The ultra-rapid delivery service MilkRun, based in Australia, has announced its closure after raising one of the largest early-stage rounds in the history of the nation’s venture capital industry. The company would suspend operations by the end of the week, according to an email from founder Dany Milham, who cited deteriorating economic conditions as the main justification. Given MilkRun’s prior success in the ultrafast delivery industry, the news is unexpected.
One of the first Australian firms to employ the ultrafast delivery model was MilkRun, which guaranteed to send food, alcohol, and party supplies from urban warehouses to clients in 20 minutes or less. Using low interest rates to obtain sizable funding from venture capital firms, this business model was popularized by organizations like Getir in Turkey and GoPuff in the United States.
MilkRun received $75 million in funding at the beginning of 2022 from a group of investors that included local companies AirTree Ventures, Skip Capital, and Grok Ventures as well as investors overseen by Tiger Global Management and backed by the Atlassian co-founders Scott Farquhar and Mike Cannon Brookes. One of the most promising companies on the Australian market emerged as a result of the company’s growth and performance, which attracted the attention of international venture capital firms.
MilkRun has shut down following the closure of its local rivals Voly and Sent last year. There were also speculations that MilkRun was looking for acquisition partners, with perhaps Coles or Uber. In spite of this, other competitors like Coles, Woolworths, and Uber have all launched their own delivery services with shorter delivery windows, intensifying competition in the ultrafast delivery sector.
The once-promising Australian ultrafast delivery firm, MilkRun, has abruptly come to an end. The business has decided to wind down because of the declining economy, despite its early success and huge capital.
One of the main reasons behind this failure was the company’s inability to work out its unit economics.
Unit economics refers to the costs and revenues associated with each order placed by a customer. In simple terms, it is the measurement of the profitability of a business on a per-unit basis. In the case of MilkRun, the company offered a 10 minute delivery service for fresh groceries. While the service was appealing to customers, the cost of each delivery was very high due to the short time window the company offered for delivery. As a result, the company was unable to consolidate orders, making it inefficient to operate.
The cost of each delivery was high because MilkRun had a very short delivery window. They offered same-day delivery, which means that the delivery driver had to go to each customer individually to drop off their groceries. This meant that the company could not consolidate orders, resulting in a high cost per delivery. When you factor in the cost of the driver, pick and pack cose, warehousing and vehicle costs, the company was unable to make a profit on each order. This was the reason why the company failed.
Hopefully, future startups can learn from MilkRun’s mistakes and work out their unit economics before launching. Grocery delivery can be profitable but you need to make sure the unit economics make sense before beginning, there is a balance between what the customers want and what makes sense from a financial perspective.
About the author
Founder and CEO at Zoom2u & Locate2u (ASX:Z2U). Steve has significant software development and entrepreneurial experience. Operating in the delivery space for more than 15-years, he actively contributes to the development of the industry. He has a strong focus on job management and job despatch systems.
