Instacart (YC S12) aims to be the Amazon Prime of grocery delivery

Amazon has had, what, five years to expand its Amazon Fresh grocery delivery service? The fact that they have chosen not to implies that they haven't managed to make it cost effective. I think this speaks volumes about the feasibility of grocery delivery.

$10 for one-hour delivery and $4 for three-hour delivery seems extraordinarily cheap, given the someone is actually going to a grocery store, buying this stuff, and delivering it to you.<p>If those are the actual operations, it appears like it would be very difficult to turn a profit. However, it does seem like there are plenty of good ways to make the operations more efficient once demand is high enough while still remaining light on assets like warehouses, trucks, etc.

Back of the envelop calculations: A typical delivery would cost 1 hour of someone's time. At minimum wage this would cost ~$5. So $99 buys you 20 deliveries. If you batch up 3 customers every hour than $99 can pay for 60 deliveries.<p>If your order twice a week for 50 weeks than customer gets 100 deliveries for $99. So net/net Instacart would have gap of 40 deliveries = $33. So in essence they would eat up $33 per customer as loss which you can simply be viewed as customer acquisition/retention cost.<p>I think this is brilliant model. $99 for 3 hour deliveries would be very attractive to upper middle class. It also illustrates class of powerful business models which are simply based on swapping time for money and leveraging the exchange rate between time and money to be minimum wage.

Isn't Amazon Fresh the Amazon Prime for Groceries?

I hate to be overly negative against this startup, but I have a couple of issues with this service, that haven't been addressed since Webvan in 2000:<p>1) The target audience is definitely those people who are too busy to get their own groceries. If they are too busy to get their own groceries, aren't they too busy to cook a meal? I would think that take-out or going out to eat would be their #1 competitor in this area. When both my wife and I were working full-time, at the end of the day we were so exhausted that the last thing we wanted to think about was what we were going to eat, and then actually cooking it. We ate out probably 5 days out of the week. Ordering take-out will be quicker, and less of a hassle.<p>2) If the delivery person selects items such as meat, eggs, milk, etc that are expired or very close to expiry, it will likely cause a complete lack of confidence in the service. It will only take 1 bad experience buying meat, or a couple of busted eggs in a dozen, and they could potentially lose a customer forever. I'm not sure what their return policy is, but if they have one, it will likely be pretty costly for the company. There also could be incentive for people to return their close-to-expired food to Instacart, claiming that the delivery person selected it. It may seem petty, but for example very high chargebacks rates are one of the biggest challenges that Square faces right now.<p>3) Free delivery is interesting, but the 3hr delivery window I think will turn out to be pretty inconvenient for customers. It means that they need to deliver their goods at home, because who wants to be stuck at work waiting for their groceries to be delivered? I'm not sure what the delivery times were during their beta testing, that would be interesting to know, but my best un-educated, armchair-analyst guess is that the highest amount of deliveries will be from 7 to 10pm, and on weekends. If Instacart takes off, it means a disproportionate about of work required between 7pm and 10pm, and a lot less at other times. This sounds like a lot of people sitting around waiting for deliveries.<p>4) Safeway has their own delivery service as well, with a 1hr time window. What exactly does this service provide that Safeway can't? Is it cheaper? Or just faster?

I loved Webvan when it existed, and then Tesco's delivery service in the UK, but never got into the delivery options in the US since then. (I also ended up with &#62;30 of their crates...)<p>I'd pay $50/wk for someone to go to storage freezer (deer, beef), the butcher in Alameda (other meat), Berkeley Bowl (produce), Tokyo Fish Market (fish, japanese stuff), Whole Foods (365 is a decent deal, failthrough for anything not at the above), Costco (specific bulk items, like ito-en green tea and san pelligrino), and Trader Joe's (frozen food) to get groceries. Unfortunately, I think I outgrew Safeway some time ago. The other problem is I often want to buy highly seasonal items, based on availability, price, and quality. I don't think there's a good way to get the quality I want at a single store at a decent price; Whole Foods comes closest, but is expensive. Add BevMo for liquor, too.<p>Webvan had basically one or two steps better quality than Safeway (on par with Andronico's), and all in one place.<p>A service to get stuff for a party during the party (e.g. if you run out of beer) in 1h for $10 would be awesome. I don't think I'd use 3h Safeway delivery even if free. I would use a higher end service with great quality food (by going to the right shops) if the ordering experience exposed current inventory status.

