Instacart (YC S12) aims to be the Amazon Prime of grocery delivery

http://news.cnet.com/8301-1023_3-57489629-93/instacart-aims-to-be-the-amazon-prime-of-grocery-delivery/

by apoorvamehta • 14 years ago

109 58 14 years ago

news.cnet.com

thurn• 14 years ago

Amazon has had, what, five years to expand its Amazon Fresh grocery delivery service? The fact that they have chosen not to implies that they haven't managed to make it cost effective. I think this speaks volumes about the feasibility of grocery delivery.

apoorvamehta2• 14 years ago

thurn - It does speak volumes. And, if you were to study our model, you would realize that Amazon Fresh and Instacart have very little in common. To start off - we are almost entirely a software company. Amazon Fresh, on the other hand, has warehouses, trucks and they own the inventory - completely different from us. We believe those differences are significant - and hopefully they speak volumes too :)

minikomi• 14 years ago

Sounds like a great blog in the making

InclinedPlane• 14 years ago

Yes and no. One thing to keep in mind is that Amazon is a highly diversified company. So even if expanding Amazon Fresh to other cities would turn a profit it may not be worth it to them to put resources behind if it won't be able to turn as much profit as, say, expanding amazon proper to other countries (which they're doing) or building out the cloud business, etc.

danielvinson• 14 years ago

My takeaway is that this is not profitable on the global or national scale, but on a local or regional scale, it can be. Amazon might not want to pursue a strategy with limited scalability, whereas Instacart might not even need to worry about that.

greghinch2• 14 years ago

While I agree that Amazon not having much success in this market is not a great sign, it seems like there are probably a number of other reasons they haven't been expanding the service. Amazon is trying to be the one spot you buy all physical goods, but it's been proven time and time again that getting to generalized, or trying to be all things, means you can't do all of them (or sometimes any of them) well. I think a new company with this focus definitely has the best chance of success. At which point, Amazon will probably buy them.

For now though, please expand up to Marin!

frossie• 14 years ago

Yes. For example Amazon offers quite a poor consumer experience for clothing and shoes, even if they do sell them. There are reasons why Zappos can thrive (and presumably why Amazon acquired them).

[Edit in response to comment below: I do not believe it is right to try something in a store and then go buy it online. Even if you believe that is okay, it actually proves that the purely-online consumer experience is sub-standard, otherwise why bother go to a store at all?

While Amazon is great at issuing refunds for, say, non-functioning electronics, they don't issue full refunds if you buy a hat and there's nothing wrong with it but it doesn't quite fit/look right, and you have to pay for return shipping. Contrast this with the Zappos approach where returns are both free, and hassle-free].

Wingman4l75• 14 years ago

Personally, I wish Amazon had stuck with books. IMO, their diversification has made their site organization suffer -- especially when they allowed 3rd-party sellers to create product listings (which led to maddening duplicates).

I pray that Newegg's diversification from computer hardware won't have the same adverse effect, but it's probably a law of retail that it will.

w1ntermute2• 14 years ago

Yeah, I just don't see grocery delivery becoming feasible until it's done using UAVs. But the main issue with that (aside from getting FAA approval, which is in the works) is that it'll require retrofitting houses with delivery chutes.

blhack• 14 years ago

This isn't as hard as you think. Place an optical indicator (like a QR code), on a piece of paper, and put it where you want the groceries to wind up. Drone finds your house. Finds your landing spot (which was presented to you via a nice "print this" dialog when you ordered), and sets the stuff down.

Alternatively, if you're going to be doing this, you can purchase and register an IR beacon that is more permanent than a piece of paper.

Wingman4l75• 14 years ago

I think you're forgetting the limitations of payload and fuel...

lotharbot• 14 years ago

If Amazon sets up a physical business in any given state, they have to start collecting sales tax on all their sales to that state. So "cost effective" for Amazon Fresh means not just cost effective in isolation, but also accounting for the cost in infrastructure, lost sales, etc. that comes with collecting sales tax.

That's one of probably a dozen reasons why what works (or doesn't) for Amazon might be different for Instacart.

navpatel• 14 years ago

I used Amazon Fresh when I lived in Seattle & Redmond; and I think this appeals to a different impulse. The key with Instacart is it's (almost) instant, Amazon Fresh is not. The "hey I'm setting up for a bbq, and I need to a couple things from the grocery" is not possible with Amazon Fresh. Whether or not it's a big enough market... I guess they're going to find out!

jlgreco• 14 years ago

I use Amazon Fresh as a "hey, I'm running low on eggs, soap, and paper towels. I don't care what kind I get, I just want more" type service. Works great for that.

