Gopuff Business Model | How Does Gopuff Make Money?

Gopuff is a Philadelphia-based digital delivery service. Gopuff is unique among delivery services. The company stores acquire and sell its inventory; it makes a profit by selling items for a higher price than what it paid. 

Gopuff also charges a set shipping fee of $1.95, and it admits that it does not raise or lower rates at any point. 

Gopuff Fam is an additional monthly membership club that offers a variety of complimentary bonuses. The organization also sells advertising to brands in the form of prominent product placements.

The Gopuff business model is based on marking up products, charging for delivery, charging for membership programs, and selling customer data to businesses for advertising.

The Gopuff online store offers consumers immediate daily needs, including cleaning and household products, over-the-counter medications, baby, pet, food products, and alcohol in selected areas. 

The company uses micro-fulfillment facilities in each area to quickly deliver thousands of products for a fixed $1.95 delivery fee. 

Gopuff is open 24 hours a day in various marketplaces and late at night in others to make sure clients get what they need at the right time.

Gopuff was established in 2013 by Rafael Ilishayev and Yakir Gola. The company is located in Philadelphia and presently operates more than 200 micro-fulfillment centers in over 500 cities across the United States.

What Is Gopuff?

Gopuff is a platform for on-demand delivery. Customers may choose from thousands of products in categories ranging from pet food to office supplies.

Gopuff earns money from product markups, shipping fees, subscriptions, and advertising on its site.

The Gopuff startup was founded in 2013 and has become one of the most successful delivery companies in the United States. Its current market capitalization is $8.9 billion.

Company NameGopuff
Company TypePrivate
FoundersYakir Gola, Rafael Ilishayev
ProductFood and consumer goods delivery services
Founded Date2013
HeadquarterPhiladelphia, Pennsylvania, United States
WebsiteVisit Website

How Does Gopuff Work?

The Gopuff food and grocery delivery service are operating in more than 550 cities around the United States.

GoPuff’s customers can choose from thousands of products, including pet food, cleaning supplies, and office supplies.

Gopuff is easy to use. The first step is for clients to register for the service either online or with the company’s mobile app available for Android and iOS devices.

A user can begin browsing items on the platform after providing their location and payment information.

You just order the product and wait for it to be delivered to your house. The Gopuff team works with independent contractors to complete these orders.

The user can use various payment methods, including credit cards (Mastercard, Google Pay, others), debit cards, and mobile payment options like Apple Pay, Google Pay, or Venmo. A COVID prevention measure prohibits cash payments.

Fam is a membership program that users can subscribe to. You receive benefits as a member, such as complimentary delivery and discounts on orders.

How Does Gopuff Make Money?

Gopuff earns money from product markups, shipping fees, subscriptions, and advertising on its site.

In the section below, we’ll take a deeper look at each of these.

Markup Fee

The Gopuff website allows direct purchases and sales of items. The majority of competitors transport items from other stores and restaurants, which stands in stark contrast.

Gopuff thus makes money whenever a product is sold. An organization’s profit is calculated by subtracting its sales price from all associated expenses, such as purchases and storage of products.

Investors think this model is much more profitable. 

As Gopuff owns the product, it has real-time knowledge about availability. Some platforms may have out-of-stock problems due to misalignment with grocery partners.

Gopuff Business Model

The second benefit is its ability to process orders much more quickly. The company has employees who pick up and deliver the merchandise to the delivery driver. The driver will save time by not having to rummage through multiple shelves.

Thirdly, the company’s warehouses remain open till late at night. As a result, its window of opportunity is significantly larger.

However, it should be noted that this model is somewhat riskier, as Gopuff must invest in warehouse space if it enters a new city. 

The license itself can cost far more than $1 million. To sell alcohol, the restaurant must also apply for a liquor license.

Delivery Fee

Gopuff charges a $1.95 shipping fee when you purchase a good. Alcoholic beverages will be charged an additional $2.

The costs are intended to cover the costs of delivery, not generate a profit for the company. Gopuff manages its warehouses, so its delivery times are often significantly shorter since drivers do not have to rummage through shelves.

Whenever you order more than $49., delivery is free. There is a sufficient profit margin to compensate for the delivery price then.

Membership Charge

The Gopuff Fam membership program provides a variety of benefits to its consumers.

These include free delivery on all orders and additional discounts. The monthly subscription fee is $5.95.

The membership program encourages frequent orders from customers. The monthly subscription payment obligates the customer to “recoup” the investment through additional purchases.

Advertising Fees

Gopuff sells preferred product placements to brands interested in promoting their products on the Gopuff platform.

Brands can benefit from ranking first in any given category with millions of monthly visitors.

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Forbes informs us that Gopuff has received $600,000 from Nightfood, a Brooklyn-based ice cream startup.

The company sells anonymized customer data about these products in addition to providing preferential treatment to certain products. 

These data points include how often a particular product was purchased, which demographic, and when it is most likely to be purchased.

Who Is The Owner Of Gopuff?

Currently, the ownership structure of Gopuff is not publicly disclosed since the company is still privately owned.

It is, however, reasonable to assume that the founding team retains the majority of shares on an individual basis.

Gopuff Business Model

If Anthos Capital does not sell any shares in secondary sales, it will own a significant portion of Anthos Capital’s shares.

