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Grocery Delivery Service Instacart (YC S12) Raises $44M
- pinars 12y agoThe link seems to be broken?
- free2rhyme214 12y agoWhy Instacart over Amazon Fresh or Google Shopping Express? I saw their product when it first launched but I didn't see a distinct advantage.
- deleted 12y ago[deleted]
- steven2012 12y agoI 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.
- free2rhyme214 12y agoNot the best strategy in my opinion.
- calbear81 12y ago"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.
- shiftb 12y agoThat's not our exit strategy. We're building a long term business here.
- stevetjoa 12y agoMy reason is simple. I use Instacart frequently. When I first evaluated Google Shopping Express, it didn't seem possible to buy basic perishables such as milk and orange juice (and I don't mean the canned kind that sits on shelves at room temperature). That's pretty much a killer if I can't buy fresh milk and orange juice.
- free2rhyme214 12y agoAnd then when they offer those products at lower prices?...lol
- veemjeem 12y agoNot everyone is driven by price. Sometimes convenience trumps price. I use the delivery services so I don't have to waste an hour at Staples to buy one item.
- mmmmax 12y agoFaster delivery Bigger selection Speak directly with your shopper
- nobodysfool 12y agoThe only way I can see this as profitable is at a huge markup or they start stocking items themselves just like a grocery store does. I think people care less about what grocery stores the shopper goes to than getting the correct items. They should just have a food warehouse and stock stuff.
- deleted 12y ago[deleted]
- Jemaclus 12y agoAre 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?
- nomedeplume 12y agoThere should be a basic level of business knowledge required to participate in these discussions.
- Jemaclus 12y agoHere'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.
- zainali 12y agoWait, weren't you being snarky? "Don't you have to eventually make money to pay back those VCs?"
- nomedeplume 12y agoI was totally feeding off his tone, and I also love how he believes his question deserves an answer.
- gtCameron 12y agoYou answered your own question, yes eventually you have to make money. You just have a different definition of eventually than VCs do.
- brianr 12y agoCongrats Instacart!
- abuehrle 12y agoI 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.
- mrgordon 12y agoYep, extremely disingenuous. One time they left the receipt in the bag and let me assure you that there are huge markups being taken...
- deleted 12y ago[deleted]
- volker48 12y agoI'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.
- calbear81 12y agoI pretty much had thought that they didn't make money on delivery because on average drivers make $5 - $8 per shop/delivery. Free delivery with $x in groceries also confirms that they are making a margin on groceries, which I've heard is as much as 30% but I guess that depends on how often they update their prices and if there are sales going on at the stores they shop at.
- tylerlh 12y agoI'm a pretty heavy Instacart user, and I'm convinced what they're making on markup eclipses what they make from delivery fees. Not complaining, just wish the messaging didn't gloss over it as mentioned above.
- Killah911 12y agoShit, 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
- free2rhyme214 12y agoSmartphones didn't exist back then and there isn't the dot com bubble going on right now.
- ThomPete 12y agoIts a legitimate question actually. The difference is that they got their logistics and pricing down. The Y2K companies didn't.
- potatolicious 12y agoThe 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.
- k-mcgrady 12y agoThis 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.
- veemjeem 12y agoThey 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.
- k-mcgrady 12y agoInteresting. 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.
- veemjeem 12y ago
- 3327 12y agoi 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.
- mrmch 12y agoHuge 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.