Why food delivery services keep going broke in Australia: Finance expert exposes the four major factors that are leading to their demise
- MilkRun is latest delivery service to close
- Rise in rent and labour costs impacted company
- Experts believe it was hard to compete with Coles and Woolworths
A rise in the cost of living has led to the downfall of Australian food delivery services, with four brands collapsing within the last 12 months.
Send, DashMart, Voly, and most recently MilkRun have all been forced to stop trading, with the latter announcing the news on Tuesday.
Channel Nine reporter Chris Kohler revealed the largest issues facing these kind of services was a rise in the cost of rent, labour and groceries.
‘How come delivery systems never seem to work? I mean it works for a little while, but then the businesses seem to go broke,’ he said in a TikTok.
‘So why is this happening?’
MilkRun allowed customers to choose a variety of groceries from select mini-marts around Sydney and Melbourne, with the delivery arriving within 20 minutes.
‘The problem is the cost of rent went up an awful lot in the past 12 months,’ Kohler continued.
‘And the cost to employ 400 people also went up a lot, but if you jack up the cost of the groceries themselves, people will just probably get up and go to the supermarket themselves.
‘So MilkRun was stuck.’
The delivery system was reportedly losing an average of up to $13 per order.
Channel Nine reporter Chris Kohler revealed the largest issues facing these kind of services was a rise in the cost of rent, labour and groceries
MilkRun riders will be made redundant this week after the company announced its closure on Tuesday
MilkRun’s founder, Dany Milham, sent an email to his 400 workers on Tuesday in which he blamed worsening market conditions for his company’s collapse despite the business ‘performing well’.
He told his staff they had ‘set out to change the face of grocery delivery in Australia’.
All riders will lock up their bikes for the final time on Friday.
In January 2022, MilkRun raised $75million in seed capital and was backed by the likes of Atlassian founders Mike Cannon-Brookes and Scott Farquhar, making it one of Australia’s fastest-growing start-ups.
The company was thought to have a valuation in the hundreds of millions.
This week Mr Milham blamed tough economic and market conditions for the eventual decision to close the business.
‘Since we announced our structural changes in February, 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,’ he wrote in the email to staff.
Professor Gary Mortimer, business and retail expert at the Queensland University of Technology, told Daily Mail Australia that MilkRun’s collapse was ‘not a shock’.
‘The writing was on the wall for these hyper-grocery delivery start-ups for some time,’ he said.
‘They grew significantly during the pandemic. It was opportunistic entrepreneurship at its very best. We had populations in Sydney and Melbourne locked down and people not wanting to venture out of the home.
‘Obviously as the pandemic came to a close, people ventured back into supermarkets and we started to see these businesses start to fall over.’
Mr Mortimer said it was also difficult to compete with supermarket giants like Woolworths and Coles.
‘When you’ve got 3.5 per cent unemployment – people aren’t choosing to ride bikes, they are choosing to get jobs elsewhere,’ he added.
MilkRun closed in a position that allows them to pay off their suppliers and staff.
MilkRun founder and serial entrepreneur Dany Milham believed MilkRun would be bigger than Coles or Woolworths within a decade
