Instacart (YC S12) wants to be Amazon with 1 hour delivery

http://techcrunch.com/2012/08/01/instacart/

by apoorvamehta • 14 years ago

157 98 14 years ago

techcrunch.com

antidaily• 14 years ago

Peapod but faster?

tg3• 14 years ago

Kozmo.com, but with a saner business model.

mmmmax• 14 years ago

I remember Kozmo.com! The big difference now: Smartphones

fuzzythinker• 14 years ago

wiki search for kozmo shows 2 more similar services: MaxDelivery, Urban Express, both in NYC though.

AznHisoka• 14 years ago

No, Amazon, but within 1 hour. No need to overcomplicate things.

Wilya• 14 years ago

Well, except they sell only groceries, which isn't at all Amazon's core business (and isn't what Amazon does, in 99.9% of the world).

shiftb• 14 years ago

This is a brilliant idea. Hard, but worth doing.

bezaorj• 14 years ago

I truly want this on my city, and I guess a lot of people are thinking the same, so the model has a lot of potential!

vgurgov• 14 years ago

This is the most useful service i discovered i recent months. period. I seriously recommend this to anyone in SF. I dont remember the last time i went shopping for groceries. It already saved me tons of hours and money. no-brainer.

disclaimer: my company is in the same YC batch and I know Apoorva personally and was happy to get early access to service.

jhuckestein• 14 years ago

It'll be interesting to see how this plays out against Amazon's push into same-day delivery. Amazon is setting up local distribution centers of their own. Instacart is using existing distribution centers (i.e. retail stores).

Both companies need to figure out how to best deliver items locally. This is a big logistical challenge (but luckily it's well researched). In addition, Amazon needs to predict demand locally and ship items to a local distribution center. Instacart can leverage existing supply chains but has to pay a premium for it. If Instacart is willing to operate at a loss for a while, they might actually have an advantage over Amazon and can fully focus on getting the local delivery part of the equation right.

Very exciting stuff and congrats on the launch!

Disclaimer: I met Apoorva a few weeks ago and have been happily using the service since. I'm extremely impressed by how he managed to do all of this essentially alone and can't wait to see what's next.

Edit: typos

rokhayakebe• 14 years ago

This gets even better and it will save tons of money when I can create a bag, save it, then simply press one button to re-order.

apoorvamehta6• 14 years ago

Coming up in the next iteration (i.e. in a day or two) :)

mthmohan• 14 years ago

Love the idea.. Possibilities around POS data and Nielsen like services are obvious extensions.. Good luck!!

imjk• 14 years ago

Wasn't there a documentary about this somewhere back in the day that came to define the dot-com bubble?

jolan• 14 years ago

Yep, E-Dreams.

http://www.youtube.com/watch?v=4oClrbijIxA&feature=resul...

apoorvamehta6• 14 years ago

The documentary was talking about Kozmo.com, which had several issues in their business model including no minimum order size or delivery fees.

reddickulous• 14 years ago

How can they make money delivering for $9.99? I guess the item prices are jacked up a little.

nukethefridge2• 14 years ago

This looks great. Today I'm sick WFH and could really use some meds delivered. I signed up for an invite... what is the process/wait time like? I may have to try something else if I'll need to wait too long.

danielweber• 14 years ago

Unfortunately for you I would expect medicine to be something they won't deliver. Alcohol, too.

nukethefridge2• 14 years ago

I was thinking more like cough drops and advil, not prescriptions... would those still be outside the acceptable list of things to deliver?

justin• 14 years ago

You can get your pharmacy orders picked up in SF by Exec (http://iamexec.com). In California your assistant only needs your name, address and phone number to get your prescribed medications.

Philadelphia• 14 years ago

Doesn't Amazon plan to be Amazon with 1 hour delivery?

apoorvamehta6• 14 years ago

same day is different than 1 hour. not to mention, you cannot order perishables from Amazon.

jlgreco• 14 years ago

http://fresh.amazon.com

cs7024• 14 years ago

I'd love to have this service at home, so I'm (selfishly) hoping Instacart becomes hugely successful!

That said, I can't help but wonder whether the company will find a business model with sustainable economics. A lot of really smart people have tried and failed to accomplish this sort of thing before. For example, Amazon invested $60 million in Kozmo.com back in the late 90's, and they couldn't make it work. (Kozmo.com ended up raising a quarter billion dollars before shutting down.)[1]

The main challenge is that same-day, point-to-point delivery is very expensive -- a complex problem. (Most delivery systems in use today rely on some kind of hub-and-spoke design.) Perhaps the wide adoption of smart phones will make point-to-point delivery economically viable for Instacart -- e.g., by giving the company cost-effective access to underused delivery vehicles as needed to satisfy the ebbs and flows of consumer demand.

