
Google Launches Fresh-Grocery Deliveries - tacon
http://blogs.wsj.com/digits/2016/02/17/google-launches-fresh-grocery-deliveries/
======
nickpsecurity
Google usually operates in high-margin industries. This is the opposite. I've
had the "privilege" of working in this one. You're talking all kinds of
players working against each other for perceived self-gain with individual
companies constantly pushing costs down to the point their staff can barely
break even. And Google intends to compete with _that_ using something with
_higher_ cost?

Pretty crazy. I was unsurprised they'd use Costco and Whole Foods while
targeting two areas that already pay too much for stuff. Love to see them try
that in my area where people go for whatever costs the least most of the time.
Lots of true premium services have gone out of business with what's left being
those that approximate premium with right compromises to keep cost down.
That's probably true across most of the States.

The biggest flaw in all this is what these companies keep ignoring: impulse
buying. The big stores put what you need as far away from you as possible.
Then, you have to exert physical effort to get to good deals while seeing, at
arms reach, all kinds of profitable items. This is a hard to quantify, but
_big_ , chunk of grocery revenues. So, these companies doing online deliveries
or personal shoppers have to make more money than the competition while
leaving out one of most powerful techniques for making money.

Always operating at a disadvantage, there. So, we're not going to see such
things proliferate. Those with the most capital, negotiating power with
manufacturers, and proven techniques win here. Almost always.

~~~
skewart
I suspect there's another reason they're doing this, and they don't actually
think this will be a profitable business opportunity. Delivering groceries in
2016 is probably a strategic move in support of a larger effort that will pay
off in 2019.

Perhaps it's about gathering richer data on consumer preferences and behavior.
Or maybe it will help them develop autonomous vehicles in some way (having
already been operating a delivery service for a while might be helpful when
they start rolling out new tech).

Or maybe they're just throwing spaghetti at the wall to see if it sticks.

~~~
Dwolb
Yup this is it. Google's bleeding money on these initiatives to preserve its
crown jewel: search.

More and more people are using Amazon and other services first to find stuff
they need - which means lower engagement with search and lower effectiveness
of paid ads. If Google can build some of these services themselves it could
potentially maintain its reputation as the first stop on the customer journey.

~~~
_asummers
As a slight anecdotal counterpoint to your comment about Amazon, while I often
buy the product eventually from Amazon, I initially search "amazon
$productname" on Google because I don't like Amazon's search.

~~~
iofj
It is truly baffling how many online retailers screw up search on their sites.
I very often search "site:amazon.com <what I want>" just to avoid having to
deal with site searches.

Sometimes I think that just putting things like all alibaba products (maybe
also put others who also allow this) on your own better functioning site at a
5% or so markup would be a huge opportunity.

------
jt2190

      * Google Express provides delivery only
      * Partner retailers provide "warehousing" 
        and order picking.
      * 3 USD per delivery fee for memebers
      * 5 USD per delivery fee for non-members
      * 35 USD minimum order
      * San Francisco and Los Angeles only, for now.

------
joelrunyon
What's Google's USP here? This service sounds like everything Google that
Google goes at great lengths to avoid (physical products, customer service,
etc).

~~~
Outdoorsman
From the article they're simply entering the "delivery" market...picking up
items from retail stores and transporting them to willing buyers...obviously a
markup is implied...the cost of convenience...

There's no holding of inventory...thus no storage-related overhead...

When I was in college one of the jobs I had was at a combination "feed"
mill/agri-center...the boss was 85 years old and made a speech each year when
he distributed Christmas bonuses....

He bought the business as a young man back in the late 30s...

He never failed to mention that people relied on what we produced in their
everyday lives...he was proud of the fact that he had never laid an employee
off...

He told us, "People will always want good food when they sit down at the
table, and we're part of making that possible..."

A truth in the last century...a truth now...

Investing in providing one of the basics of life...hard to question the
logic...

~~~
mc32
There have been many players in this market, old and new. And when you don't
have warehouses to automate and extract efficiency, you need people to do the
picking. It takes me quite some time to do my own shopping, knowing my store's
layout, knowing what I want in advance. I only see low, low margins.