SoftBank and Accel, on the other hand, invested multiple times and acquired stakes from existing investors.

Gopuff will finally reveal its ownership structure to the public when it decides to go public.

What Is The Funding & Valuation Of Gopuff?

Crunchbase reports that Gopuff has raised 2 billion dollars in venture capital across seven rounds.

D1 Capital Partners, Baillie Gifford, Softbank, Valor Equity Partners, Fidelity, and e.ventures are some notable investors.

Gopuff was valued $8.9 billion in its most recent funding round (Series G raised in March 2021). It received $3.9 billion in October 2020, a significant increase over that amount.

What Is The Revenue Of Gopuff?

Gopuff is not required to disclose revenue figures to the public as a private company. This could occur if the company decides to go public in the future.

Success Story Of Gopuff

Yakir Gola and Rafael Ilishayev founded Gopuff in 2013, with its headquarters in Philadelphia. Both founders continue to serve as co-CEOs of the company to this day.

Ilishayev and Gola were born entrepreneurs after their parents immigrated to the United States when they were children.

The young Russian began working in his father’s sandwich shop when he was 11 years old. The business expanded later in life, and he helped run a banquet hall the family bought.

Meanwhile, Gola worked for his father, Joe the Jeweler, a cash-for-gold business. He even assisted in modernizing the business during his high school years by installing sales-tracking software.

Ilishayev and Gola enrolled at Drexel University in Philadelphia to study business, fueled by their entrepreneurial spirit. They met in class and immediately became friends – and later roommates.

Their late-night activities necessitated frequent trips to their local convenience store as responsible college students. Ilishayev was the only one with a car at the time, and as a result, he was forced to make all those stores runs.

As a designated driver, you may find it inconvenient, and thus, an idea comes to mind: How about ordering those items online and having them delivered to your apartment instantly?

In their junior year, they began working on the business. Since the founders were students and first-time founders, funds were tight. There was some good fortune on their side.

The founders searched for office furniture and space after their business was launched. Their final destination was a building owned by a close friend, who offered to take over whatever remained in it.

It was a pleasant surprise to discover four floors of fully-equipped office cubicles. They sold most of the equipment on Craigslist and earned over $60,000.

The Gopuff app first launched in December 2013 thanks to Ukrainian software developers hired due to the financial boost.

Initially, Gola and Ilishayev operated the business entirely on their own, without seeking external financing. 

Professors convinced them to introduce the app to Drexel students, giving them complementary lighters and bottle openers in return.

Since Gopuff stores and sells products directly, the company also had to convince local distributors to cooperate. 

They did not have the funds to pay upfront since their money on developing the app had been spent.

After having falsely exaggerated the size of their customer base (a textbook case of ‘fake it ’til you make it) and promising distributors that their business would grow significantly, they eventually gained 30-day credit terms despite having no credit history.

Even more impressive was that both founders were enrolled in universities and attending classes while taking delivery orders well into the morning. 

The business then expanded into new cities using its profits. Gopuff expanded into two additional cities before raising any funds (Chicago and Washington).

Gopuff Business Model

Gopuff raised its first round of venture capital funding in December 2015, three years after launching it. That same year, Gopuff launched another delivery brand, Gobeer, which allows the company to deliver alcoholic beverages.

The team added more cities and funding over the following few years. However, the firm and its management continued to operate in the background, despite a few bountiful rounds (for example, a $108.5 million Series D in November 2018).

This was in stark contrast to other food delivery startups such as DoorDash or Instacart, which leveraged funding announcements to increase interest in their businesses (from both customers and investors).

The trajectory of the company shifted dramatically as a result of the SoftBank vision fund’s involvement. 

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Masayoshi Son, who heads the investment arm of the Japanese conglomerate, invested $750 million in the company in January 2019.

Gopuff also enjoyed significant benefits from the Coronavirus and subsequent stay-at-home mandates. 

The increase in revenue contributed to Gopuff’s 400% revenue growth during the first half of 2020. The company has been available in more than 500 cities throughout the US as of last year.

A more significant acquisition was the company’s purchase of alcoholic beverage retailer BevMo for $350 million. 

GoPuff’s network expanded by 161 locations across Washington, California, and Arizona due to the acquisition.

The delivery service of Gopuff was also rumored to be expanding into the United Kingdom in recent months. The European market is currently dominated by local players such as Gorillas.

Despite the firm’s enormous success, it encountered a few bumps along the way. 

A Philadelphia warehouse was forced to be relocated in 2020 after residents complained about garbage piles and a traffic jam.

Gopuff recently entered its first foreign market with the acquisition of Fancy, a delivery service based in the United Kingdom.

There are currently over 550 Gopuff locations available in the U.S., employing nearly 2,000 people.

Key Takeaways From Gopuff Business Model

Gopuff is a digital delivery service based in the United States specializing in basic household items and alcoholic beverages. 

It was started by university students who saw how time-consuming and inconvenient it was to refill their college housing constantly.

Personal Capital Business Model

Gopuff earns money as a direct purchaser and warehouser of inventory by reselling items at a profit. The company also charges a fixed shipping cost for orders exceeding a specific value.

Gopuff charges $5.95 a month for its membership program, which includes discounts and free shipping. 

Furthermore, the company offers brands advertising spaces as well as aggregated data on consumers.

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