"Scaling Food Distribution Is Really, Really Hard"<p>No, it isn't. It is fairly straightforward and thousands of companies have scaled across the world.<p>Scaling a two-sided network focusing on providing a niche seasonal product to a niche audience is really, really hard. It wasn't the food distribution that wasn't scalable, it was the business model.<p>"We were motivated by enthusiasm for our mission and eagerness to bring Good Eggs to more people. But the best of intentions were not enough to overcome the complexity."<p>No, you were motivated by aggressive expansion targets to provide returns for the dozens of millions of dollars you took as investment and to make a lot of money.
<i>"The single biggest mistake we made was growing too quickly, to multiple cities, before fully figuring out the challenges of building an entirely new food supply chain."</i><p>This is a repeat of Webvan. Webvan had a good idea, but tried to "scale" fast. They had about 3% market share in 30 cities, and needed 30% market share in 3 cities.
I live in Good Eggs central - san francisco, and I foresee problems that are still ahead for this startup. Don't get me wrong: I really want Good Eggs to succeed, but they have quality control issues that need to be addressed and scale <i>very</i> poorly.<p>Specifically, I've been a customer of theirs for years, and in the past two years in particular, I've seen prices go up pretty dramatically and quality in some cases go down.<p>It used to be the case that Good Eggs produce and meats were farmers-market quality at really good prices, delivered. Now it's the case that the produce feels like farmers-market seconds (the produce I get from them regularly has only a few more days of freshness left and are decidedly <i>not</i> the fruits or veggies I would pick if I went to the store on my own), and the meat and fish prices have gone well beyond the cost of the same meat from other sources (say a trip to a regular market). Top this all off with persistent packaging and logistics errors - my last order contained someone else's frozen lunch pies, didn't contain any of the cheese I ordered, and was delivered an hour before the actual delivery window I requested (and contained fish, so if I hadn't already been home, this would have been a problem).<p>Good Eggs is really good at fixing these problems - I email their customer service and they credit me for stuff I don't have and throw in a $5 off coupon for next time or whatever. If inconsistent quality or mispacks were rare, this'd be perfect. The problem is, it is not rare at all. I have definitely fallen off in my use of their service - if I'm paying the same price, I might as well just go to Andronico's, Whole Foods, or the Ferry Building (or Gus's or Rainbow, or Berkeley Bowl ... there's a lot of great grocery stores in the SF region) so I can pick out what I want, and sometimes (especially at Berkeley Bowl) get a way better price.<p>They need a better process for vetting the product they get from distributors (and possibly a better contract when it comes to rejecting low-quality stuff) and a better process for getting people's stuff into their bags. That's not scaling, that's core competency. It may be the case that this <i>doesn't</i> scale, can they deliver food that's sufficiently high quality that I could say, 'If I went to the store, I'd have chosen that tomato' at a price that's competitive with the store? That's a difficult problem to solve and requires well-established relationships with vendors.
<i>It takes a lot more than good code, talented engineers and passionate customers to scale food tech startups that deal with getting perishable food from local farms to people’s doorsteps.</i><p>It feels like some kind of tech-myopia that anyone should think code was the key to a successful food company. The old "when you're holding a hammer..."
Just two months ago, they announced expansion of delivery to Manhattan's downtown area: <a href="http://blog.goodeggs.com/post/120709577938/good-eggs-is-coming-to-manhattan" rel="nofollow">http://blog.goodeggs.com/post/120709577938/good-eggs-is-comi...</a><p>I'm guessing the logistical and financial troubles described in the OP were pretty clear 2 months ago...was expanding service to Manhattan a Hail Mary to attract additional investment?
Part of their operation was driving a truck up to Fishkill, NY and filling it with goods from Hudson Valley producers, many of who are too small to be commercially distributed already. I bet someone could keep doing that and make good money. But probably not enough money to make VC's happy.
Facepalms all around. Supply chains are hard, and the idea that you can just write software to "solve" them is a level of hubris that defies description. Supply chains aren't a problem you can solve with big data. They aren't a problem that be solved with machine learning. In fact, you could combine the worlds top researchers in Computer Science, Economics, Operations Research, Mathematics, and Statistics, put them in a room together for a decade, and still not "solve" even 1% of the problems that Supply Chains face. I know the ITA presentation on Air Travel Planning Complexity[1] has been circulated here many times, but it always blows peoples minds how complex that problem space is, and that type of problem is miniscule in comparison to end to end supply chain optimization. I work in a problem space that is the combination of 9 different NP-Complete/Hard problem spaces (I've counted) on a regular basis...we are barely scraping by with millions of lines of code and entire data centers of our servers running at peak utilization 24/7, and that is with state of the art heuristics solvers and hundreds of PhD-level researchers, and that is only a subset of the Supply Chain problems that my company faces. To say that Good Eggs bit off more than they can chew is a MASSIVE understatement.<p>Supply Chain Management is a field that is heuristic-driven because there isn't a solution. The heuristics that drive modern food distribution are the result of a real world genetic algorithm that is already thousands of generations deep...and miniscule incremental improvements have been the subject of PhD Theses for over a hundred years now. You don't optimize on top of that by writing a web service. Supply Chain Management <i>may not be technologically advanced</i> in its usage of enterprise software, but that doesn't mean that their ideas and processes are stupid. At best, it means there are some annoying frictions in the industry in the way that they interact with other industries (and there are actually plenty of viable startup opportunities to fix this). The presumption of stupidity[2] regarding the existing state of logistics and supply chain management killed this company, just like how it killed Webvan, and is going to kill a whole host of startups in the distribution and delivery space within the next few years. [3]<p>[1] <a href="https://static.googleusercontent.com/media/www.itasoftware.com/en//pdf/ComplexityofArlineTravelPlanning_Carl_Sep-03.pdf" rel="nofollow">https://static.googleusercontent.com/media/www.itasoftware.c...</a><p>[2] <a href="http://www.aaronkharris.com/presumption-of-stupitidy" rel="nofollow">http://www.aaronkharris.com/presumption-of-stupitidy</a><p>[3] PS: If you are in VC and have a stake in any startup that is doing last mile delivery, liquidate now. There isn't a single startup in the space, whether they are currently valued at $1 or $1B, that can sustainably provide their existing value proposition that they are promising to their customers. It <i>is</i> possible to force scale some of them into something sustainable, but your valuations make me believe your cash flow neutrality projections are off by more than an order of magnitude.
