Google usually operates in high-margin industries. This is the opposite. I've had the "privilege" of working in this one. You're talking all kinds of players working against each other for perceived self-gain with individual companies constantly pushing costs down to the point their staff can barely break even. And Google intends to compete with that using something with higher cost?
Pretty crazy. I was unsurprised they'd use Costco and Whole Foods while targeting two areas that already pay too much for stuff. Love to see them try that in my area where people go for whatever costs the least most of the time. Lots of true premium services have gone out of business with what's left being those that approximate premium with right compromises to keep cost down. That's probably true across most of the States.
The biggest flaw in all this is what these companies keep ignoring: impulse buying. The big stores put what you need as far away from you as possible. Then, you have to exert physical effort to get to good deals while seeing, at arms reach, all kinds of profitable items. This is a hard to quantify, but big, chunk of grocery revenues. So, these companies doing online deliveries or personal shoppers have to make more money than the competition while leaving out one of most powerful techniques for making money.
Always operating at a disadvantage, there. So, we're not going to see such things proliferate. Those with the most capital, negotiating power with manufacturers, and proven techniques win here. Almost always.
And Google intends to compete with that using
something with higher cost?
The UK already has at least one mass-market grocery delivery company that is profitable (albeit barely - a pre-tax profit of £11.9m on sales of £1,202.9m).
The CEO, Tim Steiner, believes in the long term they can be more efficient than bricks-and-mortar retailers by having a few large, automated warehouses fulfilling orders for the entire country. This leads to better power efficiency (no need for things like open-front refrigerators retailers need) and reduced waste (trying to keep an item in stock in 3 warehouses results in less over- and under-ordering than trying to keep the same item in stock in 300 walk-in stores).
There's a £40 minimum order, and a delivery charge (£0-£5 depending on time of day and day of week), but groceries themselves are price-matched to a major bricks-and-mortar retailer.
Of course, to get great prices from suppliers you need a large enough market share to get economies of scale / negotiating leverage. And to get that market share you need reasonable prices. Mark up the items a lot or charge too much for delivery and you'll always be a niche competitor getting poor prices from your suppliers.
UK is a very different situation: online grocery shopping is very well established and very competitive, with most major supermarket chains offering delivery and supposedly 3 in 10 people buying their groceries online [1].
I don't know if this is a factor, but isn't parking a big problem in big UK cities? If you wanted to make a grocery store run, you'd have to fret about parking and traffic.
Most American cities don't really have this problem
Correction - most American suburbs don't have this problem. Grocery stores in most major American metropolises (NYC, SF, Boston, DC) can't afford the real estate for parking lots.
Most Americans do not live in cities anything like NYC, SF, Boston, or DC. Even in DC, the District of Columbia is is a relatively small jurisdiction of (generously) 700,000 people in a region of over 5 million. Even District grocery stores generally have on-site parking--perhaps over or under the store--and it is often free.
So, no correction is in order and it is perfectly accurate to say "Most American cities don't really have this problem."
Used to buy mine online but I got so sick of dealing with the websites (Tesco was by far the worst, ASDA a close second) I went back to doing a weekly shop and grabbing a taxi to get home.
Now since I work in town I use the local market for all the fresh stuff (meat, fish, veg) and a variety of smaller shops for household supplies, it's actually cheaper (less waste since I mostly buy on the day of use and the market is way cheaper for most stuff than supermarkets with better quality).
It certainly does make sense if you're looking at places with expensive property, like London. A supermarket takes up a huge area, and usually in areas where land tends to be expensive. Nobody wants to go to a supermarket in the middle of nowhere.
I think that's where online supermarkets are going to win out over conventional supermarkets.
Personally, I prefer to go to supermarkets than shop online, even if it was cheaper, I'd still probably go to the supermarket, but that's usually because I decide what I want to cook for tea on the way home from work, so I'll stop by the supermarket and grab some stuff, I enjoy the experience.
> A supermarket takes up a huge area, and usually in areas where land tends to be expensive
I think this is a particularly good point about their success, especially in London. In London, there aren't really many huge supermarkets (the closest one to me is about 5km away through dense built-up areas), and most people don't own cars. Hence, if you want to do a big shop, online delivery is pretty much the only way.
Yep. even when I pass by a big supermarket (it is on my way home near the tube station), bulky items and lots of items are difficult when travelling on foot & crowded bus.
