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I think the interesting thing about these start ups is how ambitious they are. The promise is always a nonsensical "You can have anything you want from anywhere
by SilverBirch 4y ago
I think the interesting thing about these start ups is how ambitious they are. The promise is always a nonsensical "You can have anything you want from anywhere you want, faster than is reasonably possible". I'm surprised that there isn't a bigger focus on the actual technical limitations of what is possible.
By making your offering "You can have anything" you draw in a load of customers who are ordering things that actually aren't that urgent, and therefore they have extreme price elasticity, whilst also making the problem you're solving the most expansive version of the problem possible. The second you start charging for the fast delivery they're just going to go elsewhere. You're just acquiring really shitty customers.
The thing to learn from is Amazon, Amazon don't make money on delivery, it was a differentiator to attract customers to their shop which makes money, and it was built on top of a difficult but possible technical problem - building a much more efficient warehouse.
In my view, there's only 1 area where people will pay a premium for time, and that's food delivery, and everything else people will settle for a longer wait (really, we're talking here 15mins vs 24 hours). The smart thing to do maybe is to find a way to utilize the non-peak hours of the food delivery companies to do grocery delivery in a less time-sensitive, but cheaper way.
- rmbyrro 4y agoNow logistics have not only a "last mile" problem, but also a "last hour" problem to deal with...
- amelius 4y ago> I think the interesting thing about these start ups is how ambitious they are. They have to, to satisfy investors. Investors have declared rapid delivery to be a winner-takes-all market, where the winner captures the customers through an app (customers can only have so many apps on their phone, and prefer to use a single app for their rapid delivery needs). So rapid growth is the only option. Grow or die. That's why we see so many of these startups going down.
- Ekaros 4y agoI really doubt that take. Then again I'm extremely price sensitive customer... And will always look at cheapest option or even pass if the delivery is a few euros more... And I can't be only one.
- spaceman_2020 4y agoI do that too. Since there are so many similar apps and the product selection is the same, I just go with whoever is offering the cheapest delivery or offers. The app experience has been standardized enough that I don’t really care what I use as long as I get the cheapest price.
- amelius 4y agoYes, I think they are selling at a loss too. Possible thanks to investor money.
- gwbas1c 4y agoBecause it's not about starting out with a sustainable business model. It's about taking a massive wad of cash and using it to block other entrants into your marketplace. Keep out competition as long as possible, and then once no one is looking, raise prices. (Honestly, it seems kind of short-signed to me.)
- spaceman_2020 4y agoThat doesn’t seem to have worked out for Uber. Doubt it can work out for anyone else
- gwbas1c 4y agoI mostly agree, it seems mostly a dead-end mindset. (Then again, I've decided for my career that it's best to work for someone who runs a business, instead of running a business myself.) But, I was thinking a bit more about my statement last night; and I realized there are two directions to take: Build enough assets that, when the business fails, you can sell something off to whoever comes along with another wad of cash; or once you push everyone out and it's clear you don't have a sustainable business, rebrand so that everyone thinks you're a newcomer. I personally wouldn't do it, but I'm too much of a nice guy to run a business.
- blackoil 4y agoHas this model ever worked for anyone apart from businesses with very strong network effects?
- greenthrow 4y ago> it was built on top of a difficult but possible technical problem - building a much more efficient warehouse. Amazon did not solve this via technical means. Amazon relies on worker exploitation for this.
- SQueeeeeL 4y agoYeah, but it exploited workers at a scale never before scene. Truly showing the power of technology.
- arrosenberg 4y agoI dunno, the cotton gin was kind of a banger in that regard.
- Robotbeat 4y agoIn other words, they’re the same as retail.
- hedora 4y agoMany technical innovations went into Amazon warehouses. They pioneered random placement of items to load balance the aisles and workers, and rely more heavily on robotics than previous warehouses did. These things weren't feasible in the mid 90s. I suspect the reason it is so terrible to work at one is that designing a fulfillment scheduling algorthm that can handle 10% variance in human throughput is really hard. (The main complaints the workers have involve bathroom breaks!) They realize they are running out of people they have not burned out yet, and are looking into fixing it before exhausting the entire US labor pool, so clearly they've created a massive quality of life issue for the workers.