I mean, this is the opposite of self-checkout efficiency. They're putting more
people into to the cost of the product/service.

~~~
Outdoorsman
Wal Mart became a giant by operating on low margins...scaling, then using
scale for purchasing leverage...

I wouldn't assume that Google is paying the same price that ordinary customers
are in the retail settings Google order fillers pick from..

Likely rates were negotiated before launch...

~~~
mc32
Yeah but groceries are a very thin margin business half percent to two percent
profits. There isn't a lot of room for negotiating great prices.

~~~
Outdoorsman
They are not selling groceries...

They are selling the convenience of having groceries delivered to your home...

The two are entirely different, the margins, as well...

~~~
roel_v
Grocery delivery here in the Netherlands is booming, with the big supermarkets
offering their own and several smaller players working on services. When I buy
from the biggest supermarket here, delivery fee depends on the moment of the
day you want it delivered (between 5 and 8 in the evening is the most
expensive, e7 (~$10)); cheapest moment is e3 or so. But, if you buy some
products delivery is free; this week it was 8 bottles of coke or so. It's
pretty much always non-perishables that get you the free delivery. I don't
think we've ever paid the delivery fee, maybe once or twice.

The price of the groceries is the same as in the shop. You get the specials
and all. The ordering app they have even lists the specials right at the top,
it's easier to order specials online than it is in-store. Dutch are _very_
price sensitive, there is very little margin for marking up convenience.

I don't know how they can make money on this. I suspect they bet on being able
to automate order picking within say 5 years and are providing the service now
as a loss leader to get people used to the idea, and work out their processes
using people before spending big on automation.

~~~
michaelt

      if you buy some products delivery is free; this week it
      was 8 bottles of coke or so
    

I'd be interested to learn more about that - could you provide some links?

~~~
roel_v
Only in Dutch, but here is the page: [http://www.ah.nl/gratis-
bezorgen/wk7/coca-cola?ah_campaign=i...](http://www.ah.nl/gratis-
bezorgen/wk7/coca-
cola?ah_campaign=intern&ah_mchannel=ah&ah_source=bonus&ah_linkname=lane1-1-assortiment-
actie-coca-cola.2016.wk7) .

At the top it says 'free delivery when buying 2 4-packs of coca cola, for
deliveries on Wednesday, Thursday and Saturday. Also valid at pickup points.'

The 'pickup points' are where you can go to collect groceries yourself; you
order online, it's bagged for you, you drive into a location where they put
the bags into your car, you pay and you drive off. Takes less than 5 mins,
many people schedule it on their way home when there is nobody at home to
accept deliveries.

I love the home delivery thing - it feels very decadent though.

~~~
feintruled
I know what you mean. It does feel strangely uncomfortable to the liberal
mind, like having servants.

~~~
ragazzina
How is it different than having pizza delivered?

~~~
feintruled
It's not, really. I guess delivery is a long standing way of receiving pizza,
but not for groceries. It feels more menial, somehow. I'm not saying it's a
particularly rational feeling, it just tickles some middle-class guilt impulse
somewhere for me.

------
rajacombinator
Google Shopping Express (the superior name) is the best delivery service I've
used. One of the best Google products too. For car-less city dwellers like
myself, it is a huge time and effort (and potentially money) saver to get
bulky and heavy dry goods delivered to my apartment. There is definitely
profit to be made here if they cut out the middlemen (stores) and operated
their own warehouses. Right now they're probably trying to piggyback demand
data, if they're smart. When you add in Google's ability to make quality
software and algorithms it makes sense where their edge can come from.

But sadly, it will probably be just another "me too" side project that gets
axed.

------
fs111
They do the alphabet-rename thing to better split things into different
brands, yet this is attached to the Google brand. How does that make any
sense?

~~~
rhino369
Because the alphabet rename was a stupid idea in the first place. There is no
reason to do business under the name of your Conglomerate entity name.

------
mmgutz
I'm skeptical this will be successful. I just can't see these kind of
operations selecting ripe and fresh produce like my mother taught me from the
grocery store. They're concerned about their bottom line and will send
whatever is available. Good for the stores, not good for wise consumers.

~~~
jon-wood
At Hubbub we've never seen that happen. We're working with independent shops
who know they're part of a marketplace where they're competing against other
grocers, and if they try to palm off their rotting stock on a customer we'll
refund it at their expense, and the customer likely won't buy from them again.

