Last summer, Buggy announced a multimillion-dollar raise, a new CEO and a different direction: it was pivoting to ultra-fast delivery at a time when other startups in the sector struggled to survive.

Ultra-fast delivery startups, which bring consumers their groceries and other household goods as fast as within 15 minutes, gained popularity in North America in recent years, especially in the early days of the pandemic. Venture capital poured billions into the sector and new players launched in Canada. 

But as the economy shifted with rising interest rates, high inflation and Russia’s war in Ukraine, cheap capital dried up and high-cost, high-burn businesses suffered. In December 2021, GoodGood, a Toronto variety-store concept offering delivery as fast as 30 minutes, raised $6.5 million at a roughly $30-million valuation. Less than a year later, it ceased operations. Meanwhile, staff at other similar services started to speak out over work conditions, with some turning to unionization.

Amid all this, Buggy bet it could make ultra-fast delivery work, turning its business model to focus on delivering as fast as 15 minutes. Once known as InABuggy, it hired as CEO Nicole Verkindt, the 38-year-old founder of the supply-chain data business OMX and a former Dragon on CBC’s “Dragons’ Den: Next Gen Den.” In May 2022, Buggy announced a $4.6-million raise from investors including Verkindt and snapped up the assets of two startups in the sector: Ninja Delivery and Tiggy.

Unlike some delivery apps, which pick up goods from retailers and make money by marking up the price, Buggy fulfills orders out of self-operated “micro-warehouses” located on streets with little foot traffic, where it stores inventory. But it doesn’t promise 15-minute delivery for every order, mostly working to beat next-day competitors instead.

Verkindt, who started as CEO April 1, recently spoke to The Logic about how she believes Buggy can promise rapid delivery and be profitable.

This interview has been edited and condensed for length and clarity.

Why do you think you were recruited and what made you interested in the job at the time?

I knew some of the investors that were in this company, and they knew me. When they called, I was kind of flabbergasted. I did supply-chain tech for 10 years. I don’t know anything about the grocery space. I guess it’s got supply chain in it.

I went to the States. I spent a bunch of time ordering from Gopuff and going to the dark stores. I was like, “There’s something here.” The folks in that store were telling me that people are using it as their Amazon. Why would you wait for the next day when you can get it in 20 minutes?

Buggy’s investors weren’t just recruiting me for a job. They were recruiting me to invest in the company. I took months to decide.

There’s a lot of naysayers in the business. I think all of that was a function of the macroeconomic environment, where everything was getting funded like crazy. Companies were investing huge dollar amounts to acquire customers. It was just such a land-grab business and there were so many competitors.

In Canada, there’s no real competitors any more, and we’re being very, very thoughtful about how we spend every dollar, getting the model to make money.

What made the company decide to go in the direction of ultra-fast delivery?

We just got our micro-warehouses running in the fall of 2022. We’re going entirely in that direction because the customer experience is just so much better.

It’s a tougher model because you’re taking all the risk: you’re buying all the inventory, paying all the rent. It’s a retail-logistics model.

So the primary reason for the change is customer experience?

It’s the future. You go to Europe, you talk to Americans that have Gopuff and they don’t like using third-party apps. There’s substitutions. There’s markups on top of retail prices.

How do you avoid markups?

We have a wholesale relationship. Then we only mark up to the retail price.

So how do you make a profit with ultra-fast delivery?

We deliver as fast as 15 minutes. But one of the ways to make money is that you’re not as focused on ultra-fast. We will deliver within the time that we promise. So if we’re busy, we toggle it up. We believe that anything under an hour is still unbelievably great. You’re competing against next-day.

The second way is being open to many distribution models. The thing that kills all these companies is the really high customer-acquisition costs. We can’t behave the way all of these businesses behaved during the super frothy, tons-of-VC funding time. We’ve partnered with Uber Eats, SkipTheDishes, DoorDash and we are partnering with grocers to distribute for them. You can order on Uber Eats and you can have a Buggy person deliver it. We’re getting that customer for free.

The third way: we’re launching something called Fulfilled by Buggy. We’re working with a few direct-to-consumer brands. Those brands are paying to store their product in our micro-warehouses, and when their customer checks out, they would have an option in Toronto to have it delivered faster. It’s more of a white-label fulfillment strategy, which is a really great way to offset our overhead costs.

How many micro-warehouses do you have now?

We have three. Two in downtown Toronto and one in London, Ont., servicing the university market. The goal is to have a couple of stores in every major city in Canada and maybe one on every major university. That gets you to about 12 to 15.

When and why did you acquire the assets of Tiggy and Ninja?

The timing was right for us because we were getting started as they were starting to wind up. We needed to buy all of those assets, anyway.

But the main reason was those companies—criticize them all you want, they had a very loyal customer base. I saw their data. We were able to take on those customers. 

What I’m really frothing at the bit to do is to go to Vancouver, because Tiggy’s following and loyalty in Vancouver was unbelievable.

What do you mean by assets? What did you acquire?

This is an asset-heavy business. You’re opening warehouses that have industrial fridges, freezers and shelving; and a lot of technology. There’s a lot of screens in these warehouses. We acquired all that. Some inventory.

Is the company profitable?

I can’t say. I do have a stat: We grew 31 per cent last month in sales.

Will Buggy look to raise more money?

We are going to do a small retail raise through FrontFundr. Just feel it’s right for us.

We’re very lucky that we’ve got some private investors and we can access that pool. We may go back and maybe raise from private again, but we don’t have anything else on the horizon that’s major for the time being, from that perspective.

Do you see a future where the company would go public, such as through an initial public offering?

It’s definitely not my focus. My focus is to work on the business.