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>The delivery service is actually a loss leader for instacart's underlying business, which is influencing purchase decisions through their app and getting paid

by kitcar 10y ago

>The delivery service is actually a loss leader for instacart's underlying business, which is influencing purchase decisions through their app and getting paid for it If that were true, wouldn't a heck of an easier approach have been to setup an "ad network for retail delivery apps"? I think you might be underestimating both the difficulty of the logistics side of their business, and therefore its value as well. I've never really looked into Instacart (Not available here), but I imagine a more likely Instacart investment thesis is "if local businesses were given the option to not have to manage their delivery fleet, with minimal impact on other parts of their business, would they switch? + How much can we reduce the cost of local delivery due to scale/volume, and therefore is a monopoly position in local delivery achievable?

clairity 10y ago
i agree with you that the logistics problem is incredibly hard but we may be disagreeing on whether instacart has cracked the problem (or even can). having talked to shoppers (instacart's workers) in the past, i don't believe they have solved the logistics challenge yet. their recent tips fiasco tells me that they're still gross margin negative and needed to fudge those revenue numbers into fitting with this valuation. it's certainly possible that they have a credible story around how they get operationally profitable with the delivery business, but that's a margin-limited business that i don't think investors will get excited about. data and services are relatively high-margin businesses and that's why i think that's the play here. but i agree that whoever solves the very hard last-mile logistics problem is going to be fabulously well-positioned (amazon, walmart, fedex, ups & uber seem to be the leading contenders). thinking that scale/volume will solve the problem is enticing, but so many companies have chased that holy grail only to fall short that i'm not sure that it isn't a mirage.

by kitcar 10y ago

clairity 10y ago

i agree with you that the logistics problem is incredibly hard but we may be disagreeing on whether instacart has cracked the problem (or even can). having talked to shoppers (instacart's workers) in the past, i don't believe they have solved the logistics challenge yet. their recent tips fiasco tells me that they're still gross margin negative and needed to fudge those revenue numbers into fitting with this valuation. it's certainly possible that they have a credible story around how they get operationally profitable with the delivery business, but that's a margin-limited business that i don't think investors will get excited about. data and services are relatively high-margin businesses and that's why i think that's the play here. but i agree that whoever solves the very hard last-mile logistics problem is going to be fabulously well-positioned (amazon, walmart, fedex, ups & uber seem to be the leading contenders). thinking that scale/volume will solve the problem is enticing, but so many companies have chased that holy grail only to fall short that i'm not sure that it isn't a mirage.