10-minute delivery services are omnipresent in more and more German cities. The e-bike riders from Gorillas, Flink and Co. are increasingly populating the streets. But how does the business model behind it actually work? How do gorillas and co. make money? We’ll tell you.
Not a new business model
Although the business model of 10-minute delivery services in Germany is still relatively new for most people, Gorillas, Flink and Co. have by no means reinvented the proverbial wheel.
In fact, with “Gopuff“ founded a delivery service for groceries and everyday consumer goods in Philadelphia in 2013.
The idea then as now: Users can conveniently do their shopping via an app. They choose between 3,000 products at Gopuff – from carrots to cat food to sunscreen.
After completing the order, the entire purchase will be delivered directly to your doorstep. In the case of Gopuff, the delivery time is a maximum of 30 minutes. With Flink, Gorillas and Co. it is ten minutes. Accordingly, the name of the 10-minute delivery service came about.
How do 10 minute delivery services make their money?
This is probably the most frequently asked question in connection with gorillas, Flink and Co. After all, the offer seems too good to be true at first glance. Of course, there are a number of factors and developments that play into the financing.
1. The delivery fee
Most delivery services charge a surcharge for their service. In the case of gorillas, for example, this is included 1.80 euros per delivery. The American model Gopuff at 1.95 US dollars. Both prices are incurred with every order and thus flow directly into the accounts of the companies.
2. Payment of drivers
Here, too, the differences between the individual competitors are not particularly great. Hourly wages are usually included 10,50 Euro. Added to this is any tips received and a monthly surcharge in the low euro range for using your own internet.
If you consider that the drivers are on busy roads at almost any time of the day or night and in adverse weather conditions, the pay seems average at best. Thus, the 10-minute delivery services certainly save money at this point.
3. The purchase price
The 10-minute delivery services all advertise “supermarket prices”. That means: If you order your goods from Gorillas, Flink and Co., you don’t pay much more than you would for regular shopping in the supermarket. This is important for customers because the offer remains attractive.
However, the competitors still save money, of course. This is because they buy their products directly from the producer, eliminating possible middlemen and thus lowering the prices due to the bulk discount when purchasing.
In the end, the users pay the same price. However, the difference between the purchase and the selling price goes to the accounts of the delivery services.
How does the 10-minute delivery service business model work?
A first glance at the business model shows that the providers’ profit margins are not particularly large. In concrete terms, the yield depends on two main factors:
- The number of orders
- The number of deliveries per hour per driver:in
If the offer is not used by gorillas and co., costs will inevitably arise. On the one hand, all fresh foods like fruits and vegetables go bad. So if the demand for these products is low on some days, not only food but also money is wasted.
Of course, this also applies to the utilization of drivers. The fewer orders there are, the more employees sit idle in the decentralized warehouses.
On the other hand, the capacity utilization of the drivers is crucial. The more orders they can complete in an hour, the higher the revenue they generate per hour worked.
Decentralized warehouses as a key element
In order to keep the delivery promise of ten minutes and to increase the delivery frequency per driver, it is essential for the providers to have as many decentralized warehouses as possible in as many places as possible. The more warehouses there are, the shorter the routes for deliveries.
Gorillas is currently in 17 German cities as well as selectively active in France, the Netherlands, Great Britain and Italy. Competitor Flink now offers its services in 18 German citiesin the Netherlands and in Paris.
The more providers there are, the more storage space is required in (German) cities. Accordingly, the expansion of Gorillas, Flink and Co. will sooner or later face a logistics problem. How do they keep their promise when there is no more available storage space?
The biggest cost items for the 10-minute delivery services
We have already discussed the revenue streams of 10-minute delivery services. Of course, there are also numerous expenses. In the first place are of course the rental costs to name for the camp.
Added to this are the costs for the pay the drivers, the groceries and the e-bikes that serve as a means of transport. This in turn entails numerous other cost sources:
- electricity costs for charging
- Rental costs for the storage and loading areas for the e-bikes
- Repair and wear and tear costs arising from wear and tear or accidents.
The costs for operating your own applications, processing incoming payments and other cost items are also incurred. However, these are probably less important.
Annual contracts for drivers
However, a closer look at the employment relationships reveals weaknesses in the system. Gorillas boss Kagan Sümer likes to point out that all employees are permanent employees. However, if you consider that this is required under German law, this argument is less effective.
In addition, the drivers will probably only be fobbed off with annual contracts. This shares, for example, the “Gorillas Workers Collective” with. It is particularly piquant that the probationary period runs for six months.
This means: Half of the contract period, the drivers may be dismissed from the delivery services without giving reasons and without warning. As a result, there is no actual security for employees.
However, such contractual structures are of course very lucrative for employers. They offer a lot of flexibility with little responsibility and, if in doubt, many exit options.
The future of 10-minute delivery services in Germany
The niche of 10-minute delivery services in Germany is therefore very special. On the one hand, attempts are made to minimize costs in as many places as possible. On the other hand, profit is maximized without the costs becoming too high for users.
The goal is a shopping cart total of 30 euros
Every economic layperson understands that this balancing act is demanding. So it is not surprising that gorillas boss Kagan Sümer in an interview with the Online Marketing Rockstars calculated with a shopping cart of 30 euros.
After all, every product that sells at a profit increases earnings. With the sale of individual products, no lucrative business model can be established in the long term given the costs incurred.
No scalable business model
However, purchases that are too large can no longer be realized with the previous business model “rider delivers goods on e-bike”. Consequently, the more people shop, the more strength and energy is required for delivery.
So if it is still possible to transport a small weekly purchase on the back of a bike, it looks different if six kilos of groceries are added to ten bottles of drinks.
Either the 10-minute delivery services have to purchase an additional fleet of electric cars or split an order between several drivers. Both solutions are not particularly attractive.
E-bikes, surveillance, layoffs: Gorillas and Co. have huge problems
At the same time, just one year after it was founded in May 2020, it is clear that the consistent cost optimization at Gorillas is causing massive problems.
The central warehouse in Berlin will be closed in June 2020 wildcat strikes came. As already mentioned, the drivers complain about, among other things, incomprehensible terminations and broken wheels, they are forced to use.
according to the declarations of the Gorillas Workers Collective, riders regularly end up in the hospital because the e-bikes are no longer roadworthy and accidents occur as a result.
In addition, there are serious violations of privacy and data protection law in connection with the drivers. These should have been clarified in the meantime. Nevertheless, the tracking of employees remains the order of the day simply because of the business model.
