By David Dorf on Jul 25, 2013
My wife hates grocery shopping. She's shopped at lots of different brands, but its always the same time-consuming, uninteresting task. For her and those like her, no investment in customer experience is going to help. She just wants the food to show up at her front door. That was the promise of Webvan, the famous internet failure in 2001. Their problem was that they spent millions building warehouses and a fleet of trucks to do everything themselves.
Peapod (owned by Ahold), FreshDirect (Morrisons has 10% stake) and AmazonFresh take a similar but more disciplined approach. They built their warehouses and truck fleets more slowly based on demand. They focus on metropolitan cities where its easier to compete, and they don't promise 30 minute delivery times as Webvan offered. Those three companies are finding success because they took the time to learn the grocery business first, then figured out how to make money with home delivery.
But that approach requires slow growth with high infrastructure costs. An alternative approach is to forgo the warehouses and trucks and leverage what's already available in every town. Instacart takes a crowdsourcing approach to grocery home delivery. Customers select their groceries from various nearby stores, then a personal shopper picks them up and delivers them the same day.
The 10-person company only serves San Fransisco right now, but they have 200 independent personal shoppers that get paid a fee plus tips. (Pick better fresh produce, and you'll likely get a better tip.) I imagine some of these people might form trusted relationships with their customers.
The secret is in the logistics. The personal shoppers are given an app that helps them navigate to and within the stores efficiently. The software does some optimization by combining orders so a personal shopper can more easily fulfill orders for multiple customers on the same trip. Instacart has no warehouses or trucks, and only pays their personal shoppers when they are working. And although grocery chains like Safeway are experimenting with their own home delivery service, in the end as long as sales are occurring they really don't care who's making those deliveries.
Seems like a pretty good plan to me.