I would really like for online groceries to work, partly because I despise going to to the grocery store. I'd much rather have someone else find a place to park, locate all of their items, wait in line at checkout and haul the groceries out of the store. I'm even willing to sacrifice things in order for that to happen, like being able to inspect and pick my own meat and produce.<p>The only sticking point for me is price and selection. I want options when choosing products and I want the prices to be comparable to what I see in the store. I don't want prices that are twice as much as in the store PLUS delivery fees.<p>Hopefully Instacart Express tackles that problem. The only concern I had after reading the thread is that it sounds like they have an employee go to an actual grocery store to pick up the order and deliver it. That method of doing things sounds painful once the service really starts to grow, but perhaps they've got an alternative strategy for when that happens.<p>Good luck, Instacart!

We started and operated a grocery delivery service like this for some 15 years as a sideline to our normal delivery business.<p>It was an operational nightmare.<p>Picking one order for a customer at a grocery store quickly is hard enough. Two orders requires using two carts and care that you don't mix up the orders. Picking more than two orders at a time is almost impossible, which limits your productivity.<p>We routinely had customers who would order more than a cart worth of groceries at a time. Offices would order 20 cases of soda pop and several boxes of munchies. Picking, transporting, and delivering these orders often took well over an hours' worth of time each.<p>If the average customer is ordering once a week, the $2 they receive won't be enough to cover their costs, and they'll have to charge significantly more than shelf price for the groceries if they are to be profitable. But this will discourage customers who believe they are paying an annual fee in return for "free" delivery.

In Minneapolis, we've had grocery delivery for quite a while now through Coborn's Delivers (<a href="http://www.cobornsdelivers.com/" rel="nofollow">http://www.cobornsdelivers.com/</a>). It used to be Simon Delivers (<a href="http://en.wikipedia.org/wiki/SimonDelivers" rel="nofollow">http://en.wikipedia.org/wiki/SimonDelivers</a>), a startup that went under and then was taken over by an existing local grocery chain.<p>We pay $5 for next-day delivery or $10 for same-day (for orders of at least $50, otherwise add another $5 to delivery).<p>It's a huge time saver, we have groceries delivered every Sunday and they have good selection and produce. The prices are a little more expensive, but it's totally worth it for us.<p>The startup I'm working at also uses it periodically to have soda and snacks delivered. Much easier and more reliable than having to send someone out every few weeks.

I can't help but worry that services like Instacart, TaskRabbit and Exec may perpetuate the problem of "underemployment" in the United States.<p>Let's face it, you can't pay delivery people as good as, say, Costco does it's hourly employees and only charge $4 or $10 for delivery. It's even worse if these services are just 1099ing these people without any benefits, gas money, etc. (I have no idea if this is the case).<p>Maybe these services use student workers. Maybe I'm way off. But I do know that I'm as pro-capitalism as anyone but felt a little dirty after paying someone on TaskRabbit $15 to walk around SF for 2 hours and get me some restaurant information.

Do you not have these services already in the US? In the UK every major supermarket will deliver to your home whenever you want. They all have mobile apps, etc. They have the leverage, surely the same would happen in the US?

I thought this concept of grocery deliveries for free had died with WebVan back in 2000 [<a href="http://en.wikipedia.org/wiki/Webvan" rel="nofollow">http://en.wikipedia.org/wiki/Webvan</a>]

"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." How are they going to scale this? Sounds like it would require a huge workforce in each of their markets. And what about the grocery chains' delivery services like Peapod?

I hope that while they exist they use heavy duty containers for the deliveries.<p>I'm still getting a lot of use out of my old Webvan tubs!

As far as I can tell, Instacart works on phones only, not the web. Will there be a web UI? And it's iPhone only. Q: Where does Apple get its 30%? All in-app sales? Just the delivery charge? Will there be an Android version? If not, why not?

those damn instacart addicts :)