I'm curious to see if and how Instacart can pull it off.

[1] http://en.wikipedia.org/wiki/Kozmo.com#History

apoorvamehta6• 14 years ago

While I agree that a lot of smart people have tried this before (Kozmo.com, WebVan, etc), I believe that there are significant differences in the approach that we are taking.

Specifically, Kozmo.com was founded in an era where you could IPO without having profits. Having that mentality from day one allowed them to make huge concessions to users such as give them free delivery on everything, and not have a minimum order. For example, you could pay $1.50 for a gum on Kozmo and get it delivered to you within an hour. WebVan, on the other hand spend $1B on building it's own warehouses and fulfillment infrastructure.

Learning from those companies, we have done a lot of things differently. For starters, there is a minimum order of $10. There is a delivery fee of $3.99 for 3 hours and $9.99 for 1 hour. (Would you not pay $4 for someone to do all your groceries?) And, we do not hold any inventory - all of it is sourced directly from local retailers.

It is also important to mention that the time that we live in is very different. People are a lot more comfortable adding their credit card information on web/mobile. Not to mention, the access to smart phones that people have gives customers the ability to shop from anywhere - office, couch, next to the fridge.

We believe we are different from the companies that have tried this in the past. And, we hope we are live in your hometown very soon.

(edits to follow)

bastian• 14 years ago

Thanks for cloning Get It Now after using it. ;)

cs7024• 14 years ago

apoorvamehta: thank you for your prompt, articulate response.

The logistical challenges look daunting to me. My recollection is that the problem of coordinating and optimizing deliveries in such a point-to-point system with time constraints is NP-hard (I could be wrong about this, but that's my recollection). Then one has to deal with all sorts of real-world problems like order-fulfillment errors and substitutions (intentional and otherwise), constant shrinkage of merchandise, etc.

Obviously there's some price at which the service can be profitable, but I'm not sure it's $4. (Consider that the former CTO of Kozmo, Chris Siragusa, has been running a one-hour, point-to-point $3 delivery service for a number of years, MaxDelivery.com, but he has kept the service restricted to a relatively small, dense area in lower Manhattan, making the economics worthwhile.)

In any case, I sure hope you're right!

kevingadd• 14 years ago

So does that mean you view yourselves as potential competitors for services like Safeway's home grocery delivery?

LargeWu• 14 years ago

> Specifically, Kozmo.com was founded in an era where you could IPO without having profits

Yes, it's different this time. Just ask Groupon.

Also, and maybe you have a lot more insight into the business model than I do, but I just do not see how this scales, as your marginal labor costs have got to be a very high portion of your revenues. How many deliveries per hour can an employee handle?

For example, assume you are paying $8.00/hr. If you have one person shopping, and they can compile 4 orders per hour, and one person can deliver those, which is a big if, you are just breaking even on labor costs.

aidenn0• 14 years ago

It seems like by having a delivery fee is a non-starter.

"I can get it in 2 days free with amazon, or $4 today... is that worth it?" People will spend huge amounts of time and effort to not pay delivery charges, even when the total price ends up being the same!

rogerbinns5• 14 years ago

You also have another way of making a few more bucks here and there. Supermarkets often have coupons, and also buy one get one free type offers. The former can reduce the cost of goods to you, and the latter means you can charge two customers for an item but only pay for it once.

quintin• 14 years ago

Apoorva, Something that I noticed working in Bangalore is the BigBasket.com model. Order something that will be delivered in a time slot. Say I need egg + broccoli + rice etc. I get to choose the next available delivery time. Chances are that the slot might get filled. But if I choose 9:30 AM, it will be delivered by 1-2 PM. The next slot available is 4:30 delivery. Reduces sourcing end variables for the supplier & increases predictability on the other end.

jonmc12• 14 years ago

I'm hoping service succeeds also - its an awesome value proposition for consumers. However, I've built a few real-time delivery businesses, and I'm pessimistic.