- Ekaros 4y agoI think reality is that there is minimum you can pay for a worker. And there is only so much you can get out of single worker over longer period. Clearly they have overshoot the later and it will eventually bite them. Main issue is that from numbers perspective only the throughput matters. Not if it is in general sustainable in long run.
- alasdair_ 4y agoPeople will pay a premium for non-food items that they need today. For example: you’re hosting a party and have run out of wine or plastic cups or a wine ipener or whatever. Tampons, toilet paper, razors, diapers, etc. are also things people often need right now and can’t easily get them (any parent with young children knows how much it sucks to run out of something at a point where the child is asleep - do you wake them to go to the store?) Even random stuff like home improvement items - it really sucks to be covered in paint and then realize you need some sandpaper or whatever - having to clean off and go to the store in the middle if a project is a real pain.
- AdrianB1 4y agoYou are describing bad planning as emergencies. They are just bad planning and there is a cost associated with it. That cost is not reflected in the price paid, so these startups run at a loss. "Just in time life" is a bad idea.
- spaceman_2020 4y agoThat sounds good on paper but doesn’t work in reality. To deliver products quickly, you need inventory close at hand, aka “dark stores”. To justify the massive upfront investment in dark stores, you need either need massive volume, or you need high average order value. Massive volume doesn’t work because rapid delivery is niche and delivery fees means that people can’t use them as frequently. Plus, dark stores simply can’t carry enough inventory to do large volumes. The only option is to increase the average order size. But because dark stores carry limited inventory, you can’t upsell much.
- Ekaros 4y agoNot to forget that you need also quite substantial inventory. The stuff might not be perishable, but still you need to tie up capital in it. And you can't have too little either when there is demand spikes you can't fulfil orders or customers won't come back when you can't supply stuff.
- spaceman_2020 4y ago
- pbreit 4y agoVery few people need many groceries within 15 minutes (or several hours or even same day). What I am surprised we have not yet seen is "Trader Joes online". Not for Trader Joes to do it (they seem disinterested and very focused on an in-store experience/model). But for some startup or legacy company to make such an offering. Limited SKUs, terrific value, optimized for online ordering/storage/deliervy, etc.
- danpalmer 4y agoThere are a number of subscription grocery delivery companies in the UK that work on a fixed delivery day model. i.e. you sign up and based on your address you're given a day that all deliveries will happen on. This works by having fixed routes, known ahead of time, which optimise for local driver knowledge (it's supposed to be the same driver every week), and therefore can afford to be really quite cheap for delivery. I like the model and I'd like to see it applied to more types of food delivery.
- bhahn 4y agoIs that not what Amazon Fresh is, or is supposed to be, in the US? (disclaimer: work for DoorDash, but in an unrelated org)
- ev1 4y agoNo, that was what PrimeNow was. PrimeNow is discontinued last year. Amazon Fresh is scheduled fairly large delivery windows, usually at least a day out. If you get super lucky there might be an available slot later the same day but not often if city.
- pbreit 4y agoI was thinking MUCH more curated inventory. Private label for many/most of the staples. Relatively high quality at reasonable prices. Mostly non-organic with some organic options.
- ska 4y agoIf you are talking about actual Trader Joe's stock, I suspect you'd be locked up in a lawsuit pretty fast. IIRC, they (TJ's) successfully shut down a store-front operation like this in Vancouver (or some other Canadian city?) by a mix of lawsuits and identifying all the buyers then banning them - game of whack-a-mole but one they were willing to play. You could argue no harm as they didn't even operate or plan to operate in the country (and I think they did argue that).
- alexashka 4y agoHow is it ambitious to have a bunch of teenagers on scooters delivering shit after school? We would've had this the entire time if we didn't have minimum wage laws, that these companies are skirting.
