There were also many video startups before YouTube, but the web wasn't ready for them (infrastructure, speed, etc.). Webvan was a long time ago and the failure of it is well-documented in Four Steps to the Epiphany, which said they built before reaching product market fit. Now I don't know much about Instacart, so I can't speak to how they're doing, but that doesn't mean the world isn't ready for this generation's Webvan.
One could also argue that Sequoia now knows the difference between a doomed-to-fail grocery delivery services and a successful one after experiencing it first-hand. :)
> One could also argue that Sequoia now knows the difference between a doomed-to-fail grocery delivery services and a successful one after experiencing it first-hand.
When did they experience a successful one?
Groceries are incredibly low-margin businesses that don't engender a lot of interest from the end users (mutual funds for the IPO stock), not usually the purview of VCs. But perhaps this $200M grocery investment will be the $200M grocery investment that pays off.
Larger grocery store chains (i.e. Safeway) have a tremendous price markup, often times reaching 50%. This markup contributes to their profits, of course; but it also helps offset losses from the inefficient process of distributing perishable goods to consumers. If they could improve that efficiency while keeping prices constant, then grocery store chain profits could benefit substantially.
That's $8.5M they're going to spend proving (or disproving) market viability, at which point, if it's working:
- The stores themselves will just roll out their own competing services. They can't afford for a middle man to eat their margins.
- Existing players like Fresh Direct will leverage their complete control over stock and distribution to beat them on price and service. There's a lot of wiggle room when you don't have to deal with stocking physical store shelves.
I guess, thanks to AirBNB/Uber, that 'collaborative consumption' is the new hot VC investment.
> The stores themselves will just roll out their own competing services.
Safeway already has their own online ordering & delivery service, however it doesn't allow you to bundle items from other (possibly competing) stores. Instacart allows you to pick (for example) 3 items from Safeway, 2 items from Trader Joe's, 1 item from Costco, and 6 items from Target ... all in the same delivery. It would take a joint venture / agreement among all the major retail chains to make that happen with their own services. Instacart's model is actually safer than it seems at first glance.
I'm not really convinced that this is an interesting feature.
People tend to choose store brands for a myriad of reasons, and stores tend to differentiate themselves based on those market divisions.
Paying a premium to get a single delivery with items from both (which is something that has a lot of logistical issues) doesn't seem like something with substantive draw.
Instacart is a really interesting business (it's a logistics play, not a retailer, and logistics is stealthily really sexy – it doesn't matter what sells, you win), but the thing is, US is at least ten to fifteen years behind the rest of the world in grocery sales:
(amongst many – every major UK supermarket has a popular home delivery service).
It's up there with mobile and wireline Internet, and cable TV, for areas where moving to the US has felt like moving back to the mid-nineties... there are other areas where the US is unquestionably the leader, but yeah.
I really wish Instacart or something similar succeeds. The state of grocery delivery in the Silicon Valley is far from ideal.
The key, though, would get the supermarkets involved. The only way to lower the delivery price and stay profitable is to convince the stores that it's in their interest.
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[ 4.1 ms ] story [ 29.6 ms ] threadWhen did they experience a successful one?
Groceries are incredibly low-margin businesses that don't engender a lot of interest from the end users (mutual funds for the IPO stock), not usually the purview of VCs. But perhaps this $200M grocery investment will be the $200M grocery investment that pays off.
- The stores themselves will just roll out their own competing services. They can't afford for a middle man to eat their margins.
- Existing players like Fresh Direct will leverage their complete control over stock and distribution to beat them on price and service. There's a lot of wiggle room when you don't have to deal with stocking physical store shelves.
I guess, thanks to AirBNB/Uber, that 'collaborative consumption' is the new hot VC investment.
Safeway already has their own online ordering & delivery service, however it doesn't allow you to bundle items from other (possibly competing) stores. Instacart allows you to pick (for example) 3 items from Safeway, 2 items from Trader Joe's, 1 item from Costco, and 6 items from Target ... all in the same delivery. It would take a joint venture / agreement among all the major retail chains to make that happen with their own services. Instacart's model is actually safer than it seems at first glance.
People tend to choose store brands for a myriad of reasons, and stores tend to differentiate themselves based on those market divisions.
Paying a premium to get a single delivery with items from both (which is something that has a lot of logistical issues) doesn't seem like something with substantive draw.
http://www.ocadogroup.com http://www.lse.co.uk/ShareChart.asp?sharechart=OCDO&share=oc...
(amongst many – every major UK supermarket has a popular home delivery service).
It's up there with mobile and wireline Internet, and cable TV, for areas where moving to the US has felt like moving back to the mid-nineties... there are other areas where the US is unquestionably the leader, but yeah.
The key, though, would get the supermarkets involved. The only way to lower the delivery price and stay profitable is to convince the stores that it's in their interest.