Also beer. Carrying cases of beer home sucks. ;)

yabbadabbadoo• 14 years ago

Amazon also had years to perfect it's apparel and shoes service. That didn't stop zappos from kicking ass. And look how that turned out. The idea that an incumbent, by default, can't do something because an entrenched giant can't is laughable.

delinka• 14 years ago

According to CNET, it's not actually a grocery logistics outfit, but a delivery company. They're just delivering groceries ... from the local supermarket. A remote shopping and delivery service, limited currently to groceries. I foresee and expansion into restaurant delivery, too.

If it bombs, it won't be because they can't keep the lettuce fresh from the field to your door, it'll be because you just can't do Ultimate Delivery for $99/yr.

nycer2030• 14 years ago

Are you familiar with FreshDirect? It's an incredibly popular (and profitable) service for grocery delivery in NYC. As the article mentions-- in big cities, this is a viable business.

RandallBrown• 14 years ago

Isn't Amazon Fresh the Amazon Prime for Groceries?

evanmoran• 14 years ago

This is word for word what I was thinking. Well played Randall from 58 minutes ago.

georgemcbay• 14 years ago

I hope that while they exist they use heavy duty containers for the deliveries.

I'm still getting a lot of use out of my old Webvan tubs!

damian2000• 14 years ago

I thought this concept of grocery deliveries for free had died with WebVan back in 2000 [http://en.wikipedia.org/wiki/Webvan]

fourmii• 14 years ago

"Instacart simply takes customers' $10 or larger orders, sends a staff shopper to a local merchant to load up on fruits, vegetables, meats, and the like, and then delivers them." How are they going to scale this? Sounds like it would require a huge workforce in each of their markets. And what about the grocery chains' delivery services like Peapod?

steve89183• 14 years ago

If they wanted to scale, they would need to make deals with the grocery stores to pack the groceries, or have their own food depots so that the delivery people wouldn't have to waste to packing groceries.

ssharp• 14 years ago

$10 for one-hour delivery and $4 for three-hour delivery seems extraordinarily cheap, given the someone is actually going to a grocery store, buying this stuff, and delivering it to you.

If those are the actual operations, it appears like it would be very difficult to turn a profit. However, it does seem like there are plenty of good ways to make the operations more efficient once demand is high enough while still remaining light on assets like warehouses, trucks, etc.

streptomycin• 14 years ago

Those prices are comparable to services like Peapod which take orders the day before and plan out at least relatively efficient schedules. Especially if they're moving to a yearly flat rate subscription to get people to make more frequent orders, I don't see how this can work.

But I wish them the best of luck, it would be wonderful for them and their customers.

sytelus• 14 years ago

Back of the envelop calculations: A typical delivery would cost 1 hour of someone's time. At minimum wage this would cost ~$5. So $99 buys you 20 deliveries. If you batch up 3 customers every hour than $99 can pay for 60 deliveries.

If your order twice a week for 50 weeks than customer gets 100 deliveries for $99. So net/net Instacart would have gap of 40 deliveries = $33. So in essence they would eat up $33 per customer as loss which you can simply be viewed as customer acquisition/retention cost.

I think this is brilliant model. $99 for 3 hour deliveries would be very attractive to upper middle class. It also illustrates class of powerful business models which are simply based on swapping time for money and leveraging the exchange rate between time and money to be minimum wage.

danielharan• 14 years ago

With a concentrated customer base and excellent logistics, they may be able to do much better than 3 deliveries per hour.

feydr• 14 years ago

fyi - SF min. wage is $10.24/hr - although I just got an invite to the app and if it's true to their word I'll use it all the time - I was using safeway delivery before as I don't have a car currently and it's a real pita to do groceries w/out - even zipcar will cost around that much plus your time

tednaleid• 14 years ago

In Minneapolis, we've had grocery delivery for quite a while now through Coborn's Delivers (http://www.cobornsdelivers.com/). It used to be Simon Delivers (http://en.wikipedia.org/wiki/SimonDelivers), a startup that went under and then was taken over by an existing local grocery chain.

We pay $5 for next-day delivery or $10 for same-day (for orders of at least $50, otherwise add another $5 to delivery).

It's a huge time saver, we have groceries delivered every Sunday and they have good selection and produce. The prices are a little more expensive, but it's totally worth it for us.

The startup I'm working at also uses it periodically to have soda and snacks delivered. Much easier and more reliable than having to send someone out every few weeks.

watchdogtimer• 14 years ago

We started and operated a grocery delivery service like this for some 15 years as a sideline to our normal delivery business.

It was an operational nightmare.

Picking one order for a customer at a grocery store quickly is hard enough. Two orders requires using two carts and care that you don't mix up the orders. Picking more than two orders at a time is almost impossible, which limits your productivity.

