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.
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.
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].
My Amazon experience for clothing and shoes is roughly the same as for all other Amazon products; I visit a physical location to actually peruse/test the product (in this case, try it on) and then order it cheaply online.
Do you have specific pain points, or is it the innate difficulty in online shopping for clothes?
>My Amazon experience for clothing and shoes is roughly the same as for all other Amazon products; I visit a physical location to actually peruse/test the product (in this case, try it on) and then order it cheaply online.
Because so many of us (including myself) now behave in this manner, I'm fairly convinced that most brick and mortar stores will have to assume an "annual dues" model a la Costco to survive. (and offer some form of competitive advantage over Amazon, of course -- ex: focusing on item discovery rather than cookie cutter merchandise, etc.)
I can't speak for the other poster, but for me, its mostly a sorting problem.
I do think Amazon has improved on this a lot. In the past I would find multiple listings, for the same product, from different merchants, under different names.
As an example, if I am looking for a specific Diesel jean I have waist, length, wash, and cut. The wash might be either described correctly, "0073N", or incorrectly "Dark blue." Looking at it now, this is much improved over where it was just a year ago.
On the other side of things, Amazon has a problem with fake products getting in their inventory by third party sellers being labelled as genuine -- another issue that has been getting better (The iPhone Charger listed as by Apple but priced like an iPhone app, was there for years.)
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.
I completely disagree. I think Amazon.come is absolutely amazing, and I do the vast majority of my shopping through it.
Bezos's intention was to offer everything under the sun when he started the company, hence the name Amazon, because of it's diversity in terms of number of species that exists there.
I compare my experience with Newegg, and although I've bought some stuff from Newegg, I will generally go with Amazon, even if it's a few dollars more expensive, because I trust Amazon so much more, and the entire experience is so much better. I'm basically their model customer, and they have me hook, line, and sinker, especially with Amazon Prime.
Maybe that was his intention, but it's hard to deny that the main focus of Amazon was (and may continue to be) books. I think it just boils down to whether or not you believe in the aforementioned idea that it's only possible to do one thing really well.
Anecdotaly, I had two experiences where my card got flagged by NewEgg, they didn't bother telling me until the next day. I cancelled the order, over nighted it from Amazon for almost exactly the same price.
I cringe every time I have to order something outside of Amazon, dreading a MasterCard secure card, frozen order, mis-packaged products, and any number of other issues that affect my physical goods purchases outside of their system.
I don't think the problem is so much that they're too diversified, its that their search functionality has done a very poor job of keeping up with and supporting that diversification.
It seems that I only have good results when I search for a specific $productname, and even then I get results for products with user comments reading something like "its not $productname but..." or "get a $productname instead". More frustrating is that these seem to be ahead of what I'm actually searching fairly often.
I really think the root problem is their allowance of 3rd-party sellers to create product listings. There needs to be a "master listing" for a specific product, to avoid the current problem of multiple duplicate listings -- which, like you said, may not actually be product X at all, but is product Y instead. It makes Amazon look like eBay.
Don't even get me started the self-published ebook spam -- is Amazon just ignoring it?
I think the problem Amazon has dug for itself is by operating at razor thin profit margins, the volume has to be massive. That of course means crossing into more and more markets, and spreading itself more thin
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.
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 :)
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!
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.
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.
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.
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.
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.
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.
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.
It's not that simple. There are a lot of people living in apartments - how's it going to work for them?
And where exactly would you place the indicator? In your front yard? Normally, delivieries are made to your porch, but the drone would have difficulty finding an optical indicator on the porch from above.
And what about groceries that need to be refrigerated? Those will need to be dealt with specially.
Oh noes, now I only have a business that delivers groceries to people with lawns. What a tiny niche business:) Seriously though, those are really lame problems. If I could sign up for a service that uses a geofence to find out when I get home and then f-ing airlifts milk to the dead center of my front lawn, I would buy so much milk.
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.
$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.
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.
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.
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
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?
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.
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.
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.
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.
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.
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.
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."
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.
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.
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.
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.
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.
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?
"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?
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.
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?
