Delivery Startups Are Back Like It’s 1999

Currently, I'm working for a food delivery service in San Francisco where you can order from your 'favorite' (or on our list) restaurant, and we'll deliver it straight to your office. The entire delivery process is rife with problems. For starters, the majority of our deliveries are made in downtown San Francisco, a transportation arena that is terribly over used, and our presence doesn't make it any better. There's no functioning loading and unloading zone in front of our delivery locations, so either we have to park further away, or we have to park illegally, and sometimes even double park. This impacts all the traffic around us making the traffic arena even less efficient. Certainly people 'understand' our purpose, but the streets are not designed to accommodate us. We are abusing the commons with our use of their infrastructure for our delivery. If streets were designed with delivery involved, surface parking would be moved inside the blocks, and not alone the most valuable street edge. It's possible to have the street edge be for loading and unloading only. They do it at the airports, and it would create great increases in delivery efficiencies, but our cities are not designed that way. So we steal transport space instead, while trying to stay one step ahead of the ticketing agents.

Next, there's the problem of sorting, and order processing. If we have the orders early enough, our algorithm can process a decent delivery route, but with all the one way streets, it's never the most efficient route, it's just the most allowably efficient route, and so again I spend time, energy, exhausts driving around blocks to get somewhere that was just around the corner from my previous stop. Delivery doesn't have the power to change the street system, and the street system was never designed to optimize delivery. The reality of the street is a huge obstacle towards any real delivery efficiencies.

This becomes increasingly complicated when we get late orders - which we do all the time - where dispatch sees if we can 'fit another one in'. Once that happens, the perfect solution to the TSP is gone, out the window. A last minute order (especially a big order) can easily add 30 minutes to a simply route.

Then there's the issue of the actual delivery. We try to get them to our clients 'hot and steaming' but that can be a challenge. And often it gets there acceptably hot.

Then there's the actually logistics of getting the food into the buildings. Some buildings have doors that have to propped open while you are unloading. Other buildings have burdensome security measures that take extra time. Other buildings require that all deliveries be made in the delivery entrance, using the freight elevator, etc. None of this is actually on the logistics, it's only something that you discover during your route. Again this means that you have another layer of information - call it security information - that reduces all attempts at optimization.

Finally, it can't scale. No matter how efficient the point of purchase is, or the wheel and hub distribution, or the route, I can only make 16 deliveries in a shift. That's my absolute max. I can't make more. I've tried, but I can't. And I get paid a set amount every hour. What that means is that each delivery, at a minimum, has to pay half my hourly wage to receive their delivery. There's no other possibility.

The fact is that this type of delivery is extremely elastic. Fatally elastic. A tiny drop in income will result in two things - 1. Less ordering. People will simply buy fewer restaurant meals from their 'favorite' restaurants. & 2. More take out. Because in the end we are competing with take out, and while the number of restaurants a company can order from is not as large as the number of restaurants that we deliver from, the reduced price will justify the reduction in choice.

Can I see the writing on the wall? Not yet. Orders are consistent, but the nature of the business should give anyone long term pause.

As for Amazon's delivery - well they are in a completely different game, competing against a completely different segment, and so I think that they are in the strongest position to reap the benefits of same day delivery services. In fact from my perspective, I'm seeing more Amazon trucks than Office Max, Office Depot, UPS trucks. And I'm seeing Amazon boxes everywhere.

I've also been surprised at how much Ikea delivery I'm seeing. I think that they are mostly being delivered by FedEx, but we might see stand alone Ikea delivery in some cities in the future.

Those companies deliver at the end of their service structure, they already do everything else up to that point. Those are the companies that I think will come through this delivery game strongest.

So the question is who else has massive warehouse infrastructure that could just add on local delivery? Costco?

This restaurant delivery is a fools game.

Yes much more accurate to say smart phones came along. Back then the "mobile" experience was typically a WAP/WML service that would display text on the screen that you could navigate. I actually worked on a service back then called Strategy.com that used WML to deliver news, weather, and traffic to mobile devices. It was very limited. We thought we were awesome when we created traffic notifications using a push service that cell providers would bundle on the phone.

My $20/delivery estimate was for UPS levels of marketshare but translated to 1-hour cycle times. I wouldn't be surprised if Instacart's logistics costs were more than double this amount.