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How Does Gopuff Make Money? Gopuff Business Model & Revenue Sources Explained

By Gursumeet Kaur 16th July 2021

What is Gopuff and How did it start?

Gopuff is the go-to solution for immediate everyday needs, fulfilling customer orders of cleaning and home products, over-the-counter medications, baby and pet products, food and drinks, and in some markets, alcohol— in just minutes. With micro-fulfillment centers in every market it serves, the company delivers thousands of products quickly for a flat $1.95 delivery charge. Gopuff is open 24/7 in many markets and late-night everywhere else to bring customers what they need when they need it most. 

Founded in 2013 by co-founders and co-CEOs Rafael Ilishayev and Yakir Gola, Gopuff is headquartered in Philadelphia and Gopuff business model currently operates more than 200 micro-fulfillment centers servicing over 500 U.S. cities.

gopuff business model

History of Gopuff

Cofounders Rafael Ilishayev and Yakir Gola were sophomores at Drexel University in Philly when they decided that stocking their college townhouse with snacks and essentials was taking too much time & too many trips to the store on top of balancing school, work, friends & family. So they spent all night drafting mock-ups of the app on the back of their class notes. Three months later, they were delivering those same convenience items from the back of their Plymouth Voyager around campus. The service caught on, the name stuck & now 7 years, 400+ micro-fulfillment centers and BevMo! stores in 650+ cities and more than 7,000 employees later, our customers are ditching the store to get it Gopuffed.

How does Gopuff work?

Gopuff is free to download for iOS and Android devices—just search your app store. Or you can order on the good ol’ internet at www.gopuff.com. Create an account on the Gopuff, add everything you need to your cart & checkout. Gopuff business mdoel accepts credit and debit cards, Google Pay, Apple Pay, and Venmo. It’s that simple. Your order will be at your door in less time than it takes to finish the next episode of whatever you’re binging.

  • Gopuff delivery fee is only $1.95 every time, and they never surge or hike prices. Yes, you read that right.
  • An additional fee up to $2 is added to all orders containing alcohol; this fee covers costs incurred to ensure compliant delivery of alcohol products and ID verification.
  • All orders must be at least $10.95 for Gopuff delivery.

Does Gopuff deliver alcohol?

For customers ages 21 and up, Gopuff offers delivery of alcoholic beverages like craft beer, hard seltzer, liquor, and a variety of wines in most, but not all cities.

Customers ordering alcoholic beverages must provide a valid ID at the time of delivery. While they have removed signature requirements as part of their COVID-19 response, contactless delivery is not available for orders containing alcoholic beverages. Gopuff business model recently implemented a procedure to check and scan IDs from a distance.

GoPuff and COVID-19: The privilege and doom of exponential growth in the convenience goods online market.

Exponential growth and untapped opportunities in Gopuff Business Model during COVID-19

It shouldn’t be surprising that during COVID-19 the e-commerce sector as a whole has experienced a +100% Y-o-Y growth, even after the first panic-buying wave disappeared. In fact, Gopuff registered a nearly 90% increase in customers ordering at least once per week (vs. March 2019), and a 55% increase in order value.

However, and what is perhaps more surprising, is the fact that the pandemic brought a completely new set of users and significantly changed consumer behavior. Gopuff business model has seen an abrupt change of mix of the products it commercializes, with cooking and beauty products growing at 112% rates to address the new DIY needs in American households. The new normal has become normal, and Gopuff has been able to quickly understand these trends, respond to the new needs better than its competitors, bring more customers (and transactions) on board and feed its machine learning models to improve the company’s category management capabilities and speed-up the data flywheel.

At the same time, more mature and older users started to enter the app, engaging with the same frequency as tech-savvy millennials but with larger order sizes. In fact, new customers’ order value surpassed that of existing Gopuff customers in 5 of 7 days of the week. So, COVID-19 not only boosted the penetration among Gopuff’s existing customer segment but also allowed the company to tap a new (and more profitable) customer profile that will require Gopuff to rethink its product strategy.

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How Does Gopuff Make Money?

Gopuff makes money by marking up products, through delivery fees, subscriptions, as well as advertising on its platform.

  • Markup: Products sold on Gopuff are purchased and sold directly by the company. This is in stark contrast to many of its competitors which deliver products from other supermarkets and restaurants. Therefore, Gopuff business model makes money whenever it sells a product. The difference between the sales price and all associated costs, such as buying and storing the product, is the profit it makes.
  • Delivery Fee: Ordering a product on Gopuff incurs a delivery fee of $1.95. Another $2 is added to all orders containing alcohol. The fees are used to cover the cost of delivery and not a take-home profit for the company. At that point, the company generates enough profit from the margins that it can substitute the delivery fee.
  • Membership: Gopuff offers a membership program called Gopuff Fam, which offers consumers a variety of benefits. These include no delivery fee on all orders as well as other discounts. The subscription costs $5.95 per month.
  • Advertising: Gopuff sells preferential product placements to various brands that want to promote their items on Gopuff’s platform. With millions of eyeballs every month, being placed first on any given product category can be extremely valuable to brands.

Gopuff Business Model: Funding, Revenue, Valuation

  • According to Crunchbase, Gopuff has raised a total of $2.4 billion across seven rounds of venture capital funding. Notable investors include Accel, Softbank, D1 Capital Partners, Fidelity, Baillie Gifford, Valor Equity Partners, e.ventures, and many more.
  • Gopuff’s most recent funding round (Series G raised in March 2021) valued the business at $8.9 billion. That’s a significant uptick from the $3.9 billion it received back in October 2020.
  • Gopuff’s estimated annual revenue is $1B per year.
gopuff business model, gopuff revenue

Recent Updates of Gopuff in 2021

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