Sometimes "do things that don't scale" is bad advice. It's great advice when starting out (because you should be focused on building an appealing product before you worry about scaling it), but you need to be using your scale-up to test ways of breaking out of doing the "things that don't scale". The idea is to turn it into a forcing function for the company: if you can't find a better way to scale, you're done.<p>Disruptive innovation is about ripping out the assumptions that incumbents made and operating under a new set of assumptions that may not have been possible when the incumbents started. But sometimes, the incumbents' assumptions/constraints are still valid, and new entrants don't have as much of an advantage (or the new entrants' advantage is easily copied).
I think the sweet spot is going to be a Trader Joe's-like online brand. Good quality, organic options, low prices, curated selection. Instacart, GoodEggs and others are missing the mark.
A couple more points here:<p>1. A lot of people who care about organic and farm-to-table ethos already live in areas with significant market coverage. Those people will tend to have existing behaviors — GoodEggs sought to displace these. This can be hard if existing players do good-enough job.<p>2. The paradox of some delivery services is that the people who need them most are sometimes the most economically unviable customers (because they are geographically spread out, because they are lacking in funds or both).
I wonder if the problem has to do with providing a desirable product? It's already pretty easy to get good food, good organic food and good organic locally grown food from a variety of vendors. With GoodEggs it seems you're getting a clunky ordering experience, inability to select produce, an extra shipping charge, moderate/high prices, etc.
Bummer - I was rooting for Good Eggs!<p>re: software and food. The truth is nuanced:<p>- obviously, code won't overcome the challenges of immature, lower-scale logistics and business operations. Roll up your sleeves like everyone else!<p>- no, it's not about "big data" as much as business process software.<p>- but yes, code can help in some ways:
- analytics/BI/decision-support: smarter decisions, fewer meetings.
- running ops: fewer managers, automated monitoring and project followup.
- use code to help manage your supply chain.<p>- but yes, "tech thinking" does help:
- faster, safer process change
- remote monitoring
- application of classic compsci algorithms vs reinventing wheels.<p>cheers!
adam<p>Buyer's Best Friend
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Good luck to them. Hope they figure it out. Churn can really hurt your business and affect growth tremendously if you don't address it. I'm guessing that's the case here. It's like taking three steps forward and two step back. I'd rather take one step forward at a time.
$200M Wouldn't be enough. They are trying to solve a problem that doesn't exist for 95% of the country. Sure, there is a market for this, it's just not the size they are thinking.<p>As the article says, "Figure Out Your Model Before Scaling".
The first time around it was called "The New Economy" <a href="https://en.wikipedia.org/wiki/New_economy" rel="nofollow">https://en.wikipedia.org/wiki/New_economy</a>
I really liked Good Eggs, and their customer support always seemed great. Unfortunately, my last order came an item short so they gave me a $5 credit on my next order. A day or two later, they close down in NY and now I won't be able to redeem the credit.<p>Not a big deal, but it was a bit annoying coming from a company I'd always used specifically for their great customer service.
It's a little ironic that goodeggs is considered a food technology firm, when it has nothing to do with technology, and in fact has a rejectionist approach to technology in the first place.<p>Monsanto and Cargill are food technology firms. Advances in food technology are what allow us to feed 9 billion people with a fixed resource (arable land). There are serious innovations in food production and distribution that have saved millions of lives in the last half century (Norman Borlaug and the Green Revolution).<p>An online seller of local produce is not "food tech". It is simply using the web to sell food. Add to that their dislike of synthetic pesticide/fertilizer and other real advances in food technology (advances that in the developing world mean a real reduction in deadly diseases that spread through the use of animal manure [natural fertilizer]), and it makes them just another anti-tech firm that happens to peddle goods on the Internet.
When I first heard of this company I thought it was some kind of joke. Turns out I should really learn how to bamboozle investors into handing me $53M for shitty ideas that don't make even basic logic sense.