> “Instacart’s core value proposition is last-mile delivery at scale, something Amazon has always struggled with,”
Is this really the case? I was under the impression that the e-commerce giant is great at last mile delivery.
Is this really the case? I was under the impression that the e-commerce giant is great at last mile delivery.
That isn't to say that Instacart is better. They're nowhere near a sustainable business under their current business model.
Since >75% of the costs of parcel delivery are due to the last mile, and because parcel delivery margins are so low, we can use parcel delivery prices as a rough proxy for last mile delivery costs.
Last mile delivery is only viable at scale due to delivery density. USPS has extremely cheap parcel delivery because they have a government enforced monopoly on letter delivery, ensuring they basically visit every house every day no matter what. The UPS/DHL/FedEX crowd can do 1 day delivery at reasonable-ish prices due to their scale for all parcels. But Amazon and Instacart are cutting delivery windows down to 1 hr, and that absolutely destroys your delivery density...on the order of 10-15x.
For the PrimeNow/Instacart business model to make sense, they need costs that are comparable to the current large parcel carriers...meaning they would need to scale their businesses to 10-15x the size of the large parcel carriers to get their prices in the range where their businesses are viable. Amazon is closer than instacart, but that is like saying a car is more likely to get you to the moon than a bicycle.
This is of course, is the opposite of the grocery delivery model that do work: A constant weekly delivery(you can change items of course), at a fixed day/time(according to delivery times to your area), in a returnable passive cooler box before 8:00 am. You don't have to be receive.
That way, after a bit of scaling, you can get to a good delivery density.
But of course, that's a different offer than 1-hour delivery. But is it not appealing enough ? or is the problem that other, stronger retailers can relatively easy copy it ?
Because if it's the latter, Walmart did already win(almost), at least on the logistical front, and that would explain why Amazon focuses on buying a niche company with a main skill of having unique products, and rich customers.
I had this when I lived in Denver, and really missed it when I moved. It was basically the milk man, but they delivered milk, juice, eggs, bread, etc... They would also take the empty milk jugs and recycle them.
I had a set standing order and could drop a form in my cooler for minor changes/skip the week.
https://www.theguardian.com/money/2015/may/02/online-shoppin...
The UK is, overall, denser than the US, but there is plenty of the US as dense as the least dense areas of the UK which get these services. Plus, you have cheaper petrol and cars. What would stop this model being used in the US?
But it is important to note that delivery in general isn't impossible to make viable, but rather the specific type of delivery that Prime Now and Instacart are offering...where you order and get it an hour later. There are plenty of ideas out there that could work quite well, but Amazon and Instacart have already hooked their customers on a higher service standard that will never pay off for them, and if they want to change it to make it viable they are gonna have to piss off a lot of customers.
Yep - this is what really differentiates Amazon at a philosophical level from say Google. Google doesn't like dealing with people or the messy real world. Amazon rolled up their sleeves and got stuck in, saw that there was opportunity in doing something difficult rather than working around it. Amazon Logistics is a seriously impressive operation.
http://www.cnbc.com/2017/04/21/robots-are-now-deliving-food-...