"But long-term this is most likely not going to be economically feasible unless Uber starts to figure out other ways to monetise this, through adding delivery fees or charging advertising fees to brands that take part in the programme."
They could use the same model as Instacart currently does and charge a premium on the individual products themselves. This is also the same model that online delivery food services (ie Foodler) have successfully employed.
DC is Uber's second largest market outside of San Francisco - and that includes Chicago, NYC, LA, etc. It's a test kitchen for a lot of consumer services because it's got a lot of different demographics under one roof. It's also relatively small, making it easy for Uber drivers to get around the area without incurring a bunch of extra costs for the company. Grocery delivery is also super popular in DC already.
San Francisco, by contrast, is almost too perfect. It would no doubt be successful there, but it doesn't give them as good of a feel for how this service would fare outside of Silicon Valley where these types of ad-hoc delivery services are far more common.
Is it really relatively small? DC proper is small, but it's just one jurisdiction out of many in the metro area, and not even the largest one. Uber covers a big chunk of the area. Looking at Google Maps (with the scales matched!) you could fit SF proper in about one quadrant of the the DC beltway, and of course there's plenty of city outside the beltway too.
True, but DC isn't a traditional metro area. The entire regulatory structure changes once you leave the borders of DC, because you've moved into a new state (Virginia or Maryland). Uber's coverage area for this service takes a hard stop at the DC borders to keep them from running into a new set of state laws and taxes they'd have to deal with.
Not quite. I live in Arlington, VA and they're currently facing hurtles but they still service the area. For a while there, cops were pulling suspected Uber drivers over and fining them between 500 and 2k (I even had drivers ask me to sit in the front seat so it didn't look like he was chauffeuring). Uber would pay all of the fines for the drivers. It's been an ongoing battle but from what drivers have told me recently, they've calmed down with the arrests.
The grocery delivery service is only available in DC, though. Actually, just a portion of DC. Which takes us back to the question of why DC, since you could carve out a suitable portion of just about any city.
Why are Silicon Valley startups continually trying to get into the food and grocery delivery business? Is there research somewhere that shows that this is a lucrative market?
I'm old enough to remember Webvan, I'm seeing COSTCO cede their delivery service to Google, and I realize that most food delivery business is minimum wage work. I don't see the money in it.
I think for two reasons: Food delivery is essentially rent-taking, since once someone begins to use it, they'll use it indefinitely (until a better service or format comes along); and secondly, I see grocery delivery as a way to trojan horse in to same-day parcel delivery, since if a person is delivering your groceries, the marginal cost of having them also deliver a package is tiny in comparison to the cost of delivering just the package.
I see it as very different from something like, say, Instacart not because of the core idea of grocery delivery, but because Webvan made some mistakes that seem made-up when read today. Recall they had their IPO just 60 days after their first webstore which in turn was something like one month after their beta launch.
So they went from beta with 1000 users to IPO in like 90 days. That's, what, the time Instacart spent just in Y Combinator growing and learning?
Also wasn't WebVan running warehouses? That is so totally different than InstaCart and Google Shopping Express. Your long memory is, IMO, working against you here.
AmazonFresh is doing something along the lines of what WebVan was trying, with the capitalization to make a real go of it.
>Your long memory is, IMO, working against you here.
What you wrote and what I wrote I don't think conflict at all, so I don't know why you'd say it is working against me. Also I have found references to what I wrote in writing[0] so I'm not completely crazy.
Now, an anecdote that I might screw up because my memory is fuzzy about it, is that the founder of Instacart was given a copy of Webvan's business plan on a floppy as a sort of "Good luck!" token.
It's a time consuming and often inconvenient thing that almost everyone has to do on a regular basis. Everyone is a large market and if you can find a small percentage of that market willing to employ your services, that's still significant.
I assume the idea is to give their drivers something useful to do with downtime. If all drivers could be closer to 100% utilized by taking a delivery when there are no passengers, they could have more drivers and happier/wealthier drivers.
Similar to AWS, really. Originally the AWS idea was that Amazon needed those extra servers and a way to manage them anyway, might as well do something valuable with the excess capacity.