~~~
toomanybeersies
The quality of produce is not a binary thing though. When you go to the
supermarket, there's the rotting produce, there's the premium produce, but
then there's also the mediocre produce, which probably takes up 80% of the
stock of produce.

Now, someone who cares about the quality of their bananas, or specifically
wants bananas of a certain ripeness (maybe they want overripe bananas for a
cake, or slightly unripe bananas for cooking), can go to a physical store and
select the bananas they want. A picker at a warehouse isn't going to do that,
I'm sure they'll avoid picking stock that's past it, but that doesn't mean
they'll grab the best, or what you want.

~~~
jon-wood
At least in our case customers can request the bananas how they want, and the
pickers will get exactly what they want. We've had people request and get "an
avocado that will be ripe on Wednesday".

------
colept
I can't wait until the day I can pickup groceries out of the trunk of a self-
driving van.

------
tabdon
Do the economics of food delivery change drastically when 1) there is no
driver, 2) the car runs on electricity? Maybe this is their way to establish a
food delivery brand ahead of what they to believe to be the inevitable
driverless vehicle era.

------
nikolay
I'm pretty happy with the free and near real-time Amazon Now. Amazon Fresh is
one of the rare Amazon failures. Well, it's still around, but at $299/year
(well, minus $99 for Prime) plus tips for delivery - it's expensive! I got the
Express trial and was happy that I'll be able to save trips to Costco, but,
no, I won't as they possibly offer less than 1% of Costco's inventory, so,
it's a totally useless service for me as I still need to visit the wholesaler.

~~~
Symbiote
The UK has a very competitive market for grocery delivery. It's existed using
the Internet since 1997 - it's one of the first services I remember people
being attracted to.

Everything is available, and after almost 20 years they've obviously worked
out how to deliver what people want (fresh / unripe / whatever).

Delivery is still £1-5 or so, depending on time, and the supermarkets often
have a minimum spend (or additional charge). £40 for Tesco.

If shopping every week, that's potentially less than Amazon, and with the full
range, so perhaps there's room for competition.

~~~
lucaspiller
Tesco will deliver for under £40 (previously £25), but will charge £4 extra on
top of the delivery fee.

Although there are a lot of players, apparently they operate these services at
a loss [0].

[0]
[http://www.dailymail.co.uk/news/article-2707071/Supermarket-...](http://www.dailymail.co.uk/news/article-2707071/Supermarket-
giants-lose-100million-year-online-delivery-services-Cost-delivery-means-
effectively-paying-customers-shop-them.html)

~~~
ionised
They don't mention the one I use in that article, Ocado, which is an online-
only grocery company.

------
n0us
I enjoy going to the store to get food.

------
frik
Now that Amazon bought the WebVan brand, Google starts Express fresh-grocery
delivery too, and we read about crazy Giphy $300mio evaluation. Btw who owns
the Pets.com brand these days?

~~~
autopov
I still have a couple of WebVan's plastic bins. They went out of business soon
after my order was delivered. They're still in quite good condition despite
the abuse I've heaped on them. Will Google want them back?!

------
coldcode
Google delivering groceries. Wish Steve Jobs was around to poke fun at that
one. How does that leverage any advantage Google has or add to their
profitability?

------
mc32
What does Google see that WebVan did not and Peapod and the USPS do not?
Groceries tend to be low margin and relatively heavy goods.

[And, it takes me half hour to an hour to do my shopping, and that's knowing
what I want to buy in advance, knowing the store. There is not much room for
profit in this scenario, except charging value added rather than flat fee. I
mean they are partnering with local grocers rather than automating food
stores]

If anyone has the reach and network it'd be the USPS (although their fleet
would have to be modified to carry perishable goods).

Seriously, they've been hemorrhaging money, why doesn't or hasn't the USPS
looked into the growing same-day delivery market (beside their Amazon deals).
Are their unions holding them back, because if they are, it's shortsighted.
They should have logistics down to a science.