We routinely had customers who would order more than a cart worth of groceries at a time. Offices would order 20 cases of soda pop and several boxes of munchies. Picking, transporting, and delivering these orders often took well over an hours' worth of time each.

If the average customer is ordering once a week, the $2 they receive won't be enough to cover their costs, and they'll have to charge significantly more than shelf price for the groceries if they are to be profitable. But this will discourage customers who believe they are paying an annual fee in return for "free" delivery.

adebelov• 14 years ago

those damn instacart addicts :)

callmeed• 14 years ago

I can't help but worry that services like Instacart, TaskRabbit and Exec may perpetuate the problem of "underemployment" in the United States.

Let's face it, you can't pay delivery people as good as, say, Costco does it's hourly employees and only charge $4 or $10 for delivery. It's even worse if these services are just 1099ing these people without any benefits, gas money, etc. (I have no idea if this is the case).

Maybe these services use student workers. Maybe I'm way off. But I do know that I'm as pro-capitalism as anyone but felt a little dirty after paying someone on TaskRabbit $15 to walk around SF for 2 hours and get me some restaurant information.

steve89183• 14 years ago

I hate to be overly negative against this startup, but I have a couple of issues with this service, that haven't been addressed since Webvan in 2000:

1) The target audience is definitely those people who are too busy to get their own groceries. If they are too busy to get their own groceries, aren't they too busy to cook a meal? I would think that take-out or going out to eat would be their #1 competitor in this area. When both my wife and I were working full-time, at the end of the day we were so exhausted that the last thing we wanted to think about was what we were going to eat, and then actually cooking it. We ate out probably 5 days out of the week. Ordering take-out will be quicker, and less of a hassle.

2) If the delivery person selects items such as meat, eggs, milk, etc that are expired or very close to expiry, it will likely cause a complete lack of confidence in the service. It will only take 1 bad experience buying meat, or a couple of busted eggs in a dozen, and they could potentially lose a customer forever. I'm not sure what their return policy is, but if they have one, it will likely be pretty costly for the company. There also could be incentive for people to return their close-to-expired food to Instacart, claiming that the delivery person selected it. It may seem petty, but for example very high chargebacks rates are one of the biggest challenges that Square faces right now.

3) Free delivery is interesting, but the 3hr delivery window I think will turn out to be pretty inconvenient for customers. It means that they need to deliver their goods at home, because who wants to be stuck at work waiting for their groceries to be delivered? I'm not sure what the delivery times were during their beta testing, that would be interesting to know, but my best un-educated, armchair-analyst guess is that the highest amount of deliveries will be from 7 to 10pm, and on weekends. If Instacart takes off, it means a disproportionate about of work required between 7pm and 10pm, and a lot less at other times. This sounds like a lot of people sitting around waiting for deliveries.

4) Safeway has their own delivery service as well, with a 1hr time window. What exactly does this service provide that Safeway can't? Is it cheaper? Or just faster?

brandon2722• 14 years ago

Point #2 Sounds like it could be alleviated via offering users the ability to set account preferences: "If an item is running low on stock, I'll take something that is close to the expiry date."

apoorvamehta2• 14 years ago

Steve, thank you for your comments.

Our metrics to date seem to disagree with your speculation about people not having the time to cook. There are also a host of products that Instacart carries for occasions other than dinner, like sundries, snacks and beer. These are our most popular items. Also, I agree that it would be a terrible experience for the customer if items arrived expired or broken - which is why we take such great care to make sure that those things don't happen.

We've also found that a 3-hour delivery is very convenient for most customers, and it's by far the most preferred option. With regards to delivery from grocery stores themselves: please try ordering something from one in the next hour.

colinsidoti• 14 years ago

I went to a talk with one of WebVan's early employees, who actually went on to found Kiva Systems, the robotic fulfillment system Amazon just purchased for something like $750 million.

He seemed to insist the reason WebVan couldn't be profitable was because fulfillment was too expensive, which served as inspiration for Kiva. Having people walk around was too slow and too big a cost center.

Obviously this is biased, but still an interesting point to throw in here, since it doesn't look like something they've addressed.

bengl3rt• 14 years ago

It's really for people without a car. I have plenty of time to cook, but shopping for groceries without a car is annoying. Taking more than two bags at a time on the bus really sucks.

bhickey• 14 years ago

Don't forget about people who don't have cars.

I absolutely loved Ocado when I was living in London. Tesco's was four blocks away, and Sainsbury's a kilometer. Getting groceries home on the bus is no fun.

Damaged goods were refunded no questions asked (the yogurt pots had a habit of bursting).

