Go Grocer rejected two buyout offers from ultrafast players, opting to strike out on its own.

Chicago grocery chain rejected 2 acquisition offers from rapid-delivery players in 2021. Its CFO and cofounder explains how it plans to beat them at their own game.

• Go Grocer, founded in 2008, bills itself as a cross between 7-Eleven and Whole Foods.

• Rapid-delivery players and Instacart held talks with the 16-unit Chicago chain last year.

• Go Grocer rejected two buyout offers from ultrafast players, opting to strike out on its own.

Last year, as rapid-delivery players invaded the US with their 15-minute-delivery models, a family-run grocery chain in Chicago became an acquisition target as the startups sought to use its stores as microwarehouses.

Go Grocer bills itself as a cross between 7-Eleven and Whole Foods Market, with 16 locations in the Windy City that offer 5,000 items. Paul Stellatos, one of Go Grocer's cofounders, told Insider that taking over these small-format stores and using them as fulfillment centers would give any ultrafast player an instant edge in the city.

But Go Grocer rejected buyout offers from two unnamed ultrafast players because it wanted to strike out and do fast delivery on its own.

As it held talks with rapid-delivery players last year, Instacart also came calling, Stellatos said.

Those talks eventually evaporated as Go Grocer launched its app in November. It leaned in to a "hybrid" model of grocery delivery and order pickup.

"Ultimately, we decided to play the wait-and-see game," said Stellatos, who cofounded the company in 2008 with his brother, Greg.

With stores open to the public, Go Grocer reduces its labor and real-estate overhead right off the bat. Stellatos, who is also the chief financial officer of Go Grocer, said these costs were kept down because it already leased stores and it used existing staff for the new delivery and pickup business.

Stellatos said Go Grocer also has a base of loyal shoppers and no venture-capital investors telling him how to run the business.

"We don't have any partners or investment firms breathing down our neck," he said, adding what made Go Grocer unique was "that we are currently bootstrapped and profitable."

Go Grocer can deliver goods in seven to 12 minutes because its stores are in dense areas of Chicago.

Go Grocer

No 15-minute-delivery promises

Go Grocer launched its app two months after the first rapid-delivery player, 1520, entered Chicago. By the end of 2021, the Turkish startup Getir and the New York-based Buyk had also set up shop in its home turf.

Unlike rivals, Go Grocer strays from promising delivery within 15 minutes. Stellatos said operating dark stores for ultrafast delivery is not a profitable business model due to high real estate and labor costs in the US.

Instead, Go Grocer offers scheduled delivery and is at times able to offer speedy delivery because its stores are in highly dense areas of the city. Some stores can deliver groceries within seven to 12 minutes, Stellatos said. The average delivery takes about 22 minutes.

Two brothers, Greg and Paul Stellatos, cofounded Go Grocer in 2008.

Go Grocer

While ultrafast players will deliver a pint of ice cream for under $2 in 10 or 15 minutes, Go Grocer has a $15 minimum for delivery orders. That minimum allows Go Grocer to provide free delivery, while remaining profitable on every order, Stellatos said.

Go Grocer also uses a combination of existing staff and local and national apps like DoorDash and Uber Eats to make deliveries. Stellatos said working with last-mile operators was much more economical than having gig or full-time couriers sitting around the store waiting for orders during downtime.

"Our advantages in this game is that the expenses that dark warehouses incur, we don't incur those expenses because we already have a hybrid profitable model," Stellatos said. "All our stores are open, profitable, and all we're doing is adding the app, or what I call the cherry on top to the customer experience."

Rivals give away the house with promotional coupons

It's common, especially in New York City, for ultrafast-delivery players to offer promotional coupons ranging from $20 to $25 off each order for first-time customers — a practice Robert Mollins, a Gordon Haskett analyst, called "very unsustainable" in a recent research note.

Stellatos agreed and said he would not take Go Grocer down the same discounting path because "there's no return value" in giving your product away.

Go Grocer has established shoppers who've been shopping at its stores for years, so getting them to try the app is an easier pivot, Stellatos said.

So far, the hybrid approach is showing promise. Go Grocer's app has had growth in users each month since its launch, with an average basket size of about $60. The grocery-delivery startup, valued at $125 million, has also outlasted at least one rival, as 1520 shut down operations in December.

"All we're doing now is sort of hunkering down and making sure that we can be as profitable as possible, while giving the customer the best user experience that we can," Stellatos said.