Real-time operations are costly to manage even though the software has become easier to build. Not being Amazon and not being able to control inventory, and access to that inventory, hurts. However, probably a bigger issue is establishing consumer habit - triggering that need to order at the moment the user wants it. This comes down to establishing a brand (expensive) and also evolving consumer behavior (more expensive). And, these consumers will have to be in the < 200 geographical regions of the US that are dense enough to facilitate < 4hr delivery profitably (its probably less than 50 regions where you could fulfill on 1-hr delivery profitably at any substantial volume).

You could say Uber is a counter example of succeeding in this space. I would argue that they replaced an existing consumer habit with a better one. I don't see that in the same-day delivery space - thus the need for education.

There have been a few generations of these services (Webvan / Kozmo; Licketyship; Ecourier / Shutl; Postmates). Eventually, the cost of tapping into consumer habit vs the small margins of brokering a delivery will create an amazing opportunity. In the meantime, the cost of educating and acquiring users is a big deterrent and if you can build the kind of company innovative enough to solve this problem, its likely you have a prohibitively high opportunity cost.

laglad• 14 years ago

Do you think that the delivery economics work better in incredibly dense regions like Mumbai or Shenzen?

deepGem• 14 years ago

I think the main problem is sourcing. If sourcing can be done locally, then delivery costs will automatically plummet. Take vegetables for example. The actual cost of growing the vegetables is negligible compared to the transportation costs of delivering and storing to the end consumer. There is also the added cost of storing. Companies are doing a lot to address the transportation and storage but not doing much to address the sourcing issue. I think one startup in NYC is doing some sort of urban warehouse farming to tackle the sourcing issue.

dclowd99012• 14 years ago

I think to solve this problem, Amazon needs to bridge the gap between their value and local retailers' stock.

It'd work something like this:

You go online.

You want to buy a new A/V receiver

You find the one you want on Amazon at 9 am

Amazon then asks you where you live

Amazon taps into a database of willing stores that might carry the product. Most big-box stores have web-based inventory checks, so syncing their inventory with Amazon's system would (hopefully) be easier. Amazon offers the service to more specialized outfits; Smaller stores would get support in integrating the inventory system. Amazon would have to make a deal with these stores to make this work.

Using a partnership with UPS/FedEx/et.al., Amazon figures out which locations are still due for visits from a logistics company. Most make residential shipments as the last part of the day.

Amazon tells the store, "A customer requested this receiver, please put it in box size A1 and hand it to the UPS dude with this shipping label."

Amazon pays the retailer below retail, but above cost. The retailer takes it because they want the business; Amazon recoups because same-day shipping is a premium.

Box goes on the truck, truck comes to your house.

Voila, new item by EOD same day.

marquis• 14 years ago

The bottleneck is the delivery: unless there are sufficient deliveries to be made in your neighbourhood, sending a van to just your house then back to depot is very expensive. For hundred-dollar-and-up items this works, but not for the kind of consumer goods that people want within an hour (food, namely). And for $9.99 for one-hour delivery, who is not getting paid very well here?

personlurking• 14 years ago

There's an online used bookstore (Estante Virtual) in Brazil that kind of does this, though obviously with books. It's a network of 9 million titles, all coming from secondhand bookstores throughout the country who have uploaded a list of their inventory. When I browse for a book, I can choose a local vendor and if I want, find out the location so that I can just go there in person if I think that's faster than Brazil's national courier services (as many times, payment to the vendor means making an in-bank deposit to their account).

jontas• 14 years ago

Isn't this sort of the way those flower delivery sites work? You purchase some arrangement online and then a local retailer puts it together and delivers. So this model already exists and is (presumably) successful. I'd sure love to see it rolled out to other industries.

hyperbovine• 14 years ago

There's evidence that Amazon is about to make another go at same-day delivery, see: http://www.slate.com/articles/business/small_business/2012/0...

kevinh• 14 years ago

The techcrunch article title is misleading - they don't want to be Amazon; they're not maintaining warehouses (which may prevent them from crashing like Webvan). They're effectively delivery people that you hire to bring you products from local stores, which is a very different market.

Regardless, there are a lot of dead companies that litter the path for a product like this. I'd be surprised if Instacart succeeds.

adv0r• 14 years ago

Milkplease (refused by YC) is more promising and we are trying to be faster

http://www.springwise.com/retail/italy-site-lets-users-crowd...

makeee• 14 years ago

I've been using instacart a lot lately and it's awesome. I really think this is going to big.

anthemcg2• 14 years ago

I have been using past few week while it was in Alpha and I got say, its my favorite service for drink runs like sodas/juices/liquors. Def going to become a regular user. Gonna be following with much interest.