~~~
kevindeasis
It seems to make sense for having a fleet of self-driving cars. I think
they're gonna go head to head with Uber within a decade.

~~~
mc32
That would make sense if the grocery bags were waiting to be picked up for
delivery without that adding any additional cost (as I mentioned, it takes me
(quite some) time to do my own shopping, imagine shopping from a list in a
store you might be unfamiliar with)

Let's say $300 shopping list (and cost of transport is 0):

Grocery store profit: $6.00

Time to shop for $300 of groceries: 40 mins.

Dollars/hour/40mins: ?

Where is the profit here? $10/mo subscription does not cover it. Ads, coupons?

~~~
alaskamiller
That's not how Google Express works. Do you live in the bay area? You have to
see the ops yourself.

Membership is $95/yr, $35 min, $3-5 for rush delivery.

They get the same data feed as anyone else, just check Curbside's website and
see how their Target product listings are the exact same items and same
pricing.

Most of the available items are only pantry stuff, cans, jars, boxes. You can
splurge but it's gonna be rare to hit $300 buying $2 to $8 items to get there.

Costco has the ball most together. They've carved out a section just for
Express deliveries. Boxes, tapes, most of the common items are already
stocked. Costco employees are assigned to Express duty, pick, pack, and leave
it for the Express drivers to pick up. Easy peazy.

Local delivery is commoditizing to about $5 per delivery, Postmates just
dropped to about $5, DoorDash is about $5, whoever's dispatch makes their vig
of a few percents just by matching demand to supply. Google's strategy is just
dominating by putting the big capital investments into the fleet whereas the
other guys have to rely on iffy relationships with 1099 contractors.

How is this different from Webvan?

Lots and lots. The unit economics are there.

Will this work?

Yes. But only when you have the money to wait and last it out and have an
automated car trick up your sleeve.

------
hrb1979
Another issue that's not been mentioned is Google's concerns over ad revenue.
Consumers are increasingly searching directly in Amazon versus in Google for
product purchases, which is a significant worry to the Google ad revenue
model. By participating more directly in the shopping experience Google can
hope to stem some of these traffic losses. Doing it in groceries, which is
such a regular purchase, they might believe they can change habits more
quickly. And at least charging margins for convenience versus pure grocery
retail, which as others have mentioned, are brutal.

------
tjl
In Kitchener-Waterloo there's two different online grocery stores, Grocery
Gateway (which has been operating since the '90s) and Grocera (which is very
new). I've been using the former for a long time. I checked out the latter
(which is backed by Google) and the markup was too high on the items I checked
over Grocery Gateway. Tofu was $4.99 vs. $2.49 and soy milk was over a dollar
more (I have health-related dietary restrictions). Grocery Gateway is operated
by a store chain, Grocera picks them up from local stores.

------
Animats
Services which do this by sending people to retail stores suffer from out-of-
stock problems. They don't have inventory information. So you tend to get
orders with missing items. Amazon, which has its own automated warehouses,
knows what it has in stock when it accepts the order, and can tell you at
ordering time what's out of stock.

Google is doing an Uber-like job here - they just run the shopping cart
program. Others do all the work.

------
rodionos
I still own a Webvan share certificate to remind me of stupid things I did
during the last bubble. Anyway... Does Google Express have an API? I'd be
great if I could a) automate my repeat orders and b) be a bit opportunistic
for non-perishable promo items. That's what I do in store - I buy either Evian
or San Pelegrino depending in promos.

------
anarchitect
How does this "organize the world’s information and make it universally
accessible and useful"?

I'll be disappointed if there isn't some ulterior motive at play. Some in this
thread have pointed out they stand the collect more customer information or
they may potentially have a use-case for drones.

------
bobbles
Woolworths and Coles have been competing on this in Australia for some time
now.

You shop online in the same categories as the shelves in a real store, then
arrange a 3-4 hour delivery window.

So much better than going into the store, plus they do stuff like 'you bought
this last time'

~~~
stevekemp
In the UK this is common too, all of the larger supermarkets such as Tesco,
Sainsbury, and Waitrose do online delivery.

As you say they remember what you bought in the past, and our delivery slots
can be booked for 60 minute windows.

Generally there's a flat-fee of £5 for a delivery, which is pretty good
compared to having to having to do the job yourself.

------
notduncansmith
I think that the comments about the profitability of grocery delivery are off
the mark.

This feels like a loss-leader to get data, and perhaps later on we'll see an
integration with Verily (formerly Google Life Sciences).

------
danr4
Hey here's one of my ideas thrown to HN crowd:

Subscription for perishables i.e bread, meat, eggs, fruits and veggies - You
shouldn't actually buy things you buy every week, you should just get them
shipped!

