
Grocery Delivery Service Instacart (YC S12) Raises $44M - augustflanagan
http://dealbook.nytimes.com/2014/06/16/grocery-delivery-service-instacart-raises-44-million/
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abuehrle
I love Instacart. I have two comments about this raise.

1\. I hope they use some of it to hire more shoppers. It is increasingly
common to log in at 10am and see no available delivery times until the next
day.

2\. "The company makes its money through the delivery fees." That is
disingenuous. They appear to make significant margin on grocery items. It's
fine - I'm willing to pay for it - but I think they consistently gloss over
this fact.

That said, I've been a huge champion of them to my friends and family, and
I'll continue to be. Congrats on the growth.

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mrgordon
Yep, extremely disingenuous. One time they left the receipt in the bag and let
me assure you that there are huge markups being taken...

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volker48
I've noticed that the prices on their site are almost always lower (and
sometimes considerably lower e.g. $2 / lbs less) than the actual price of the
item at the store. I'm not sure if what I'm being charged is the price that is
listed on the site or the actual price of the item. It could be if the item is
less they keep the difference, but if the item is more they add on the charge.

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k-mcgrady
This really confuses me. Why aren't the large supermarkets offering a delivery
service in the US (at least last time I checked they weren't)? I can order
groceries to be delivered the same of the next day from all the major
supermarkets in the UK. I've done it for years and rarely had an issue.

Also, if any of the major supermarkets in the US step in and decide to offer
this service won't Instacart's business be instantly obliterated?

Is there something I'm missing?

Edit: I guess someone accidentally down voted my perfectly valid question.

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veemjeem
They do, but their interface really blows and the scheduling system can be
troublesome because they have a limited number of drivers and sometimes you'd
have to schedule delivery during a bad time. I've only used instacart a few
times, but I could immediately tell it was way better than Safeway's delivery
mechanism.

For starters, I could have a single watermelon delivered at 11pm for a party I
had going on, but with Safeway, I could not do same day delivery and it would
need to be delivered during working hours the following day because the other
times were already booked. Safeway's delivery mechanism is probably good
enough for large offices that need regular deliveries, but Instacart is good
for all other times. I probably would just stick with a single delivery
service for everything so I wouldn't waste my time using Safeway's service.

Instacart feels very similar to Google Shopping Express, and if you haven't
tried out either service, you should definitely try one of them out. Google
Shopping Express can't deliver perishables, but they do support Costco, so if
you don't have a car and you need 50 rolls of paper towel, that's the best
place to be.

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k-mcgrady
Interesting. I wonder if that's really enough. When it comes to groceries the
vast majority of people shop based on price. Instacart charges a markup on
every item purchased. In this market people seem to value price over
convenience especially when the convenience difference is small.

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veemjeem
I don't agree with that sentiment. I think your pattern detector is only
taking in account on how grocery shopping is currently done. When you
introduce something new into the system, it may not adhere to the same rules.
There are many cases when convenience will trump price. Say you need to buy
items from 10 different stores. I would rather use a service that goes to 10
different stores for me, than have myself drive to each store to hunt down
each item.

When I use amazon prime, I'm very aware that the prices are sometimes more
expensive than a generic brand, but I am willing to pay the small price
difference for the 2-day shipping convenience. A study was released on amazon
prime shoppers that showed prime customers are less affected by price. The
convenience of getting something with 2-day shipping, but with a higher price
trumped a cheaper item but longer delivery times. People don't always go for
the lowest cost item.

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k-mcgrady
>> "Say you need to buy items from 10 different stores. I would rather use a
service that goes to 10 different stores for me, than have myself drive to
each store to hunt down each item."

I guess it depends how you shop! :) Supermarkets are there to give you the
lowest prices and eliminate the need to go to more than 1 store. But I
understand where you're coming from. I guess we'll have to wait and see how it
works out.

~~~
veemjeem
Hah, I wish that were true. Supermarkets exist to make money, so they can't
stock items that have low demand. If you cook ethnic foods, you'll typically
need to visit several stores to buy all the ingredients for your meal.

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k-mcgrady
Judging from flog's reply to my comment it's a cultural thing. In the UK the
main supermarkets all have sections for ethnic foods (as the number of polish
immigrants has increased for example the supermarkets have added polish food
sections). Things in the US market seem to work differently.

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free2rhyme214
Why Instacart over Amazon Fresh or Google Shopping Express?

I saw their product when it first launched but I didn't see a distinct
advantage.

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steven2012
I think it's pretty obvious that Instacart's exit strategy is to make some
great technology that either Amazon or Google will buy-out.

There is no way they will survive as a company long-term trying to compete
against either of those two. It's a low-margin business with expensive, labor-
intensive components that won't scale efficiently over time. They just need
enough money to last long enough to convince Amazon or Google to buy them at a
premium so that the investors make their 10x.

