Back in 1999, you could order groceries delivered to your door from Webvan.
But most people just ordered a six-pack of soda and didn’t tip the free-delivery guy. We had friends who worked there; it was great. Then they lost a billion dollars. In 2000, my email tagline was “I can’t hear you over the sound of Nero fiddling”. We gave a Halloween party in the cannon-testing range at the Alameda Naval base in 2001, with tombstones for all the dotcoms that had failed.
San Francisco’s giant frat rager was over.
“and with the right kind of eyes you can almost see the high-water mark—that place where the wave finally broke and rolled back.”
Hunter S. Thompson
But living in the Bay Area these days feels a bit like those days, if you have friends at the high-flying companies and your partner works at a startup that might be a contender. And there are already casualties littering the field.
If a company that raised a 5M initial round and was founded by three ex-eBay execs couldn’t back the right horse (social local commerce and F-commerce are very young) then why is SF-based Instacart trying a business model that already drastically failed?
Especially in SF, where consumers have numerous online grocery delivery options? Safeway delivers groceries (using some of Webvan’s old trucks!) SPUD will bring you organic local etc. veggies, or you can Mechanical Turk it with Taskrabbit.
I learned about Instacart during a New Year’s Day conversation with a bright young thing from Dropbox, who told me the instant delivery (one-hour to same-day) arms race means the restless ghost of 90’s ecommerce delivery sites is roaming the streets of SF again. If you’re a young person who doesn’t work for Google (we know a Google employee who has turned his Mission kitchen into the litterbox room for his cats) but still makes tech money, your time is worth way more per hour than any delivery fees.
On-demand courier and personal assistant services like Postmates and Exec are a practical solution for young urban singles who don’t want to deal with things like picking up drycleaning (or may not get home from work before the drycleaner closes) and don’t have a homemaker spouse.
Is hiring out waiting in line at Tartine or Ike’s a douche move, a gratuitous flourish of privilege, or is it trickle-down economics at work?
And why does Instacart think they can deliver groceries to anybody besides the neo-digerati?
Well, they’re Y Combinator-incubated, for one thing. And they have an elevator pitch that doesn’t sound insane.
Founded in early June, Instacart is the brainchild of Apoorva Mehta, an ex-Amazon Supply Chain engineer, who is leveraging his experience building Amazon’s own complex backend logistical system in the hopes of creating a more efficient back and front-end grocery delivery experience at Instacart.
To begin with, Instacart CEO Apoorva Mehta said, the company is avoiding mistakes made by high-profile dot-com boom era failures like Webvan and Kozmo. Instead of offering unlimited free delivery with no minimum order, like Kozmo did, or building a billion dollars’ worth of grocery fulfillment infrastructure, Instacart simply takes customers’ $10 or larger orders, sends a staff shopper to a local merchant to load up on fruits, vegetables, meats, and the like, and then delivers them.
In this article by Rafe Needleman, he interviews Instacart CEO Apoorva Mehta and learns that Instacart isn’t a marketplace for food, it’s a marketplace for labor.
In other words, Instacart is selling a grocery-ordering interface paired with micro-contracting services in the vetted Taskrabbit model.
Needleman makes the point that Webvan was too early for this kind of service; Instacart is entirely mobile-dependent and the workforce of contractors with their own smartphones (“managed crowdsourcing“) who use Instacart’s proprietary store maps and shopping app are as important a piece as the customers.
Will it work? As a part-time homemaker-partner, I was immediately ready to outsource the grocery shopping to Instacart for the absurdly reasonable price of $9.99 for one-hour or $3.99 for three-hour delivery. I was crushed to learn that our Uptown Oakland neighborhood isn’t on their service yet- sensibly, they’re starting out with SF, Palo Alto and Mountainview.
And a little more investigation reveals something interesting – a markup on the groceries themselves that’s not mentioned anywhere on the Instacart site.
There’s a detailed price analysis on this blog, which is written by the co-founder of a competing business model, so grain of salt.
It’s generally described as between “5%“, “gouging” and “a touch” elsewhere.
Additionally, in a discussion on Y Combinator’s Hacker News, CEO Mehta proves himself to be a bit of a jerk.
Why these startup guys gotta be such jerks? It’s enough to make you cynical about the Internet.