~~~
awqrre
here's another idea:

1\. Create a grocery list online, 2. pickup packaged ready-to-go order at
local warehouse

~~~
MarkyC4
This is the "click and collect" model. For example:
[http://shop.loblaws.ca](http://shop.loblaws.ca)

------
SideburnsOfDoom
Does google feel that they have to compete with Amazon as a "rival stack" ?

They're both integrating things from cloud computing to autonomous vehicles,
and now to to parcel delivery.

------
beyondcompute
It'a good they didn't do some other consumer-facing product this time.
Algorithms and infrastructure are their strong points.

------
tempodox
I can't wait until the Goog finally builds entire cities, countries and
planets. Stop trifling with the details.

~~~
dagw
Company towns used to be quite popular back in the day, maybe Google should
take a stab at bringing them back.

------
drglitch
What is the long term ROI play here? Buying new eggs (low margin) along with a
high margin jewelry or clothing item?

~~~
xvedejas
There's a membership fee after the first three months of $10/mo or $95/yr

------
veritas213
This makes so little sense..

Google seems to prefer hunting anchovies over whales on this one.

------
SixSigma
As Wal-Mart rolls back, Google rolls in.

Sounds a bit "me too" wrt Amazon

------
ehudla
SV: Supporting the Asperger life style since 1998.

~~~
kevingadd
Grocery delivery is extremely important for people with disabilities, people
without cars, and people who are otherwise not able to burn an hour or two
going to buy groceries. It's not just something for rich programmers.

When I order groceries from Safeway the extra fee on top is pretty small and
their employee brings it up on a cart and carries it all inside. This means
that it's much easier to buy a bunch of groceries in bulk, which means less
trips to the grocery store and less orders, helping make the fee amortize out
a bit more.

Safeway's service actually offers _more_ fresh stuff than I can find if I
visit a local store. The Safeway closest to me is space-constrained (downtown
San Jose) so in practice they only stock around half of the things I can get
via the delivery service.

~~~
ehudla
And you think these are the reasons google decided to go into this business?

------
jedicoffee
Could just offer to buy Instacart or another service that is already
established and stop trying to kill startups.

------
kchoudhu
Why?

------
sogen
This is cool until they sunset it like countless others.

~~~
dannyr
So what if they sunset this service?

The worst thing that could happen is you go back to going physically to the
store to buy groceries.

It's not like you won't have the ability to buy groceries if the service
stops.

I personally like that companies like Google are trying out different things.

~~~
yoz-y
This should not be a Google product, they have Google Ventures to support
somebody else to do it. Google has a trillion of rotting product they keep
pushing out and then killing.

Problem with any of these Google side projects is that they come in with a
huge cash reserve so they are not playing on a level field with other
companies that would like to do something similar. Then, when they leave, it
leaves us with a barren ecosystem and takes time for other players to come in.
My favourite example is Google Reader which practically killed RSS services
for years.

~~~
dragonwriter
> This should not be a Google product

This is an added feature for Google Express, which is an established Google
offering.

Google Express was an outgrowth of Google Shopping (originally, it was "Google
Shopping Express"), which was an established Google offering.

Google Shopping was an outgrowth of Google Search, which is the most core
Google offering there is.

Why, again, should this not be a Google product?

> Problem with any of these Google side projects is that they come in with a
> huge cash reserve so they are not playing on a level field with other
> companies that would like to do something similar.

Um. Too bad? (And, really, that's not all that different to VC backed startups
position. So, if your complaint is that VC backed startups shouldn't be
allowed to compete with, e.g., bootstrapped small businesses, well, at least
that would consistently applying the principal that is implied in your
complaint. But I still think that's a bit silly, even then.)

~~~
yoz-y
VC backed companies usually have one offering and they have a huge motivation
to succeed. Google's reaction to a failed project is a simple "meh". I would
compare this more to a government subsidised production that would obliterate
competition. And no competition = bad thing. This is why we have anti-trust
laws.

------
Havoc
Strikes me as a terrible idea but curious to see them try anyway