That's an interesting counterpoint. I haven't investigated how successful companies are in U.S. if specializing only in those areas. However, they have to have economy of scale to get low prices on stuff people want. Or buy from groups like Costco as Google is with further markup.
So, there's potential there but a lot of risk, too. Need more data on such things.
> The UK already has at least one mass-market grocery delivery company that is profitable (albeit barely - a pre-tax profit of £11.9m on sales of £1,202.9m).
I just checked Pitchbook and in 2014 Ocado has a ~3% EBITDA margin. This is hysterically low for a "technology" company.[0] For reference, Alphabet operates at ~30% EBITDA margin. The problem with food delivery profits is that they are hysterically thin and underpin last-mile problems (specifically in the US where population density is much lower than UK/EU).
Side note - Why the heck are PE ratios so high on the LSE? Ocado is trading at over 220x earnings...
It's not that low... Amazon appears to do about 7B in EBITDA on about 100B revenue. I'd bet AWS is propping that up a bit with its really high margins.
If you compare them to another grocer (which they kind of are), their numbers seem more reasonable - the industry profit margins are typically single digits.
The point is that all retail is super low margin (in this case < 10%) which is made up for in volume. For Google the only incentive is to go towards a volume play because the margins will _never_ be great. The OP's point stands - this seems odd that Google would go after such a low-margin area, considering almost everything else they do has super high margins (30%+). The challenge in the US is that volume is hard to get because of last-mile economic restrictions.
If google cracks self driving vehicles then the margin would likely increase quite a bit by not paying drivers, if they applied similar technology to automate as much of the process at every part they likely could increase the margin again.
I've worked for large retailers (Staples in this instance) and they are not remotely efficiently run, bad warehouse management, bad stock management (old dated broken software), incredible lack of intelligence on stock ordering etc.
A company with the programming ability to manipulate data the way Google does could get a decent headstart on the competition in the short term (eventually others will catch up but that's the way the game is played in retail).
Hell throw in viable electric vehicles for the deliveries and you could eliminate driver costs and 2/3 of your fuel costs, that'd be a hell of a saving.
You'd also be able to offer a faster turn around time (multiple small vehicles vs multiple orders on a single van).
Throw in some nice UX stuff, real time alerts when you delivery is on the way drawn on a nice google map rather than "It'll arrive between 7-9" which means anywhere from 6:30 to 10pm in my experience and I'd sign up.
Ah good point. I missed he was saying it was low from Alphabet's perspective.
Personally I believe it's a play to keep Google's search intact - as more people go straight to Amazon to find products, it could move people away from using Google first for everything (meaning fewer searches and less effective paid ads).
The good ones are all 2-5%. Anything below that is underperforming, a no-frills shop (eg dollar store), or trying to crush competition with a growth strategy. In any case, talking to people that work at most of them show they barely function if they're near 2%.
We must also note that this is the final profit. That's after executives, shareholders, employees, real estate, etc have been paid. The markup over the price of goods is still often around 30-50% to cover above costs. So, there's plenty of potential for competitiveness by eliminating some of that.
Branding, variety, psychological manipulation, and cost due to volume deals give advantages hard to beat. The big players also tend to acquire any company that is in the process of doing that, too.
"According to a paper published by the CDFI Fund, the average profit margin for the supermarket industry was 1.9 percent in 2010. The profit margin varies by sub-classification. According to analysis of Yahoo! Finance data, the average net profit margin for publicly traded US-based grocery stores for 2012 is close to 2010's 1.9 percent average. Sagework's research shows that privately owned grocers had average profit margins of 2 percent in 2010 and only 1 percent in 2011." http://yourbusiness.azcentral.com/profit-margin-supermarket-...
Upmarket you can get ~3.5 to 6 percent which helps boost the average to 1.9, but for bulk goods 1% is not actually bad.
PS: Natural and organic food markets have some of the highest profit margins. For example, in 2012 Whole Food's net profit margin was 3.79 percent and Fresh Market's was 5.58 percent. Traditional grocery stores have net profit margins ranging from 1.96 percent for Harris Teeter and 1.91 percent for Kroger's to 1.77 percent for Safeway.