~~~
calbear81
"I think it's pretty obvious that Instacart's exit strategy is to make some
great technology that either Amazon or Google will buy-out."

I think they will make a play to open up their shop and delivery service via
API to eventually allow stores to use them as a full end-to-end delivery
service and sales channel.

The other play is to do what DoorDash is doing with focusing on the core
logistics/driver infrastructure and route/scheduling optimization software.
Doordash is generic enough to go beyond restaurant delivery and become an open
alternative to last-mile courier services in the market today. It's basically
Uber cargo but I think they could do so much more by making it an open service
that any business could use to handle on-demand delivery to their end users.
If Trader Joes wants to provide delivery, they just need to be able to ping
DoorDash with an address and have a box ready when a driver arrives. This
offloads the liability and capital costs associated with having your own
drivers and delivery trucks, etc.

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mrmch
Huge instacart user, was wondering what was happening now that Amazon and
Google are both moving into the space. It's awesome to see that they're
winning.

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pinars
The link seems to be broken?

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MSM
Was broken when I checked earlier, seems to be fixed.

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3327
i loved it from the start when i was in the bay area doing my and loved it so
much that if i wasn't a founder almost applied to join. good luck and exciting
market.

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brianr
Congrats Instacart!

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Killah911
Shit, déjà Vu. Is it y2k again? If not, what are these guys doing differently
from the Y2K grocery services?

EDIT: since Adredreseen Horrowitz invested, I assume it's likely not a repeat
from Y2k, and I'm really interested in what they're doing differrently

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potatolicious
The number of people on the internet (even if we strictly limit to the USA) is
far larger now than it was in 2000. There were an estimated 400 million
worldwide internet users in 2000. It's now estimated at over 3 billion.

In 2000 only 41% of all US households had internet access. Now it's 81%. This
number also doesn't include internet in your pocket (74% of all Americans have
some kind of mobile broadband).

The idea of "groceries on the internets" was never bad, it just tried to enter
a market that didn't actually exist yet. They also tried to do too much, too
quickly: i.e., launching into low population density markets that had zero
chance of being cashflow even in the next 20 years. Notice that Fresh,
Instacart, Google Shopping Express, and all these other perishable delivery
companies are now strictly only in the densest urban areas where there is
sufficient economy of scale to make the numbers work.

There are also some smaller contributors to success: people in general are
_much_ more willing to put their credit cards on the internet and buy things
through the internet. People are able to access the internet while on the go.
In the case of Amazon and Google they're leveraging a brand and existing user
base that they've been building for years. The state of web tech also means
the products are far less painful than before - keep in mind that 2000 was
before AJAX, where every click of every button meant a completely new page
load... over a connection that is likely dialup.

The game is very, very different from the way it was in 2000.

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Killah911
That sounds reasonable. I do still wonder about building up infrastructure vs
crowdsourcing. I'd love to have groceries delivered, I hate going to the
grocery store & spending hours of my life which I can put to better use.
However, I'm an early adopter.

The negative Karma points were totally worth the responses. Wish there were
some more with more specifics on said startup.

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Jemaclus
Are they actually making any money? Every time I see their headlines these
days, it's "Instacart raised $X" and not "Instacart earned $Y." Don't you have
to eventually make money to pay back those VCs?

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nomedeplume
There should be a basic level of business knowledge required to participate in
these discussions.

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Jemaclus
Here's a brilliant idea: how about instead of being a dick about it, you
explain the circumstances.

It was a serious question that deserves a serious answer, not self-righteous
snark.

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zainali
Wait, weren't you being snarky? "Don't you have to eventually make money to
pay back those VCs?"

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nomedeplume
I was totally feeding off his tone, and I also love how he believes his
question deserves an answer.

