<i>Instacart needs less cash to expand (compared with Amazon, which also delivers groceries in some urban areas) since it doesn't have to build warehouses or large stores.</i><p>If your gross margin is negative, then the "extra cash" from not investing in warehouses just goes straight to the customer's pocket instead, instead of towards a capital asset that actually lowers your variable costs.<p>And lets not kid, anybody who knows instacart's revenue model and the margins of the grocery industry knows with about 99% certainty that instacart is losing money with every sale. Buy it all up while the VCs are feeling charitable, cause its going to dry up very quickly.
This was certainly true for us at Livingsocial and, to an extent, it was true for Groupon as well.<p>The cash burn sucks, but you have to love the unit-level economics that this model provides. Want to turn on new revenue? - just open up another city!
I would think startups would be a little smarter than just doing the same thing in each geo. Surely fixed costs can be minimized. The warehousing infrastructure won't be that valuable if the company goes under.