The abuse of statistics is rampant. An average tells you either what the middle player makes or is only used to identify trends. The average means nothing for individual players. An average of 1.9 might mean one company makes about nothing with many making 2-3% or a bunch of companies around 1.9. Btw, Kroger is one using an aggressive growth strategy to undercut competition. Their stores stay having empty shelves around ehre. They own Harris Teeter, too. Safeway went bankrupt at that rate. So, what are these numbers proving again? ;)
I suspect there's another reason they're doing this, and they don't actually think this will be a profitable business opportunity. Delivering groceries in 2016 is probably a strategic move in support of a larger effort that will pay off in 2019.
Perhaps it's about gathering richer data on consumer preferences and behavior. Or maybe it will help them develop autonomous vehicles in some way (having already been operating a delivery service for a while might be helpful when they start rolling out new tech).
Or maybe they're just throwing spaghetti at the wall to see if it sticks.
Yup this is it. Google's bleeding money on these initiatives to preserve its crown jewel: search.
More and more people are using Amazon and other services first to find stuff they need - which means lower engagement with search and lower effectiveness of paid ads. If Google can build some of these services themselves it could potentially maintain its reputation as the first stop on the customer journey.
As a slight anecdotal counterpoint to your comment about Amazon, while I often buy the product eventually from Amazon, I initially search "amazon $productname" on Google because I don't like Amazon's search.
It is truly baffling how many online retailers screw up search on their sites. I very often search "site:amazon.com <what I want>" just to avoid having to deal with site searches.
Sometimes I think that just putting things like all alibaba products (maybe also put others who also allow this) on your own better functioning site at a 5% or so markup would be a huge opportunity.
I hear you. It's telling though you know the product is already on Amazon. You can imagine people going straight to Amazon if they know the product is there.
> Or maybe it will help them develop autonomous vehicles in some way (having already been operating a delivery service for a while might be helpful when they start rolling out new tech).
They've been operating a delivery service since 2013; this is an increase in the scope of kinds of products it includes (which brings it better in line with its Amazon competition.)
I agree it's probably a precursor to something else. They could do all sorts of things with a good distribution chain or more data on consumer purchases. Not sure how many are good business plays but there's potential.
Additionally, this decision by Google to jump into this game has now completely screwed a big project I was working on. How?
I work with retail data on behalf of large companies, and companies like Walmart and Target don't want any of the point of sale or inventory feeds they provide to their suppliers hosted on cloud infrastructure owned by a competitor. In the past, this meant absolutely no Amazon options for cloud infrastructure.
I was happily using Google Cloud. Now, thanks to this certainly ill-fated business decision to get into grocery delivery, I'm going to be forced to move my data to Azure.
Thanks Google. I sure wish you would try to focus for once instead of latching on to every single niche you see small startups in. I feel sorry for Instacart on this one as well. They were just starting to hit profitability in a few cities.
That's an angle I didn't think about. Just switch to one of the other clouds like DO that's unlikely to compete on that. Also, keep your stuff provider agnostic where possible. Stuff can always happen.
>I work with retail data on behalf of large companies, and companies like Walmart and Target don't want any of the point of sale or inventory feeds they provide to their suppliers hosted on cloud infrastructure owned by a competitor.
Target isn't a competitor to Google Express, in fact, Target is one of Google's retailer partners in Google Express.
(Walmart isn't really a competitor to Google Express, either, since they don't do an aggregate-and-deliver service like Google Express, but it isn't a partner, either, and a number of their competitors are partners, so I suppose there might be some way they see the service as making Google a competitor.)
Anyhow, to the extent that this is a problem, Google Express has been around for a few years, the only thing new is fresh grocery delivery instead of just dry goods. So, to the extent there is a problem with companies "like Walmart and Target" seeing this kind of aggregate-and-deliver service as a competitor their retail business that makes then not want their data hosted on Google's cloud, your "big project" has been "completely screwed" since Google Shopping Express (its original name) launched in 2013.
Of course not. I won't have a hard time moving my stuff, although I would have preferred to stay on Google.
I was a bit pissed off when I wrote the original comment due to this unexpected twist. Obviously not their fault, but it sucks that the two most viable cloud providers are now both in the fucking retail world.
Honestly, I love Google, and just wish they would TRY to focus a bit before branching out into anything and everything. My main gripe is that I don't think they will AT ALL succeed in grocery delivery. It's complicated and requires focus.
