The Times Australia
The Times World News

.
The Times Real Estate

.

MilkRun's demise is another nail in the 10-minute grocery-delivery business model

  • Written by Mark Humphery-Jenner, Associate Professor of Finance, UNSW Sydney
MilkRun's demise is another nail in the 10-minute grocery-delivery business model

Sydney-based startup MilkRun made a big splash with its promise to deliver groceries within ten minutes, raising more than A$85 million[1] from some of the biggest names in Australian venture capital, including Atlassian billionare Mike Cannon-Brookes.

MilkRun’s co-founder and chief executive Dany Milham had already found success with fast-delivering mattress company Koala. Less than a year ago he was confidently predicting MilkRun would be bigger than Coles or Woolworths within ten years[2].

Today the company is finished, with more than 400 staff made redundant.

It has joined a lengthening list of platform delivery companies that have done their dash in the Australian market. This include three other local startups promising 10-minute deliveries – Send[3] in May 2022, Voly[4] in November 2022, and CoLab[5] which went into voluntary administration last week. British-owned Deliveroo shut down[6] its Australian operations in November 2022, while German-owned Foodora exited in 2018.

Read more: Deliveroo's exit from Australia shows why gig workers need more protection[7]

In an email to staff[8], Milham attributed MilkRun’s end to the slowing economy:

Economic and capital market conditions have continued to deteriorate, and while the business has continued to perform well, we feel strongly that this is the right decision in the current environment.

Certainly the effect of things like inflation increasing operating costs (including debt) as well as curbing discretionary spending can’t have helped.

But even in the best of conditions, MilkRun faced an uphill climb.

Could Milkrun ever make money?

Milkrun was, obviously, not profitable. This was not a problem per se. Many startups lose money for years before becoming immensely profitable. For example, Amazon, founded in 1994, didn’t have its first profitable year until 2003[9].

Some startups require significant scale to be profitable. Others forego profit to grow market share. Presumably the big name-venture capital firms that poured money into MilkRun – Cannon-Brookes’ private investment company Grok Ventures[10], Airtree Ventures[11] (which invested in Canva), and New York-based Tiger Global Management[12] – saw such potential.

But what was that potential, exactly? How could MilkRun ever scale to become profitable? Was there really a big enough market for super-quick grocery delivery? Or were they swept along by the mania for delivery ventures that came with the pandemic, lockdowns and the surge in online ordering in 2020 and 2021?

A food delivery rider in Sydney, October 2021.
A food delivery rider in Sydney, October 2021. Mark Baker/AP

MilkRun commenced during the pandemic – the perfect time for “last mile” deliveries. But by mid-last year, with lockdowns a thing of the past, the numbers didn’t look great.

It was still losing at least $10 on each delivery[13]. Though that was much better than the $40 loss it had initially been making, Milham’s plan to soon become profitable would involve, in June 2022, dropping[14] MilkRun’s 10-minute delivery pledge – undermining its key branding point.

Costs would have gone up anyway

Even without the unexpected economic hit of inflation over the past year, MilkRun faced escalating costs.

To grow market share, it would have to expand out from the high-density, affluent inner-city areas. Operating in more suburban areas, with longer distances and more dispersed customers, would compound “last mile” delivery costs.

Any hint of profitability would also inevitably arouse competition from the major supermarkets[15], whose thousands of suburban stores and supply chains positioned them to compete in the express delivery market any time they chose.

The cost of MilkRun’s “dark store” distribution network, set up when rents were suppressed by closed borders, were also likely to increase.

Narrow path to profitability

Perhaps MilkRun’s goal was to grow market share until drone delivery became viable or other business lines (such as alcohol delivery) and profit opportunities arose. But, on present unit economics, even in ideal conditions, this was a tall ask in a post-pandemic world.

Arguably the writing has been on the wall for about year, with MilkRun reportedly unable to persuade any investors to sink more money[16] into the company.

Venture capitalists know many of the startups they fund will fail. They will back an idea early on, when a path to profitability is unclear. But they will not keep pumping in more money if a path does not materialise.

It is easy to be a “Monday expert”, decrying decisions from a position of perfect hindsight. But MilkRun always had a challenging business model, something ever more apparent as the world emerged from lockdowns, demand subsided, cost of living pressures increased and business costs rose.