I can see that thought process. However, I think there's a big difference between racks of servers and racks of people. People skip work, crash into things, ask for raises, unionize, sleep in, etc.. I don't know much about commoditizing things, but I'd much rather invest in a warehouse full of machines, then a low wage and potentially uninspired human workforce.
I think a lot of Silicon Valley startups cannot see beyond their Bay Area bubble where everyone earns $150k, treats their time like gold dust, and will pay a premium for menial services.
There isn't much money in grocery delivery services at scale.
"I think a lot of Silicon Valley startups cannot see beyond their Bay Area bubble where everyone earns $150k, treats their time like gold dust, and will pay a premium for menial services."
Couldn't agree more. Amazing how tunnel visioned they are.
1. They're local. Most people have a grocery store within 5 minutes of their house.
2. They're well-stocked. You have ten thousand products to choose from. Who could ask for more?
3. They're timely. If you go to a grocery store, it will take you a certain maximum amount of time - the amount of time it takes to go down each aisle once.
4. They're accurate. You picked every item. Your fruit fits your exact criteria.
With grocery delivery, you can be perfectly local, but your stock is identical and your accuracy is almost always worse. And your time window + the time it takes to pick the two dozen items you need will almost always be worse than going to the grocery store.
That said, there is a niche for this - the elderly and the very, very busy. To capture the second niche, you'll need to up your timeliness though and improve your branding on speed. It should take no longer to deliver groceries than it does to deliver a pizza.
Grocery delivery is getting quite popular in parts of Europe now, usually run by the grocery stores themselves (Tesco etc). They're popular with families, where making an outing to buy a week of groceries with two kids in tow after you get off work late in the afternoon can be a real ordeal. Made worse by the fact that fewer people own and drive cars here so you're lugging the groceries on a bus or by foot.
In the US it might not be as big a market due to a different lifestyle.
I'm neither elderly nor very very busy (maybe ~.5 verys), nor wealthy, but I'd gladly pay 30% more for my groceries if I could order them via a typical online shopping interface and have them show up at home at a set time (within a one hour window).
Going to the grocery store is actually pretty time-consuming. That's true even though I live within a few blocks of one.
I just did some back-of-the-envelope math and determined that the minimum time it could take for me to go to the grocery store and come back, from door to door, is about 40 minutes, and the maximum is about 2 hours. I took into account everything from walking to my car in the parking garage and getting out of the garage to finding a parking spot, waiting in line to check out, hitting traffic lights on the way there and back, etc.
I think this is why I don't cook as much as I'd like to. I can either spend 40 minutes getting groceries and then needing to cook a meal and then eating it, or I can spend 40 minutes picking up, say, Chipotle, which includes eating the food.
Grocery shopping has to be the worst inefficient process there is. Count how many times you handle a can of beans: Shelf-to-cart, cart-to-checkout, checkout-to-bag, bag-to-car, car-to-pantry, pantry-to-shelf, then later shelf-to-kitchen, kitchen-to-recycle.
Have you considered getting the groceries delivered from a real grocery store rather than Uber as per article? I normally get them delivered once or twice a week depending on need and the delivery price is considerably less than my "per hour worth". Also I don't run into things not being available at my local store, I don't buy things on impulse (leading to cleaner living, no crisps etc) and I can arrange for things even at only 30 hours before my chosen time slot.
But you can go shopping only once a week if you have storage place at home. That's a pretty good amortised cost compared to your estimate of eating at Chipotle.
The OP stated that they did not 'cook as much as' they would like to. This implies that perhaps cooking is something they may enjoy doing. Time spent doing something you enjoy is not equal to time spent doing something you don't particularly enjoy.
I may live within 5 minutes of a super market, but it's still a time-consuming (up to one hour to shop) activity that I find inconvenient and have to do very regularly. I would gladly pay a premium (and I do, via Instacart) to have it taken care of for me.
Before I started getting my groceries delivered, I would find myself regularly ordering delivery food (also online via foodler) and spending way more money because I was too tired/lazy to run to the grocery store after work.
There's also the "City people who don't have cars" market. When I was one of those people, I'd have happily paid a $10-ish delivery fee to not have to hand-carry 20lb of groceries about a mile.