Also, to add to the conversation.It all about timing, right? Now with Amazon being as big as it is and we see companies like Rewinery, Exec, Postmates smashing into this on-demand local delivery space. The time seems ideal for a company like Instacart. I do miss WebVan though.

zeroonetwothree2• 14 years ago

If they were to do alcohol delivery this could be really big. Even if they charge more for it (say $20) it's going to be extremely popular.

endeavor2• 14 years ago

That's a very interesting idea. I can see the demand being there, but a lot of legal hurdles.

anthemcg2• 14 years ago

I've ordered alcohol with the app...

endeavor2• 14 years ago

Are you guys limiting the invites? I'd love to check it out but haven't received my invite yet.

sethbannon• 14 years ago

Grocery shopping for the lazy AND impatient? Yes please.

RobAtticus• 14 years ago

This kind of seems like a rip off of Postmates' "Get It Now", no?

http://postmates.com/getitnow/

applefanner• 14 years ago

It's a great idea, in theory. But who's the target market? Wealthy professionals have a wife to bring them stuff or have personal assistants (hard to believe in the world of dual income households, but I have friends that do just this). Young, less wealthy professionals just go pick up the items themselves or have friends pick them up for them. College kids aren't going to pay for such a service, they enjoy taking a break from studying to go pick up something. And yes, I know, I'm sure there are stay at home husbands that do errands for their wealthy professional wives, I just don't know of any.

DanielRibeiro• 14 years ago

Sounds nice. I know some people have been using Exec (YC W12) to do this, but instacart is much cheaper. The only thing that takes all the excitement for me is that it does not have a android version OR a web one....

alanfalcon• 14 years ago

I love that the website doesn't shoehorn me into a crappy mobile version when I load it, but what happens now is that I get a picture of an iPhone and apparently nothing else—it's not at all intuitive for me to think to scroll horizontally to find the content of the web page, especially with the hidden-by-default scroll bars on the iPhone. To clarify, the horizontal scroll bar that appeared when scrolling vertically while "looking for the rest of the page" was hidden by a thumb for me. I only barely thought to check horizontal scrolling before giving up on the page as somehow broken on my iPhone.

Deatil of what I see (on the left) vs what I probably should see (on the right, after zooming manually):

http://i.imgur.com/1Yjfi.jpg

apoorvamehta6• 14 years ago

fixed now. thanks for the heads up :)

mochizuki• 14 years ago

If something is located within an hour of me I could just drive and get it, or use a local delivery service. I use the internet to buy extra weird stuff that I can't get locally.

HorizonXP• 14 years ago

Congrats Apoorva! Glad to see us 08 Elecs trying to change the world for the better.

SoftwareMaven• 14 years ago

Monday I was having a conversation with a coworker about the looming major showdown between Amazon and Walmart. My take was Walmart should offer exactly this, allowing them to leverage their massive supply chain and warehouses in every city with more than 5000 people (aka "The Walmart").

Awesome to see a startup rising to the challenge.

samstave• 14 years ago

Kozmo.com of the new era bubble.

This will be interesting.

tylerlh• 14 years ago

Looking forward to giving this a try. Best of luck!

tianshuo• 14 years ago

Groceries+short delivery window... sounds like webvan ;-P http://en.wikipedia.org/wiki/Webvan

dinkumthinkum3• 14 years ago

I can barely get a pizza delivered in an hour, and they've been doing that since the 1970s (I guess, I have no idea when pizza delivery started). Do I have to worry about Instacart maniacs driving like banshees on the road?

kfk• 14 years ago

Have you looked at the financials of this? 10$ for 1 hr delivery means that either the carrier is paid less than that hourly(and I guess at least 20% less than that) or he is supposed to deliver more than 1 package per hour. Considering transportation costs and idle time, I am not sure this will work smoothly. It will work if there is a list of carriers ready to drop what they are doing to go buy groceries and make some money. Basically, it will work in cities with lots and lots of students...

binarysolo• 14 years ago

This feels like a specialized TaskRabbit kind of thing (like what they tried to do with the $10 delivery for In-N-Out anywhere in SF). Could be workable if there's enough customers.

chris123• 14 years ago

Who delivers? Is this a P2P marketplace (like Taskrabbit, etc?)?

rahulnb• 14 years ago

Better than Peapod and Kozmo, the time for such a service is definitely now in the mobile driven world.

Instacart (YC S12) wants to be Amazon with 1 hour delivery

Related Stories