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Delivery Startups Are Back Like It’s 1999

nytimes.com

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Re: Delivery Startups Are Back Like It’s 1999

#11

Post by gambiting »

>>Instacart charges as little as $3.99 for grocery shopping and delivery. Yet Shah said its shoppers make about $20 an hour, plus tips, which makes profitability seem unlikely, even with the smartest algorithms routing shoppers through grocery stores and city streets. When I told him that, he sounded a lot like Borders back in Webvan’s heyday: “We’re really well funded, so that is not something we’re as worried about,” Shah said. “Growth is the most important factor.”

So is this what is happening in the SF startup world then? You get funding, get absolutely huge by selling your product at massive loss, bleeding money out with every product/service sold, and then show to investors how much you grew -> proceed to get more money? Is that it?

Re: Delivery Startups Are Back Like It’s 1999

#12

Post by mayneack »

capkutay wrote: post #4

Weren't the delivery startups of the 90s severely bloated? From what I remember, they had fleets of delivery trucks, warehouses, distributors, etc. Today's delivery startups are pretty lightweight (Not counting Amazon or Google since they're already $100b+ companies).

In my limited experience with Google shopping express, they are pretty light weight too. They will only deliver something from a store nearby, they don't seem to have a warehouse full of stuff.

Re: Delivery Startups Are Back Like It’s 1999

#13

Post by bcohen5055 »

gambiting wrote: post #11

>>Instacart charges as little as $3.99 for grocery shopping and delivery. Yet Shah said its shoppers make about $20 an hour, plus tips, which makes profitability seem unlikely, even with the smartest algorithms routing shoppers through grocery stores and city streets. When I told him that, he sounded a lot like Borders back in Webvan’s heyday: “We’re really well funded, so that is not something we’re as worried about…

Pretty sure this is the Uber strategy...

Re: Delivery Startups Are Back Like It’s 1999

#15

Post by refurb »

govindkabra31 wrote: post #6
lnlyplnt wrote: post #2

I never understood how companies like instacart explained this to their investors. Over time one of several things must happen: 1. Instacart magically makes a courier capable of doing 4 trips an hour 2. Instacart drastically increases it's prices 3. Instacart Severely lowers the compensation to courriers

Or, they get 20-25% discount from retailers (coming out of stores marketing budget and reduction in store staff cost). EDIT: The discounts come from the cost savings stores will see from delivery companies, to clarify to people commenting margins are not that high in grocery business. 1) These delivery services are become sales and marketing channel for stores. 2) Cut down time it takes for cash register scanning eac…

What's the margin on groceries? 1-2%?

Re: Delivery Startups Are Back Like It’s 1999

#16

Post by ZitchDog »

govindkabra31 wrote: post #9
hkarthik wrote: post #3

There's another phenomenon at work in the cities which is driving the Delivery startups today: the availability of a large labor pool of people who now do these jobs to survive. In India, the following lower caste laborers have been doing business with their mobile phones for at least a decade: * Laundry/Dry cleaners * Drivers * Grocery Delivery * Home cleaning These folks have been doing the same work for a long tim…

To be fair, that's not caste system.. better phrase would be income inequality or unskilled labor.

Keep telling yourself that. http://en.wikipedia.org/wiki/Socio-economic_mobility_in_the_...

Re: Delivery Startups Are Back Like It’s 1999

#17

Post by swami1984 »

gambiting wrote: post #11

>>Instacart charges as little as $3.99 for grocery shopping and delivery. Yet Shah said its shoppers make about $20 an hour, plus tips, which makes profitability seem unlikely, even with the smartest algorithms routing shoppers through grocery stores and city streets. When I told him that, he sounded a lot like Borders back in Webvan’s heyday: “We’re really well funded, so that is not something we’re as worried about…

How do you think Amazon works? Or for that matter most new ventures by a big company?

Re: Delivery Startups Are Back Like It’s 1999

#18

Post by Semaphor »

refurb wrote: post #15
govindkabra31 wrote: post #6

Earlier quoted context omitted.

Or, they get 20-25% discount from retailers (coming out of stores marketing budget and reduction in store staff cost). EDIT: The discounts come from the cost savings stores will see from delivery companies, to clarify to people commenting margins are not that high in grocery business. 1) These delivery services are become sales and marketing channel for stores. 2) Cut down time it takes for cash register scanning eac…

What's the margin on groceries? 1-2%?

Pretty much it seems:

> "The average profit margin for grocery stores is 1.3 percent" says Jeff Cohen, a grocery industry analyst with IBIS World.

-- http://www.marketplace.org/topics/business/groceries-low-mar...

Re: Delivery Startups Are Back Like It’s 1999

#19

Post by at-fates-hands »

bcohen5055 wrote: post #13
gambiting wrote: post #11

>>Instacart charges as little as $3.99 for grocery shopping and delivery. Yet Shah said its shoppers make about $20 an hour, plus tips, which makes profitability seem unlikely, even with the smartest algorithms routing shoppers through grocery stores and city streets. When I told him that, he sounded a lot like Borders back in Webvan’s heyday: “We’re really well funded, so that is not something we’re as worried about…

Pretty sure this is the Uber strategy...

Pretty sure this is the Groupon strategy...

Re: Delivery Startups Are Back Like It’s 1999

#20

Post by Instacartlove »

As far as i know, both Instacart and Postmates make money with every delivery. They used the last two years to figure out what to charge and when. Both get kickbacks from select merchants, both are in a heavy growth phase and both have tweaked their algorithms to either allow for multiple deliveries per hour or use in-store shoppers for faster access to gods. What they are doing is working and it looks impressive to me. The really interesting differentiator is that one of them can become a giant supermarket without owning any warehouse space and the other has a shot at powering local deliveries everywhere. But then again, maybe they both still figure all this out.
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