I would like to see the Ebay of local grocery delivery. Maybe with three components: Buyers, Sellers, and Delivery people (for stores that don't already deliver). Matching people in the local area. Rating delivery guys and automatically choosing based on these ratings. Heck, it doesn't even have to have hands on involvement of the store in question - maybe the delivery guy himself can post a list of items he'll buy for you at the store.
Sure, you can use a large supermarket, but I'd really love to go online, see my local store(s), and click to purchase a handful of items and have them delivered within the hour as conveniently as a pizza.
It's one of the many ideas I'd build if I weren't already building stuff ;)
Most people have a grocery store within 5 minutes, sure - but with 10,000 products? I've been living in London for the summer and if I were here any longer I'd be using a supermarket's delivery service. Sure I can find stores nearby but nothing like a tesco extra. And when the shop shrinks the things that go are the value items - and I end up paying twice as much for something that tastes the same and has a different label.
I could easily save the £5 delivery charge or whatever by having access to them thousands of items.
I mean we have lots of large stores.. but I wouldn't say everyone has one within 5 minutes. How many of these town-sized stores are there in a city out of interest?
Depends on where you are. Springfield, MO for example has 5 Walmart Supercenters and 4 Walmart Neighborhood Markets. They also have at least one Hy-vee (They were planning on building at least one more, but I don't think it is completed yet). And that is just two companies with large stores. The town has several local and regional grocery store chains- and Dilons (Kroger). Many of these store do offer delivery service, too.
This all in a city that is less than 10 miles from one side to the other (160,000 population).
I don't know that this is true. I consider going to the grocery store a creative endevor about half the time I go there. Sure I start with a list and some ideas. But then there are sales on items I like. Or they have some particularly good looking produce that I want to feature in a meal. Or they are out of some other key ingredient for a recipe.... not to mention I'll be updating the menu in my head as a wander the aisles - Seeing and being in the food is extremely distracting since I really like to cook.
Sometimes I just want to go in, grab some basic supplies and leave. I will be exploring delivery options for this case, because it will be harder for a 10 minute trip to the store to turn into a 40 minute menu binge for my impromptu dinner party tomorrow.
I'm not sure this isn't satire. It reads like you did a search/replace on a defense of Blockbuster against the upstart Netflix.
To your specific points:
1. Locality is a huge competitive disadvantage. Real-estate, staffing, infrastructure, etc.
2. More-efficiently managing a wide selection and optimizing for product that frequently turns over is a key advantage of warehouse/delivery operations.
3. It makes no sense to compare an interruption of your day with an asynchronous order/delivery method. No-one uses Netflix the way they used Blockbuster. No-one misses Blockbuster.
4. Personally picking fruit directly off plants was more accurate than personally picking fruit in a grocery store. It's also something most people don't miss as a regular chore. Warehouse/delivery has a massive advantage here as well, as they'll be able to better manage inventory flow and don't have to suffer the same exposure to elements/contaminants as a grocery store.
They can even offer "ugly produce" at a discount, bringing the same implicit assumption of responsibility for odds and ends and generating sufficient extra revenue from the particular buyers, to effectively serve them and any returns.
There's no "niche" for this. The niche will be serving the people who enjoy farmer's markets and those who dropped a dozen eggs and will pay a premium for their replacement.
Oh my God wow. This is highly convenient. I'm in DC, and I saw the puzzling "corner store" option when ordering a car this afternoon. I'll relate how the delivery experience goes once I try it today or tomorrow.
I already get my groceries delivered, usually for free from Safeway or Harris Teeter. One of them will run a free delivery special once every two weeks, so I mostly restock on non-perishables, and grab fresh food from the Whole Foods myself.
But the on-demand aspect brings a whole new level of convenience. I'm right in their target demo, so if it works smoothly I'll be thrilled.
Sad to report that this does not fulfill the gaps in the extant on-demand grocery delivery system. It's expensive, slow, unreliable, and doesn't provide the items for which the application would be most useful, e.g. delivery of fresh perishable foods in a reliable fashion.
But, that's what beta tests are for. Here's hoping the next iteration gets it right.
looks like new generation tries their teeth at the same delivery problem that the previous generation tried 15 years ago :)
Considering that delivery by a full-bodied adult in a car is a pretty expensive thing, it can be solved either by hyper-optimization (incl. prediction), or by utilizing
new or untapped delivery resources like school children/dogs/pigeons/drones/automated cars/electronically collared and constantly video recorded low-offense prisoners/etc...