References

  1. ^ more than A$85 million (www.startupdaily.net)
  2. ^ within ten years (www.afr.com)
  3. ^ Send (www.news.com.au)
  4. ^ Voly (www.9news.com.au)
  5. ^ CoLab (www.theaustralian.com.au)
  6. ^ shut down (theconversation.com)
  7. ^ Deliveroo's exit from Australia shows why gig workers need more protection (theconversation.com)
  8. ^ email to staff (www.abc.net.au)
  9. ^ profitable year until 2003 (www.computerworld.com)
  10. ^ Grok Ventures (grok.ventures)
  11. ^ Airtree Ventures (www.airtree.vc)
  12. ^ Tiger Global Management (www.tigerglobal.com)
  13. ^ losing at least $10 on each delivery (www.forbes.com.au)
  14. ^ dropping (www.smh.com.au)
  15. ^ supermarkets (www.smartcompany.com.au)
  16. ^ to sink more money (www.smartcompany.com.au)

Read more https://theconversation.com/milkruns-demise-is-another-nail-in-the-10-minute-grocery-delivery-business-model-203757

The Times Features

Understanding the Dangers of Ignoring a Gas Leak

Gas leaks are silent threats lurking within both homes and workplaces. A gas leak occurs when natural gas or any other gaseous substance escapes from a pipeline or containment. T...

Can You Sell Your House Privately in Queensland? Here’s How

Selling a house privately in Queensland is entirely possible and can be a cost-effective alternative to using a real estate agent. While agents provide valuable expertise, their co...

Itinerary to Maximize Your Two-Week Adventure in Vietnam and Cambodia

Two weeks may not seem like much, but it’s just the right time for travelers to explore the best of Vietnam and Cambodia. From the bustling streets of Hanoi to the magnificent te...

How to Protect Your Garden Trees from Wind Damage in Australia

In Australia's expansive landscape, garden trees hold noteworthy significance. They not only enhance the aesthetic appeal of our homes but also play an integral role in the local...

Brisbane Homeowners Warned: Non-Compliant Flexible Hoses Pose High Flood Risk

As a homeowner in Brisbane, when you think of the potential for flood damage to your home, you probably think of weather events. But you should know that there may be a tickin...

Argan Oil-Infused Moroccanoil Shampoo: Nourish and Revitalize Your Hair

Are you ready to transform your hair from dull and lifeless to vibrant and full of life? Look no further than the luxurious embrace of Argan Oil-Infused Moroccanoil Shampoo! In a...

Times Magazine

"Eternal Nurture" by Cara Barilla: A Timeless Collection of Wisdom and Healing

Renowned Sydney-born author and educator Cara Barilla has released her latest book, Eternal Nurture, a profound collection of inspirational quotes designed to support mindfulness, emotional healing, and personal growth. With a deep commitment to ...

How AI-Driven SEO Enhancements Can Improve Headless CMS Content Visibility

Whereas SEO (search engine optimization) is critical in the digital landscape for making connections to content, much of it is still done manually keyword research, metatags, final tweaks at publication requiring a human element that takes extensiv...

Crypto Expert John Fenga Reveals How Blockchain is Revolutionising Charity

One of the most persistent challenges in the charity sector is trust. Donors often wonder whether their contributions are being used effectively or if overhead costs consume a significant portion. Traditional fundraising methods can be opaque, with...

Navigating Parenting Arrangements in Australia: A Legal Guide for Parents

Understanding Parenting Arrangements in Australia. Child custody disputes are often one of the most emotionally charged aspects of separation or divorce. Parents naturally want what is best for their children, but the legal process of determining ...

Blocky Adventures: A Minecraft Movie Celebration for Your Wrist

The Minecraft movie is almost here—and it’s time to get excited! With the film set to hit theaters on April 4, 2025, fans have a brand-new reason to celebrate. To honor the upcoming blockbuster, watchfaces.co has released a special Minecraft-inspir...

The Ultimate Guide to Apple Watch Faces & Trending Wallpapers

In today’s digital world, personalization is everything. Your smartwatch isn’t just a timepiece—it’s an extension of your style. Thanks to innovative third-party developers, customizing your Apple Watch has reached new heights with stunning designs...

LayBy Shopping