gopuff-business-model

How Does Gopuff Make Money? The Gopuff Business Model In A Nutshell

Gopuff is a digital delivery service headquartered in Philadelphia, Pennsylvania. Gopuff differs from other delivery services. It purchases, stores, and sells its own inventory; profit is generated when the company can sell an item for more than the cost of purchasing and storing it. Gopuff also charges a flat $1.95 delivery fee, with the company proudly admitting that it does not surge or hike prices. In addition, Gopuff Fam is a monthly membership program offering several free perks. The company also sells advertising to brands in the form of high-visibility product placements.

History of Gopuff

Gopuff is a digital delivery service headquartered in Philadelphia, Pennsylvania.

The service was founded by university students Yakir Gola and Rafael Ilishayev in 2013. Responsible for stocking their college townhouse with snacks and essentials, the pair realized that repeatedly visiting the store to re-supply goods was time-consuming. What’s more, this process impeded their ability to balance studies with work, family, and friends.

Gola and Ilishayev would spend subsequent nights drafting app mock-ups on the back of their lecture notes. Three months later, they were selling convenience items on campus from the back of their Plymouth Voyager. An app was then launched in December 2013. To grow the business, they convinced university professors to pitch the app to fellow students by offering free products such as bottle openers and lighters.

Gopuff items are stored and then sold by the company, so the co-founders also needed to convince local distributors to partner with them. Gola and Ilishayev continued to make deliveries as they earned their degrees, using profits to expand into Chicago and Washington, D.C.

In late 2015, the company raised its first round of venture funding. Gopuff now operates over 250 micro-fulfillment centers in approximately 650 cities across the United States. 

Gopuff revenue generation

Gopuff has several revenue generation streams. Following is a look at each.

Item markup

As noted, Gopuff differs from other delivery services in that it purchases, stores, and sells its own inventory

Revenue, and more importantly profit, is generated when the company can sell an item for more than the cost of purchasing and storing it. 

This business model allows Gopuff to manage its inventory levels, reducing the likelihood that a product will be out of stock. Order fulfillment is also much faster, with order pickers having the delivery ready before the courier arrives.

As a direct seller, however, Gopuff must invest in warehousing space whenever it expands. Expensive liquor licenses must also be paid for in the applicable jurisdictions.

Delivery fee

Gopuff charges a flat $1.95 delivery fee, with the company proudly admitting that it does not surge or hike prices.

An additional $2 is added to any delivery containing alcohol. This fee ensures the compliant delivery of alcohol products and associated ID verification.

To maintain a flat delivery fee, each order must have a total value of at least $10.95.

Gopuff Fam

Gopuff Fam is a monthly membership program offering several free perks. 

The most significant of these perks is a free delivery option on all orders for $5.95/month.

Advertising and consumer data

The company also sells advertising to brands in the form of high-visibility product placements.

One notable example is Nightfood, an ice-cream start-up that paid Gopuff almost $600,000 for priority placement on the app. The deal also included Gopuff giving the start-up insights into who was buying its ice cream and when they were buying it.

Key takeaways:

  • Gopuff is an American digital delivery service for common household goods and alcohol. It was founded by university students who noted that continually restocking their college townhouse was time-consuming and inconvenient. 
  • As a direct purchaser and storer of inventory, Gopuff makes money by selling items for a profit. It also charges a flat delivery fee for orders over a certain amount. 
  • Gopuff charges $5.95/month for a membership program offering discounts and free shipping. It also sells advertising placements and aggregated consumer data to brands.

Read Also: How Does Amazon Make Money, How Does Instacart Make Money, How Does DoorDash Make Money, How Does Postmates Make Money, How Does Grubhub Make Money, How Does Uber Eats Make Money, The Walmart Business Model, Last-Mile Delivery: The Anti-Network Effects And Why It’s Such A Hard Problem.

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