> I was a bit pissed off when I wrote the original comment due to this unexpected twist. Obviously not their fault, but it sucks that the two most viable cloud providers are now both in the fucking retail world.
Google isn't really in the retail world (well, except for Google Store which sells a limited array of Google-branded devices, Chromebooks, etc.) -- Google Express (the service expanding into fresh grocery delivery here) is a delivery service that partners with retailers like Target, Whole Foods, Raleys/BelAir, Costco, etc., and it has been doing so since 2013 for dry goods.
When I was laid up in bed with an injury and used Amazon Fresh for groceries, the impulse-buy was extremely powerful, and took a different form.
Groceries would sometimes be delivered within hours, and plenty of pricey electronics and media could be had simultaneously. Prime now covers much of that draw. Speed is critical to capturing that impulse now.
Maybe. Prevalence of collection and brokering means data on individual customers is pretty cheap AFAIK. Grocery infrastructure and deals aren't. If this is their goal, they'd be better off partnering with a major chain doing analysis for them in return for a copy of the data.
In Canada, our grocery stores are so competitive on price that most of the actual bottom line profit derives from fining suppliers for all kinds of things (products not selling through, mislabelling, late shipments, short orders, back orders, lack of responsiveness, food safety infractions). Even the impulse items are only marginally if at all profitable. I only know this because we make financial software for the industry. It is a strange byproduct of competition.
That's really wild. Here in the U.S., the industry does a bit of that in terms of short orders. The rest I don't recall being big issues. Companies do whatever is good for business then use lawyers for the rest. ;)
Is Google Fiber a high-margin business? It seems like Google has this secondary set of strategies emerging, now, involving pushing various basic services into markets, steamrolling over whatever has been holding those services back, in order to "uplift" everyone in those markets into the sort of SV yuppies that Google makes most of their money from.
Companies in the grocery market have already gone bankrupt because they couldn't be competitive at billions in sales. I'd have either partnered with a strong company to invest in new stores with a profit cut plus discounted Google tech to make them competitive. Or straight up bought companies that produce things like salt, sugar, or key brands that fuel grocery sales. That's what the elites, esp Koch Brothers, are doing. It's recession-resistant, too.
> Companies in the grocery market have already gone bankrupt because they couldn't be competitive at billions in sales.
Google isn't entering the grocery market, its expanding its existing presence in the delivery market partnering with existing stores that are in the grocery market (some of which are already retail partners for Google Express, which has been around for a while for dry goods, and is just expanding to include fresh groceries.)
That's like saying desktops work for Microsoft so BeOS or Linux have a major chance. ;) Ecosystem, partner deals, existing base for logistics, strong brand with consumers, massive revenue... all things Amazon has to make its grocery play more successful. Not to mention they're the leader in online retail.
Google's effort looks more like how a startup would do it. No direct comparison here.
* Google Express provides delivery only
* Partner retailers provide "warehousing"
and order picking.
* 3 USD per delivery fee for memebers
* 5 USD per delivery fee for non-members
* 35 USD minimum order
* San Francisco and Los Angeles only, for now.
What's Google's USP here? This service sounds like everything Google that Google goes at great lengths to avoid (physical products, customer service, etc).
From the article they're simply entering the "delivery" market...picking up items from retail stores and transporting them to willing buyers...obviously a markup is implied...the cost of convenience...
There's no holding of inventory...thus no storage-related overhead...
When I was in college one of the jobs I had was at a combination "feed" mill/agri-center...the boss was 85 years old and made a speech each year when he distributed Christmas bonuses....
He bought the business as a young man back in the late 30s...
He never failed to mention that people relied on what we produced in their everyday lives...he was proud of the fact that he had never laid an employee off...
He told us, "People will always want good food when they sit down at the table, and we're part of making that possible..."
A truth in the last century...a truth now...
Investing in providing one of the basics of life...hard to question the logic...
> they're simply entering the "delivery" market...picking up items from retail stores and transporting them to willing buyers
Thus gaining the ability to track a lot more about what people buy/eat, in addition to their their current tracking what people read (google-analytics), where they go (android), etc.
> the cost of convenience...
...plus the long-term cost of giving Google more details about your life.
There have been many players in this market, old and new. And when you don't have warehouses to automate and extract efficiency, you need people to do the picking. It takes me quite some time to do my own shopping, knowing my store's layout, knowing what I want in advance. I only see low, low margins.