Pretty sure it's moves like these that will render most Uber valuation apologists' defenses of the valuation based on cab usage growth moot. If they could satisfy the valuation on cab fare middle-person, this would not be the experiment.
Also, something close to most peoples' logic spot would be that they are not delivering fresh produce. So, only a subset of the stuff that you find in the "middle aisles."
I'll paint in a really broad stroke, but the people willing to pay premiums for the luxury of grocery delivery buy more stuff around the outer edge of the store vs the aisles of processed carbs and food science.
I was just telling my wife that getting somebody to go to Costco for me would be a game changer. Somebody else takes my list and deals with all the people blocking the aisle to get their 5 cents of sample cheese or just because they rudely leave their cart in the middle? The stress reduction alone would be worth the money.
I'm using Amazon Fresh and the savings from not eating out due to my laziness-based avoidance of the grocery store is going to pay for it easily.
How can Instacart afford to be so fast and so cheap? ($5.99 delivery in an hour) I mean, there's at least about an hour of human labor involved in each one hour delivery.
Reminds me of a startup in Toronto: Usehurrier.com
This is really Uber's "On Demand ____" promotions (read: experiments) coming to life and I imagine partnerships with retailers (similar to their local partnerships for events and more recently restaurants) will be an easy next step for this service.
Hmm.. no thanks. Given the state of the driver in the last Uber cab I took, I wouldn't want him touching my food, especially as his fingers spent most of the time either mining his nose, ears and backside. Yuck!
65 comments
[ 2.3 ms ] story [ 127 ms ] threadReally sums up the article.
San Francisco, by contrast, is almost too perfect. It would no doubt be successful there, but it doesn't give them as good of a feel for how this service would fare outside of Silicon Valley where these types of ad-hoc delivery services are far more common.
I get the sense that they're trying to gather data without drawing a lot of attention to their experiment.
I'm old enough to remember Webvan, I'm seeing COSTCO cede their delivery service to Google, and I realize that most food delivery business is minimum wage work. I don't see the money in it.
I see it as very different from something like, say, Instacart not because of the core idea of grocery delivery, but because Webvan made some mistakes that seem made-up when read today. Recall they had their IPO just 60 days after their first webstore which in turn was something like one month after their beta launch.
So they went from beta with 1000 users to IPO in like 90 days. That's, what, the time Instacart spent just in Y Combinator growing and learning?
AmazonFresh is doing something along the lines of what WebVan was trying, with the capitalization to make a real go of it.
What you wrote and what I wrote I don't think conflict at all, so I don't know why you'd say it is working against me. Also I have found references to what I wrote in writing[0] so I'm not completely crazy.
Now, an anecdote that I might screw up because my memory is fuzzy about it, is that the founder of Instacart was given a copy of Webvan's business plan on a floppy as a sort of "Good luck!" token.
[0]: http://www.amazon.com/The-Startup-Owners-Manual-Step-By-Step...
Similar to AWS, really. Originally the AWS idea was that Amazon needed those extra servers and a way to manage them anyway, might as well do something valuable with the excess capacity.
There isn't much money in grocery delivery services at scale.
Couldn't agree more. Amazing how tunnel visioned they are.
1. They're local. Most people have a grocery store within 5 minutes of their house.
2. They're well-stocked. You have ten thousand products to choose from. Who could ask for more?
3. They're timely. If you go to a grocery store, it will take you a certain maximum amount of time - the amount of time it takes to go down each aisle once.
4. They're accurate. You picked every item. Your fruit fits your exact criteria.
With grocery delivery, you can be perfectly local, but your stock is identical and your accuracy is almost always worse. And your time window + the time it takes to pick the two dozen items you need will almost always be worse than going to the grocery store.
That said, there is a niche for this - the elderly and the very, very busy. To capture the second niche, you'll need to up your timeliness though and improve your branding on speed. It should take no longer to deliver groceries than it does to deliver a pizza.
I want my DiGiorno delivered.
In the US it might not be as big a market due to a different lifestyle.