- londons_explore 4y agoDelivery networks operate most efficiently with a mix of priorities of goods. That way, every time a truck moves, it is guaranteed to be full. These apps seem to be trying to build a network of only high priority goods, which will never work. Their vehicles and workers spend most of their time moving with just a few items for just one customer. There's no way to make that cheap.
- AzzieElbab 4y agoAdditionally, these startups play the good old game of "who has enough cash to stay afloat the longest" against each other since none have any technological or logistical advantages
- at-fates-hands 4y ago>> Their vehicles and workers spend most of their time moving with just a few items for just one customer. This was the main reason many delivery apps/startups went under during the first dot com crash. Lots of VC money floating around with too little common sense. I'm puzzled why companies think "Oh no, WE can make this work now!" and are trying pretty much the same thing. I thought we all learned this wasn't a profitable business model some 20 years ago?
- marcosdumay 4y ago"There's no way to make that cheap" doesn't lead to "will never work". It means it's at most a niche product, but it surely can work. There are plenty of people that transport only high-priority products. But yes, those companies promising to do it cheap will fail.
- drw85 4y agoThe problem is that none of these things are actually of a high priority. So customers wanting some chips or ice cream will not pay a high enough price to actually be profitable without heavy subsidizing.
- CoastalCoder 4y agoAssuming you're correct, it's painful to consider the amount of effort and money that was wasted simply because investors missed this basic insight.
- aagha 4y agoThis is right on the money. I'm visiting Southeast Asia right now and Grab is a popular service. It seems to me you can order anything (reasonable) from Grab, but it seems 95%+ of the orders are for food I think the other thing that makes delivery here simple (and I'm guessing, profitable) is the proliferation of scooters. They're everywhere and everyone has one. I suspect decent gas mileage and simple to park convenience makes them the obvious vehicle for instant delivery.
- moltar 4y agoI think it's because everyone in SEA has a scooter, so using Grab Taxi isn't super important. Although, I do see it used more often at night, for going out. But Grab Food, Grab Mart and so on are spectacular services, and I find them way better and faster than Uber Eats in many places.
- wyclif 4y agoI'm also in southeast Asia at the moment. Grab got big during the lockdowns and over the past few years of the pandemic. You would see the Grab-branded motorbike riders everywhere. But now it seems like I don't see them on the street as much anymore because they've hit a big speed bump: fuel costs for the motorbikes. As long as fuel was relatively cheap they could get employees here, especially since there's high unemployment, wages are low, and there are not a lot of jobs in provincial towns. But now they're struggling to scale.
- brianwawok 4y agoIt also helps to have a lower wage and higher unemployment rate. In the US when you have Taco Bell paying $15/hr, you would need to pay a fair bit more for someone with a clean driving record and a car. And at that point, is it really worth $20 to get a single toy from the store?
- ghaff 4y ago>It also helps to have a lower wage and higher unemployment rate. In a lot of Southeast Asia, personal service generally (drivers, full-time home help) is a lot more common generally for middle class-ish people than it is in the US or Western Europe.
- tablespoon 4y ago> I think the interesting thing about these start ups is how ambitious they are. The promise is always a nonsensical "You can have anything you want from anywhere you want, faster than is reasonably possible". I'm surprised that there isn't a bigger focus on the actual technical limitations of what is possible. A lot of people would reject that focus on limitations and realism as "negativity" and maybe even get hostile. It's stupid, but it might have been how we got to where we are.
- pen2l 4y ago> The promise is always a nonsensical "You can have anything you want from anywhere you want, faster than is reasonably possible". Importantly, this kind of infrastructure quickly leads to bottlenecks because of hot zone times. Amazon with their 'overnight' delivery has got it right, having drivers do delivery in extreme early hours when they have to confront rather little traffic. Well, I guess it's good for everyone except the drivers who are forced to lead an unhealthy nocturnal lifestyle :(.