I mean, this is the opposite of self-checkout efficiency. They're putting more people into to the cost of the product/service.
They don't do the picking, the store does for them. I'm pretty sure they're using similar methods to whatever the online ordering for in store pickup uses so it's probably not being pulled from shelves in most cases either. Google most definitely is not sending their own people into the store to pick things up.
> Yeah but groceries are a very thin margin business half percent to two percent profits.
Including groceries makes the existing, more general Google Express shopping service more valuable, and negates an advantage that Amazon's competing service, which already has grocery delivery, has over Google's service.
Analyzing the grocery delivery bit as if it were a standalone business is an error.
Grocery delivery here in the Netherlands is booming, with the big supermarkets offering their own and several smaller players working on services. When I buy from the biggest supermarket here, delivery fee depends on the moment of the day you want it delivered (between 5 and 8 in the evening is the most expensive, e7 (~$10)); cheapest moment is e3 or so. But, if you buy some products delivery is free; this week it was 8 bottles of coke or so. It's pretty much always non-perishables that get you the free delivery. I don't think we've ever paid the delivery fee, maybe once or twice.
The price of the groceries is the same as in the shop. You get the specials and all. The ordering app they have even lists the specials right at the top, it's easier to order specials online than it is in-store. Dutch are very price sensitive, there is very little margin for marking up convenience.
I don't know how they can make money on this. I suspect they bet on being able to automate order picking within say 5 years and are providing the service now as a loss leader to get people used to the idea, and work out their processes using people before spending big on automation.
At the top it says 'free delivery when buying 2 4-packs of coca cola, for deliveries on Wednesday, Thursday and Saturday. Also valid at pickup points.'
The 'pickup points' are where you can go to collect groceries yourself; you order online, it's bagged for you, you drive into a location where they put the bags into your car, you pay and you drive off. Takes less than 5 mins, many people schedule it on their way home when there is nobody at home to accept deliveries.
I love the home delivery thing - it feels very decadent though.
Yeah. I mean, we also have somebody who cleans our house, she loves working for us (her words) and we really do not have time to do it ourselves (I went looking for someone after I found myself vacuuming the kitchen floor at 11pm and thinking 'hmm should I iron my shirt after this, or get up 15 minutes earlier tomorrow to do it then...), and yet it feels somewhat 'wrong' - both from the side of having someone else do what you're 'supposed' to do yourself, and the idea that you pay someone else (much) less than what you make for it. Some with the groceries, having people deliver stuff into your kitchen using a service they cannot afford themselves. And yet I didn't feel bad buying a house from a real estate agent that was more expensive than his. It's a strange phenomenon, it must be common among people from a lower-middle class background like myself who socially have moved up into a territory that was considered 'high brow' by my 'old' environment.
Anyway, to tie this back into the grocery deliveries - I think this is a major issue for marketing people in these supermarkets working on these new offerings. Their target market must be (at least initially) working professionals with two incomes, probably with (young) children, and many (most?) of those must have similar apprehensions to what I experience(d). I tried to pry some info on that away from a marketer once when I was interviewed as part of a focus group study on something similar, but either she didn't want to let up or she genuinely didn't know what I was talking about...
If anyone knows of literature on this topic, I'd be very interested. It's not something I ever hear about, it's somewhat taboo (or at least considered bad taste) to talk about this in real life (in my experience). Which I understand, it is after all almost a 'poor me, I have so much money I have buy another wallet' style problem.
It's not, really. I guess delivery is a long standing way of receiving pizza, but not for groceries. It feels more menial, somehow. I'm not saying it's a particularly rational feeling, it just tickles some middle-class guilt impulse somewhere for me.
But the market for that convenience is noticeably smaller than the one for just affordable groceries.
And at a $10/mo subscription, that's not profitable. Hiring someone at $15/hr to pick groceries and deliver them. I don't see the math working out very well.
I would say this ties in nicely with self driving cars eventually. Not really a USP though. My best guess is this doesn't roll out in anymore cities and we hear little more.
Drones quite clearly. They have embedded their intentions on their art work. Pretty boxes falling from the sky each with its own parachute. Its drones. They are getting in now to get skin in the game to test everything and use that data to optimize. Immediate objectives do not include profit rather get customers, create ambassadors, retailer loyalty, and bring those drones in when the timing is right.