6. They have pretty low margins on a lot of their inventory.
I just did some back-of-the-envelope math and determined that the minimum time it could take for me to go to the grocery store and come back, from door to door, is about 40 minutes, and the maximum is about 2 hours. I took into account everything from walking to my car in the parking garage and getting out of the garage to finding a parking spot, waiting in line to check out, hitting traffic lights on the way there and back, etc.
I think this is why I don't cook as much as I'd like to. I can either spend 40 minutes getting groceries and then needing to cook a meal and then eating it, or I can spend 40 minutes picking up, say, Chipotle, which includes eating the food.
So much time wasted.
Before I started getting my groceries delivered, I would find myself regularly ordering delivery food (also online via foodler) and spending way more money because I was too tired/lazy to run to the grocery store after work.
Sure, you can use a large supermarket, but I'd really love to go online, see my local store(s), and click to purchase a handful of items and have them delivered within the hour as conveniently as a pizza.
It's one of the many ideas I'd build if I weren't already building stuff ;)
I could easily save the £5 delivery charge or whatever by having access to them thousands of items.
I see your point though. It's interesting to be informed of all of these different needs I had not previously considered.
This all in a city that is less than 10 miles from one side to the other (160,000 population).
EDIT: I forgot- there are also 2 Sam's Clubs.
I don't know that this is true. I consider going to the grocery store a creative endevor about half the time I go there. Sure I start with a list and some ideas. But then there are sales on items I like. Or they have some particularly good looking produce that I want to feature in a meal. Or they are out of some other key ingredient for a recipe.... not to mention I'll be updating the menu in my head as a wander the aisles - Seeing and being in the food is extremely distracting since I really like to cook.
Sometimes I just want to go in, grab some basic supplies and leave. I will be exploring delivery options for this case, because it will be harder for a 10 minute trip to the store to turn into a 40 minute menu binge for my impromptu dinner party tomorrow.
To your specific points:
1. Locality is a huge competitive disadvantage. Real-estate, staffing, infrastructure, etc.
2. More-efficiently managing a wide selection and optimizing for product that frequently turns over is a key advantage of warehouse/delivery operations.
3. It makes no sense to compare an interruption of your day with an asynchronous order/delivery method. No-one uses Netflix the way they used Blockbuster. No-one misses Blockbuster.
4. Personally picking fruit directly off plants was more accurate than personally picking fruit in a grocery store. It's also something most people don't miss as a regular chore. Warehouse/delivery has a massive advantage here as well, as they'll be able to better manage inventory flow and don't have to suffer the same exposure to elements/contaminants as a grocery store.
They can even offer "ugly produce" at a discount, bringing the same implicit assumption of responsibility for odds and ends and generating sufficient extra revenue from the particular buyers, to effectively serve them and any returns.
There's no "niche" for this. The niche will be serving the people who enjoy farmer's markets and those who dropped a dozen eggs and will pay a premium for their replacement.
I already get my groceries delivered, usually for free from Safeway or Harris Teeter. One of them will run a free delivery special once every two weeks, so I mostly restock on non-perishables, and grab fresh food from the Whole Foods myself.
But the on-demand aspect brings a whole new level of convenience. I'm right in their target demo, so if it works smoothly I'll be thrilled.
But, that's what beta tests are for. Here's hoping the next iteration gets it right.
Considering that delivery by a full-bodied adult in a car is a pretty expensive thing, it can be solved either by hyper-optimization (incl. prediction), or by utilizing new or untapped delivery resources like school children/dogs/pigeons/drones/automated cars/electronically collared and constantly video recorded low-offense prisoners/etc...
Also, something close to most peoples' logic spot would be that they are not delivering fresh produce. So, only a subset of the stuff that you find in the "middle aisles."
I'll paint in a really broad stroke, but the people willing to pay premiums for the luxury of grocery delivery buy more stuff around the outer edge of the store vs the aisles of processed carbs and food science.
I'm using Amazon Fresh and the savings from not eating out due to my laziness-based avoidance of the grocery store is going to pay for it easily.
This is really Uber's "On Demand ____" promotions (read: experiments) coming to life and I imagine partnerships with retailers (similar to their local partnerships for events and more recently restaurants) will be an easy next step for this service.