While I agree that a lot of smart people have tried this before (Kozmo.com, WebVan, etc), I believe that there are significant differences in the approach that we are taking.
Specifically, Kozmo.com was founded in an era where you could IPO without having profits. Having that mentality from day one allowed them to make huge concessions to users such as give them free delivery on everything, and not have a minimum order. For example, you could pay $1.50 for a gum on Kozmo and get it delivered to you within an hour. WebVan, on the other hand spend $1B on building it's own warehouses and fulfillment infrastructure.
Learning from those companies, we have done a lot of things differently. For starters, there is a minimum order of $10. There is a delivery fee of $3.99 for 3 hours and $9.99 for 1 hour. (Would you not pay $4 for someone to do all your groceries?) And, we do not hold any inventory - all of it is sourced directly from local retailers.
It is also important to mention that the time that we live in is very different. People are a lot more comfortable adding their credit card information on web/mobile. Not to mention, the access to smart phones that people have gives customers the ability to shop from anywhere - office, couch, next to the fridge.
We believe we are different from the companies that have tried this in the past. And, we hope we are live in your hometown very soon.
apoorvamehta: thank you for your prompt, articulate response.
The logistical challenges look daunting to me. My recollection is that the problem of coordinating and optimizing deliveries in such a point-to-point system with time constraints is NP-hard (I could be wrong about this, but that's my recollection). Then one has to deal with all sorts of real-world problems like order-fulfillment errors and substitutions (intentional and otherwise), constant shrinkage of merchandise, etc.
Obviously there's some price at which the service can be profitable, but I'm not sure it's $4. (Consider that the former CTO of Kozmo, Chris Siragusa, has been running a one-hour, point-to-point $3 delivery service for a number of years, MaxDelivery.com, but he has kept the service restricted to a relatively small, dense area in lower Manhattan, making the economics worthwhile.)
cs702, your recollection is correct. Last mile logistics is a hard problem. Not to mention, order-fulfillment errors and substitutions do happen. However, we believe these are solvable. It comes down to two things - one is proper training of the drivers and using technology as much as possible to eliminate chances of errors.
That is too high level. Let me explain more clearly for one specific case of order substitution. Since we are focusing on a niche (groceries), our system has already calculated the substitutes of items. We know how to substitute a Store Brand Ketchup to Heinz IF needed.
A lot of what I know about logistics is from my time at Amazon Supply Chain, where I dealt specifically with the challenge of fulfilling packages to the customer from AMZN FCs (aka warehouses). And, at Instacart we believe we can have the same efficiencies IF we model the stores in a city just like AMZN modeled warehouses across the world.
> And, at Instacart we believe we can have the same efficiencies IF we model the stores in a city just like AMZN modeled warehouses across the world.
My supply chain experience comes almost entirely from third-party shipping (somewhat) similar to this. In my opinion it's considerably harder and more problematic than dealing with your own fulfillment centers. You give up a lot of control.
There's a whole slew of problems:
* Integration with other people's systems, which are often horribly dysfunctional, require manual intervention (such as re-keying), and can't give you the data you need (e.g. stock levels)
* The fact that you have to rely on staff that don't work for you, and either don't care about you, or in some cases deliberately sabotage your orders
* You're often relying on a vendor who is also a direct-competitor in this or other channels
I think a good model is Seamless. They act as the middleman just as you do, however it's the restaurant's name you see, rate, and attach reputation to. This gives them the incentive to provide good service. If you're shielding your vendors from the effects of providing bad service, then there's less incentive to provide good service.
I think it's an interesting problem to solve. Though here in NYC we're spoiled by a large range of next-day options; I personally use services such as Fresh Direct, Amazon (Prime and "Shop 'n Save"), Soap, and USQ Wines.
IF you can somehow get a network of local retailers in each city, such that the stores together behave like and otherwise have similar operating and economic characteristics as regional warehouses, then, yes, I agree, it's possible. That's a big IF, though.
I have to take my hat off to you guys for attempting this!
Interesting. Do you plan to replace the weekly trip to Wal-Mart in terms of range, or will you limit yourself to the smaller product selection you'd get in a local corner store?
What will you do if all your drivers are busy? Will I be able to book an order for an hour-long slot in the future, or is delivery now or never?
if you can coordinate your own employee, or an employee at the supermarket to pull the order and have it ready just-in-time style to the curb, and then have the courier, again, be it your employee, a taxi without a customer, or another shopper going home to the same neighborhood you have gold. I would focus on the coordination of activities people are mostly already doing and by putting it all together you, and this specialized order fulfillment network/consortium make a few bucks.
I wish you luck.. that is a super cool business you get to design.
Sure it's NP-hard for an optimal solution, but the n here might be fairly small (how many orders in a 1 hour window?) or they can just use heuristics to do very well, if suboptimally.
Depends on the city. In large metropolitan areas like NY, Chicago, the VA-DC-MD corridor, etc., potentially tens or hundreds of thousands at certain times of the day (e.g., 7pm, when people get home from work).
> Specifically, Kozmo.com was founded in an era where you could IPO without having profits
Yes, it's different this time. Just ask Groupon.
Also, and maybe you have a lot more insight into the business model than I do, but I just do not see how this scales, as your marginal labor costs have got to be a very high portion of your revenues. How many deliveries per hour can an employee handle?
For example, assume you are paying $8.00/hr. If you have one person shopping, and they can compile 4 orders per hour, and one person can deliver those, which is a big if, you are just breaking even on labor costs.
> Yes, it's different this time. Just ask Groupon.
(The important part of what you quoted was not "you can no longer IPO without profits" but "the ability to IPO without profits harmed kozmo, and we are not making the same mistake". It's not particularly important whether or not IPOing without profits is actually still possible.)
Apoorva,
Something that I noticed working in Bangalore is the BigBasket.com model. Order something that will be delivered in a time slot. Say I need egg + broccoli + rice etc. I get to choose the next available delivery time. Chances are that the slot might get filled. But if I choose 9:30 AM, it will be delivered by 1-2 PM. The next slot available is 4:30 delivery. Reduces sourcing end variables for the supplier & increases predictability on the other end.
You also have another way of making a few more bucks here and there. Supermarkets often have coupons, and also buy one get one free type offers. The former can reduce the cost of goods to you, and the latter means you can charge two customers for an item but only pay for it once.
It seems like by having a delivery fee is a non-starter.
"I can get it in 2 days free with amazon, or $4 today... is that worth it?" People will spend huge amounts of time and effort to not pay delivery charges, even when the total price ends up being the same!
But then again, I can't count the number of times I've ran out to the store and paid more than Amazon prices because I didn't want to wait two days for shipping.
Specifically, Kozmo.com was founded in an era where you could IPO without having profits. Having that mentality from day one allowed them to make huge concessions to users such as give them free delivery on everything, and not have a minimum order. For example, you could pay $1.50 for a gum on Kozmo and get it delivered to you within an hour. WebVan, on the other hand spend $1B on building it's own warehouses and fulfillment infrastructure.
Learning from those companies, we have done a lot of things differently. For starters, there is a minimum order of $10. There is a delivery fee of $3.99 for 3 hours and $9.99 for 1 hour. (Would you not pay $4 for someone to do all your groceries?) And, we do not hold any inventory - all of it is sourced directly from local retailers.
It is also important to mention that the time that we live in is very different. People are a lot more comfortable adding their credit card information on web/mobile. Not to mention, the access to smart phones that people have gives customers the ability to shop from anywhere - office, couch, next to the fridge.
We believe we are different from the companies that have tried this in the past. And, we hope we are live in your hometown very soon.
(edits to follow)