> This service sounds like everything Google that Google goes at great lengths to avoid (physical products, customer service, etc).
Google Express (for which this is simply a new feature) does all those things, and its something Google has been expanding; its simply false that Google goes great lengths to avoid them.
And its an essential feature to compete with Amazon's offering that competes with Google Express.
The main Google/Amazon differentiator -- the unique selling point Google has compared to others in the similar space -- is that Google aggregates existing retailers who have unique inventory, customer relations, etc., and preserves those for customers, while Amazon acts as a single separate retailer (essentially, Google's USP is that it preserves the member retailers USPs that aren't tied directly to the physical retail location.)
I think what many comments are missing is how self driving cars play into this. Imagine a car goes to the store, pings a helper for the items, drops off the items. Wages are way lower and you have mostly capital cost.
Google Shopping Express (the superior name) is the best delivery service I've used. One of the best Google products too. For car-less city dwellers like myself, it is a huge time and effort (and potentially money) saver to get bulky and heavy dry goods delivered to my apartment. There is definitely profit to be made here if they cut out the middlemen (stores) and operated their own warehouses. Right now they're probably trying to piggyback demand data, if they're smart. When you add in Google's ability to make quality software and algorithms it makes sense where their edge can come from.
But sadly, it will probably be just another "me too" side project that gets axed.
They do the alphabet-rename thing to better split things into different brands, yet this is attached to the Google brand. How does that make any sense?
> They do the alphabet-rename thing to better split things into different brands, yet this is attached to the Google brand.
Because this is a new feature of Google Express, which was part of the established core Google business when the Google/Alphabet split happened, not one of the pre-existing non-core things broken out into Alphabet or a new venture by Alphabet post-reorganization.
I'm skeptical this will be successful. I just can't see these kind of operations selecting ripe and fresh produce like my mother taught me from the grocery store. They're concerned about their bottom line and will send whatever is available. Good for the stores, not good for wise consumers.
It was before my time, but I'm sure there were a lot of people that thought the same thing about self-service stores (before that you'd step up to a counter and order things, at least on this side of the pool).
Mind you, I'm sceptical myself; there's several deliver-fresh-food-to-home schemes going on here, they're far too expensive IMO and according to my colleagues, can be very pushy when it comes to maintaining a subscription model of sorts.
Here in the UK, every big supermarket does online delivery, and it's popular - all the ones I have used have the same process - they tell their pickers to pick like they were buying for themselves (try to get long dates, try to pick good fruit/veg), allow you to ask for specific things (less/more ripe, bigger/smaller), allow you to reject anything for any reason at the door, replace items they don't have for alternatives (including bigger sizes/premium alternatives) without charging you more, and tell you about anything on the order sheet (this item is replaced, this item is short dated, etc...) and put them into marked 'check this before accepting' bags.
I was intially sceptical like you, but I've found the quality is the same as if I'd picked it out myself. Obviously, there is no guarentee that is how another company would do it, but it does seem to be accepted here as the norm.
It's really hit or miss to be honest. I was skeptical when I first started using Ocado myself. I love to thump watermelons and feel the skin of honeydews for example to pick out the nice ripe ones. Quality is inconsistent - sometimes I get great choices, sometimes poor. I've learned now to buy certain things in person only. That said, this is only maybe 2-3 things a week which I can easily do at a fruitmonger or market. Certainly the convenience of the online shopping wins for me - carrying one bag home from the fruit stall is easier than 6 bags from Tesco.
I've been ordering fresh groceries online for a few months now (Netherlands) and while I was concerned about that as well, this hasn't shown to be a problem yet. Vegetables and fruit are very well packaged, in big styrofoam containers that have plenty of room in them, and I've never seen them stack vegetables that can't handle it (i.e., putting some lettuce on top of a cabbage isn't going to damage the cabbage).
Obviously there will be variance between suppliers, but my experience has been good and contrary to what I expected.
Customer retention is a key concern for their bottom line, so they're incentivized to not piss off a customer by sending overripe or wilting produce. In the case of partnering with local stores, you'll end up with clashing incentives (the delivery service wants you to get the shiny apple, the store sees you as a way to pawn off the bruised one). But the delivery service can still apply pressure on the retailer, as well as instructing their drivers to do a quality control check before accepting the delivery.
