an international platform affect the types of messages your stories can carry?
With Shahid, we are in a better position to tell controversial stories. Our hands aren't tied anymore, and we are working hard on stories that will resonate in Arab countries, Arabs in the U.S. and Canada, as well as stories that might be of interest outside the Arab diaspora in the U.S. and Canada. We've already had several success stories of popular shows that were dubbed into Spanish and Portuguese. This is because we're telling stories that have a universal scope but with the taste of the Arabic countries where we are shooting. And now we are free; we have no border lines.
Can you give me an example of a new type of story you're now able to tell?
One of the ideas that came up a few weeks ago is talking about Jews that came from Arab countries.
Older families from our area remember how they were living door by door with the Jewish community – in Lebanon, Egypt, Syria, Iraq – and it's important to tell those stories because they are the stories of where those Jews who are now in the U.S. and Canada came from.
How did Arabic television limit the stories you could tell?
Linear television, in addition to being made for all the family, is mostly governmental, and the government likes to be on the safe side, always. So we always have to be careful. We've come up with many stories that we couldn't do for many reasons: religious reasons, political reasons; We had to be careful.
With Shahid, we can present any type of series, and any type of dimension. For example, in the Arab world we have Ramadan, a holy month that is also very important for viewership because everyone is at home, fasting, and most of them are watching television from the early morning on. Because it's 30 days, for many years we had to do 30 episodes – even if the story could be done in 20 episodes, we had to stretch it out to make it 30.
2021 and the years to come – but especially 2021 – will be a real test for us because we're putting all our efforts as a group to make great productions. We know that we have a responsibility, especially as a group with so much time in this business.
Do you see that as a responsibility to pave a path for other Arab storytellers and creators to follow your footsteps into these broader storylines and wider audiences?
One hundred percent. We have a fairly big industry in the Arab world, and we work with many countries in the region. We see ourselves leading this industry in this new direction. I'm sure many of our friends in the media sector are preparing as well, and some are already leading with us, or they will soon.
What do you hope to achieve with success on Shahid VIP?
My hope is to bring the world near each other – to bring the people of the world together and to know more about their stories. It's very important to know a little bit about other people's lives. Also, we hope we can contribute to a U.S. co-production soon. If we can really prove ourselves on Shahid VIP, this will open our possibilities to work on a bigger scale. And I hope that we will end up making the media sector in the Arab world bigger. This is the beginning. We are really on the first word of the first sentence on the first page.
Sam Blake primarily covers media and entertainment for dot.LA. Find him on Twitter @hisamblake and email him at samblake@dot.LA
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Sam primarily covers entertainment and media for dot.LA. Previously he was Marjorie Deane Fellow at The Economist, where he wrote for the business and finance sections of the print edition. He has also worked at the XPRIZE Foundation, U.S. Government Accountability Office, KCRW, and MLB Advanced Media (now Disney Streaming Services). He holds an MBA from UCLA Anderson, an MPP from UCLA Luskin and a BA in History from University of Michigan. Email him at samblake@dot.LA and find him on Twitter @hisamblake
03:49 PM | October 14, 2022
Thanks to a new bill passed on October 5, California drivers now have the choice to chuck their traditional metal license plates and replace them with digital ones.
The plates are referred to as “Rplate” and were developed by Sacramento-based Reviver. A news release on Reviver’s website that accompanied the bill’s passage states that there are “two device options enabling vehicle owners to connect their vehicle with a suite of services including in-app registration renewal, visual personalization, vehicle location services and security features such as easily reporting a vehicle as stolen.”
Reviver Auto Current and Future CapabilitiesFrom Youtube
There are wired (connected to and powered by a vehicle’s electrical system) and battery-powered options, and drivers can choose to pay for their plates monthly or annually. Four-year agreements for battery-powered plates begin at $19.95 a month or $215.40 yearly. Commercial vehicles will pay $275.40 each year for wired plates. A two-year agreement for wired plates costs $24.95 per month. Drivers can choose to install their plates, but on its website, Reviver offers professional installation for $150.
A pilot digital plate program was launched in 2018, and according to the Los Angeles Times, there were 175,000 participants. The new bill ensures all 27 million California drivers can elect to get a digital plate of their own.
California is the third state after Arizona and Michigan to offer digital plates to all drivers, while Texas currently only provides the digital option for commercial vehicles. In July 2022, Deseret News reported that Colorado might also offer the option. They have several advantages over the classic metal plates as well—as the L.A. Times notes, digital plates will streamline registration renewals and reduce time spent at the DMV. They also have light and dark modes, according to Reviver’s website. Thanks to an accompanying app, they act as additional vehicle security, alerting drivers to unexpected vehicle movements and providing a method to report stolen vehicles.
As part of the new digital plate program, Reviver touts its products’ connectivity, stating that in addition to Bluetooth capabilities, digital plates have “national 5G network connectivity and stability.” But don’t worry—the same plates purportedly protect owner privacy with cloud support and encrypted software updates.
5 Reasons to avoid the digital license plate | Ride TechFrom Youtube
After the Rplate pilot program was announced four years ago, some raised questions about just how good an idea digital plates might be. Reviver and others who support switching to digital emphasize personalization, efficient DMV operations and connectivity. However, a 2018 post published by Sophos’s Naked Security blog pointed out that “the plates could be as susceptible to hacking as other wireless and IoT technologies,” noting that everyday “objects – things like kettles, TVs, and baby monitors – are getting connected to the internet with elementary security flaws still in place.”
To that end, a May 2018 syndicated New York Times news service article about digital plates quoted the Electronic Frontier Foundation (EFF), which warned that such a device could be a “‘honeypot of data,’ recording the drivers’ trips to the grocery store, or to a protest, or to an abortion clinic.”
For now, Rplates are another option in addition to old-fashioned metal, and many are likely to opt out due to cost alone. If you decide to go the digital route, however, it helps if you know what you could be getting yourself into.
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Steve Huff is an Editor and Reporter at dot.LA. Steve was previously managing editor for The Metaverse Post and before that deputy digital editor for Maxim magazine. He has written for Inside Hook, Observer and New York Mag. Steve is the author of two official tie-ins books for AMC’s hit “Breaking Bad” prequel, “Better Call Saul.” He’s also a classically-trained tenor and has performed with opera companies and orchestras all over the Eastern U.S. He lives in the greater Boston metro area with his wife, educator Dr. Dana Huff.
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