Through a special arrangement, presented here for discussion is an excerpt of a current article from Insight-Driven Retailing Blog.
My wife hates grocery shopping. She has shopped at lots of different brands, but it’s 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 a 10 percent 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 it’s 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 Francisco 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.
BrainTrust
Discussion Questions
What do you think of Instacart? What do you see as the pos and cons of such a crowdsourced delivery service?
Poll
Loading …
Personal shoppers are still the norm for many home delivery services in operation today. The logistics have always been a sticking point, comprising much of the labor and costs of the operation, which in turn drive up the fees needed to make business sense.
Crowdsourcing and new technology may indeed be just the ticket for bringing the costs down for the selection process. If it is, you may see others switching to this system. However, San Francisco is not a “typical” market that most home delivery programs must serve. Big cities, with densely populated, high income people have always been the most lucrative market for home delivery. Making it work there does not necessarily mean it will work in Des Moines!
I think it’s a lot like aggregated take-out food services. A nice idea that isn’t going to make a lot of money and fails quickly.
Seems to me that affluent consumers who don’t want to do their own shopping would just hire someone they know to do this on a regular basis, or have their housekeeper do it. There has to be a fee involved here somewhere, although it is not clear on the site, and I don’t imagine there is a very large segment of the population with enough extra cash to outsource their grocery shopping this way, so I don’t see it as a big business.
I’m wondering what the upcharge is. And don’t see this as much of a crowdsourced service. If I’m the only one ordering this morning, do I get charged more? Have they given up on any economies of scale?
This works in a market like Seoul or Tokyo, or other high density areas, but this model is unsustainable in the USA.
First question is, who screening the “personal shopper” doing the delivery? Food tampering, and exploitation of the elderly are real liability risks with this business model.
People have personal shoppers for clothing, assisting, taking care of pets, and cooking, so grocery shopping isn’t a stretch. Being able to hire someone as needed for such tasks is a relief for busy urbanites. And utilizing people as opposed to warehouses and transporation is a smart business model for Instacart. As people generally shop locally to their region, it’s a good concept to limit options, which helps with logistics.
This is another expensive approach unlikely to be successful except for high income customers. Store selection will never be the long-term selection. After you accrue all the cost of getting the product on the shelf, then to pay someone to walk the aisles and select the merchandise only adds more cost. Where this works best is when other retail channels are added to the mix. Unless the customer service people have sufficient work, have a car or truck, and are making sufficient income, there will be high turnover.
Crowdsourcing is an excellent way to leverage resources on-demand without the overhead of infrastructure (warehouses, people, vans, etc.). That said, crowsourcing is not for everyone or for every task. It will be interesting to see how accurate and good these crowdsourced shoppers are. Do they pick out the best produce and meats? Did they keep them in a cooler to stay fresh? If they can work out these possible kinks, I think they have a business.
Regardless of Instacart’s success, crowdsourcing will only grow over the next few years.
I don’t see this as being conceptually different than having Peapod or another company doing the shopping for you. Instacart’s one advantage is they will shop at Whole Foods and Trader Joe’s for items you may not find at a typical supermarket. As others have noted, it may work in urban markets where the population density is high and there is sufficient potential customer base of customers who can afford the service, but nowhere else.
For the housewife who hates to grocery shop, start paying up for the service as there is no free lunch. This is a very expensive way to do business, and some folks will pay for it. For the rest of us, there just is no way to get the super low grocery bill without doing it yourself, as margins will not allow for it. Big cities can do this, and that is about it.
Seems like a good thinking-outside-the-box idea. But the startup costs are expensive and the profits have to be low in order to make it appealing to those not so affluent. That said, unless my wife is incapacitated (and even then it will not work) she is doing her own shopping.
For densely-populated urban areas with a base of high-income residents, this might have some hope of success. For the masses that are looking to save a few cents on ground round, I don’t think a service charge plus tip is going to be palatable.
This type of approach can offer advantages for routine or stock-up shopping that can be planned for efficiency. However, it is less effective when specific products are needed in a short span of time. Providing that device requires logistical planning and payment for time and service. The experiments are a good idea to determine when, where, and under what conditions this approach works.
Not much. Having slogged through the web grocery wars for many eons now I can say with some confidence the problem is in the pick.
One person’s idea of what a 10 ounce can of habanero oatmeal is not the same as an others as in, “Oh … no … I meant the other size can.” And there is the whole issue of returns. And there is the whole security issue when you are hiring people whose idea of employment is hoping they picked the right onions.
I’m not saying it won’t work on a limited scale in certain markets, just saying it isn’t a remotely scalable idea.
This has been around forever and the idea keeps getting recycled as some sort of new concept. The biggest con is that people suffering from agoraphobia are few and far between. Not really enough to keep a business afloat.
My guess is every few years we will keep reading new reports on how someone has reinvented the personal assistant business. Until someone can figure out how to deliver groceries immediately at Walmart prices and no delivery fee, we are just going to keep seeing the same recycled business model.
This is a very “high-touch” model that may not lend itself to productivity gains as it grows. In its defense, most of the world’s population has migrated into dense cities, including here in the US, so the marketplace opportunity seems to be there. Additionally, with city dwellers seeming to have less free time, or at least are inept at managing their time so to have any free time, this program could work well in densely-populated areas.
As we all know, Murphy’s Law is the governing body that rules over all of retail, and for this idea, it is sure to take precedence. Sooner or later, someone shows up at your door that you’d really rather not have at your door, let alone in your house. Then you lose a customer forever. Or worse yet, ‘someone’ does something heinous.
That excluded, there’s still the question of fuel fees, tax recordings, people getting lost, robberies in transit, wrong orders…you get where I’m going: I’m with Amazon!
I don’t think “crowdsourced” describes this service very well, but nomenclature aside, I do think there may be a lucrative niche market for a personalized, multi-store grocery shopping and delivery service—at least in upscale, dense urban markets.
Readers may remember Streamline, the Boston-area online shopping service that provided never-run-out unattended home delivery direct to the fridge circa 1999-2000. Users were highly loyal despite the service fees, because the service brought significant value to their weekly routines.
Also worth recalling in the context is Kozmo.com, a defunct Manhattan service which in 2000 promised to deliver items by bike, auto, even subway in less than one hour.
Instacart has some potential to gain fierce loyalty by delivering convenience. It has two novel features. First, it enables the shopper to consolidate items from several local stores —similar to the way many people already shop to meet their household weekly needs. Second, it deploys a cadre of freelance personal shoppers using a cloud-based matching process (similar to field project solutions like Field Agent).
See also, TaskRabbit – which offers personal delivery services online.
The big “ifs” in my mind for services such as these is user-friendliness and utter reliability. If managing the app is simple and intuitive for the customer, it will be regarded as a time and effort-saving convenience.
Seems like a niche service that will work for some folks who want to pay the fees and where there is urban density. But not as likely to catch on as a broad-based service in mid-size or smaller markets.