Read the three reasons why popular Australian grocery delivery app MilkRun suddenly collapsed

The collapse of super-fast delivery start-up, MilkRun, was “not a shock” as its business model was unsustainable in the face of competition from Australia’s two largest supermarkets, according to a leading retail expert.

MilkRun announced today that it will close its doors and lay off all staff and drivers by the end of the week, becoming the latest company in a long line of fast delivery companies to go under.

Company founder Dany Milham sent an email to his 400 employees on Tuesday blaming deteriorating market conditions for his company’s collapse, despite the company “performing well.”

But Professor Gary Mortimer, a business and retail expert at the Queensland University of Technology, told Daily Mail Australia the company’s collapse was “not a shock”.

“It’s been on the wall for these hyper-grocery delivery people for a while,” he said.

“They grew considerably during the pandemic. It was opportunistic entrepreneurship at its best. We had populations in Sydney and Melbourne who were incarcerated and people who didn’t want to leave their homes.

“Obviously, as the pandemic came to an end, people were venturing back into supermarkets and we started to see these businesses start to fall.

“The first to go was Deliveroo, then Send, then Quicko and Voly. For Milkrun, the notebook had been hanging on the wall for a while. It’s incredibly hard to scale that business when you need riders and bikes to deliver the groceries in under 15 minutes in some cases – it’s just not sustainable.

“When you have 3.5 percent unemployment, people don’t choose to cycle, they choose to look for a job elsewhere.”

Prof Mortimer said small and nimble start-ups such as MilkRun and Voly could have capitalized on the demand for fast deliveries in urban areas during the lockdown, as Woolworths and Metro were faced with ‘being difficult to convert a large vessel’. turn’.

However, they had now introduced their own express delivery services, which put pressure on the start-ups.

“It’s really hard to compete with the power of large supermarkets that offer not only speed but also variety,” said Prof. Mortimer.

“The investment that both major supermarkets have made in their online operations and automated fulfillment centers — they’re really scaling up to be ready for consumers to continue shopping online for food and groceries.

“Ten cents of every dollar of food and groceries is now bought online and the benefit is that they have the capital behind them to invest in this infrastructure and that customers trust them.”

Last year, Woolworths introduced Metro60, which aims to deliver groceries within an hour, while Coles has introduced a 60-minute click-and-collect service in around 600 stores.

MilkRun served selected suburbs in Sydney and Melbourne, promising rapid delivery of food and supplies.

It appeared to have a promising future after its co-founder Mr Milham completed one of the largest venture capital raises in Australian history at an early stage, securing $75 million for the company by 2022.

The CEO blamed difficult economic and capital conditions for the decision to close MilkRun.

“Since we announced our structural changes in February, economic and capital market conditions have continued to deteriorate, and while the company continued to perform well, we strongly feel this is the right decision in the current environment,” he wrote in the e-mail. .

Mr Milham assured staff that they would receive severance pay.

“We have always been committed to doing things the right way, and by winding down the business while still having sufficient cash balances, we can ensure that our people and suppliers are paid in full,” he wrote.

Prof Mortimer praised the company’s handling of their demise.

“They have made sure that they will be able to meet their obligations, including the wages of their staff,” he said.

“It’s disappointing to see small startups like this shut down, but they’re not alone.”

Some MilkRun riders expressed their sadness at the fate of the company.

Gary Nunn, an award-winning journalist and author, tweeted, “Loved moonlighting as a #Milkrun courier. They were exceptional in that they paid per hour, not per delivery. It kept us from breaking the traffic rules. And it took me away from my laptop!”

There had been signs of trouble with MilkRun for some time. A few weeks ago, the company announced that it would cut 20 percent of its workforce.

“With economic and market conditions changing rapidly, we need to lead the way and adapt our way of working to the current environment and extend our runway,” Mr Milham wrote in a letter to staff two months ago.

“This means some structural changes and some tough decisions that will unfortunately affect some of our people.”

Launched in 2021, MilkRun became one of the first companies to offer ultra-fast delivery to customers’ homes.

It promised to deliver groceries, alcohol and other essentials to the door within 20 minutes.

MilkRun was able to deliver its products quickly because it had a number of warehouses, known as ‘dark shops’, nearby.

They were stocked with 2,000 products, making it easy for staff and riders to quickly collect and distribute the orders.

The company had serviced over 50 suburbs in Sydney and 26 suburbs in Melbourne.

The startup was backed by Atlassian tech giant founders, billionaires Mike Cannon-Brookes and Scott Farquhar.

Last June, Mr Milham apologized to customers who complained that they had not received their orders within the promised 20 minutes.

Mr Milham admitted that the company had experienced an ‘unacceptable’ decline in service.

“There have been a number of factors that have sometimes led to an unacceptable degradation of our delivery experience during busy periods,” he wrote.

“These include ongoing Covid cases impacting rider and hub staff availability, record rainfall in Sydney and the challenges associated with scaling an entire workforce faster than anyone has ever attempted before.”

The problems were compounded eight months later when Mr Milham laid off a significant portion of the workforce – and culminated today with his email.