If I could get the same service in this area, I'd do it at the drop of a hat.

vidarh• 14 years ago

I second that. We have a standing weekly order with Ocado.

For those who've not experienced Ocado weekly deliveries:

It's fantastic - they automatically create an order for us every week for delivery on Friday between 6pm and 7pm. The order includes items we've said to always include, excludes items we've said to never include, but other than that they create a "recommended" order based on our past shopping patterns. Usually it's a very close match and we just tweak some quantities if we've used less or more of something or want to wary our menu.

We then have until about 1am on Friday to amend the order via the web interface or their mobile apps as our needs change through the week. It cuts down my total grocery shopping time to about 5 minutes a week.

Everything comes sorted into color coded bags for the freezer, fridge or cupboards, and the invoice (and web site) lists the minimum number of days until the use by date of each item.

I hardly shop offline any more - between Ocado and Amazon, 99% of my shopping needs are taken care of.

cjrp• 14 years ago

This is already very common in England, and a number of the major supermarkets offer delivery service (Tesco and Ocado/Waitrose are I believe the largest).

1.) The reason I get them delivered isn't necessarily that I'm too busy, just that pushing my way around a busy supermarket on Saturday afternoon is boring! Honestly, when we haven't done an online shop and end up having to go to the store I find myself wishing I could just "search" for items, like with the web/iPhone app.

2.) Ocado (the service I'm familiar with here) never chooses items near the expiry date, it's as simple as that. They must recognise that if people were consistently getting nearly-spoiled goods, they'd just stop using it. Products nearing their expiry date usually have their price reduced in their store, so it's not a problem shifting that stock.

3.) Agreed, Ocado lets you choose 1-hour slots and that's about the longest I'd want. Unless nearer the time they can be more specific based on the van's progress, e.g. send a text saying "we should be with you between 8.00 - 8.30".

Honestly, if I was building this service I'd be looking at someone like Ocado. For me, they've nailed the whole product (including awesome iPhone/iPad apps). If the InstaCart folks would like more info about them (guessing you can't use it outside of the UK?), let me know and I'd be happy to help.

brandon2722• 14 years ago

I would really like for online groceries to work, partly because I despise going to to the grocery store. I'd much rather have someone else find a place to park, locate all of their items, wait in line at checkout and haul the groceries out of the store. I'm even willing to sacrifice things in order for that to happen, like being able to inspect and pick my own meat and produce.

The only sticking point for me is price and selection. I want options when choosing products and I want the prices to be comparable to what I see in the store. I don't want prices that are twice as much as in the store PLUS delivery fees.

Hopefully Instacart Express tackles that problem. The only concern I had after reading the thread is that it sounds like they have an employee go to an actual grocery store to pick up the order and deliver it. That method of doing things sounds painful once the service really starts to grow, but perhaps they've got an alternative strategy for when that happens.

Good luck, Instacart!

brackin• 14 years ago

Do you not have these services already in the US? In the UK every major supermarket will deliver to your home whenever you want. They all have mobile apps, etc. They have the leverage, surely the same would happen in the US?

tkahn6• 14 years ago

I imagine is has to do with the comparative sizes and population densities.

fluxon• 14 years ago

As far as I can tell, Instacart works on phones only, not the web. Will there be a web UI? And it's iPhone only. Q: Where does Apple get its 30%? All in-app sales? Just the delivery charge? Will there be an Android version? If not, why not?

rdl• 14 years ago

I loved Webvan when it existed, and then Tesco's delivery service in the UK, but never got into the delivery options in the US since then. (I also ended up with >30 of their crates...)

I'd pay $50/wk for someone to go to storage freezer (deer, beef), the butcher in Alameda (other meat), Berkeley Bowl (produce), Tokyo Fish Market (fish, japanese stuff), Whole Foods (365 is a decent deal, failthrough for anything not at the above), Costco (specific bulk items, like ito-en green tea and san pelligrino), and Trader Joe's (frozen food) to get groceries. Unfortunately, I think I outgrew Safeway some time ago. The other problem is I often want to buy highly seasonal items, based on availability, price, and quality. I don't think there's a good way to get the quality I want at a single store at a decent price; Whole Foods comes closest, but is expensive. Add BevMo for liquor, too.

Webvan had basically one or two steps better quality than Safeway (on par with Andronico's), and all in one place.

A service to get stuff for a party during the party (e.g. if you run out of beer) in 1h for $10 would be awesome. I don't think I'd use 3h Safeway delivery even if free. I would use a higher end service with great quality food (by going to the right shops) if the ordering experience exposed current inventory status.

Instacart (YC S12) aims to be the Amazon Prime of grocery delivery

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