I wonder if some smart data analysis can give a score about how picky a customer is likely to be (do they often order 'obscure' vegetables, do they only order stuff that is in season, do they search for a lot of food and cooking related terms). Highly picky shoppers will get the good stuff, and those likely not to notice or complain will get the crap stuff.
At Hubbub we've never seen that happen. We're working with independent shops who know they're part of a marketplace where they're competing against other grocers, and if they try to palm off their rotting stock on a customer we'll refund it at their expense, and the customer likely won't buy from them again.
The quality of produce is not a binary thing though. When you go to the supermarket, there's the rotting produce, there's the premium produce, but then there's also the mediocre produce, which probably takes up 80% of the stock of produce.
Now, someone who cares about the quality of their bananas, or specifically wants bananas of a certain ripeness (maybe they want overripe bananas for a cake, or slightly unripe bananas for cooking), can go to a physical store and select the bananas they want. A picker at a warehouse isn't going to do that, I'm sure they'll avoid picking stock that's past it, but that doesn't mean they'll grab the best, or what you want.
At least in our case customers can request the bananas how they want, and the pickers will get exactly what they want. We've had people request and get "an avocado that will be ripe on Wednesday".
This is clearly a key concern for a lot of people, judging from the advertising in the UK for delivery services. Just about all of them emphasise how careful they are when picking.
FWIW, I'm also rather picky, and whilst I don't always get groceries delivered, I can't recall ever having a problem with sub-standard goods being picked.
That's a big reason I'm not excited about these services. But if you're buying a lot of processed food - and a lot of grocery carts in the US are mostly processed food - then it's not a big deal.
Do the economics of food delivery change drastically when 1) there is no driver, 2) the car runs on electricity? Maybe this is their way to establish a food delivery brand ahead of what they to believe to be the inevitable driverless vehicle era.
I'm pretty happy with the free and near real-time Amazon Now. Amazon Fresh is one of the rare Amazon failures. Well, it's still around, but at $299/year (well, minus $99 for Prime) plus tips for delivery - it's expensive! I got the Express trial and was happy that I'll be able to save trips to Costco, but, no, I won't as they possibly offer less than 1% of Costco's inventory, so, it's a totally useless service for me as I still need to visit the wholesaler.
The UK has a very competitive market for grocery delivery. It's existed using the Internet since 1997 - it's one of the first services I remember people being attracted to.
Everything is available, and after almost 20 years they've obviously worked out how to deliver what people want (fresh / unripe / whatever).
Delivery is still £1-5 or so, depending on time, and the supermarkets often have a minimum spend (or additional charge). £40 for Tesco.
If shopping every week, that's potentially less than Amazon, and with the full range, so perhaps there's room for competition.
The rumour a few weeks ago that Amazon was about to buy Ocado was pretty interesting. While almost every supermarket chain in the UK offers delivery, Ocado is the only one that is online-only without physical stores. They have a big infrastructure with warehouses around the country, but most importantly they have excellent software, which they white label for other companies. As well as jumping into the UK grocery delivery market (which is the most mature in the world), they'd also get their hands on the technology to take it to other countries.
Now that Amazon bought the WebVan brand, Google starts Express fresh-grocery delivery too, and we read about crazy Giphy $300mio evaluation. Btw who owns the Pets.com brand these days?
I still have a couple of WebVan's plastic bins. They went out of business soon after my order was delivered. They're still in quite good condition despite the abuse I've heaped on them. Will Google want them back?!
Google delivering groceries. Wish Steve Jobs was around to poke fun at that one. How does that leverage any advantage Google has or add to their profitability?
What does Google see that WebVan did not and Peapod and the USPS do not? Groceries tend to be low margin and relatively heavy goods.
[And, it takes me half hour to an hour to do my shopping, and that's knowing what I want to buy in advance, knowing the store. There is not much room for profit in this scenario, except charging value added rather than flat fee. I mean they are partnering with local grocers rather than automating food stores]
If anyone has the reach and network it'd be the USPS (although their fleet would have to be modified to carry perishable goods).
Seriously, they've been hemorrhaging money, why doesn't or hasn't the USPS looked into the growing same-day delivery market (beside their Amazon deals). Are their unions holding them back, because if they are, it's shortsighted. They should have logistics down to a science.
That would make sense if the grocery bags were waiting to be picked up for delivery without that adding any additional cost (as I mentioned, it takes me (quite some) time to do my own shopping, imagine shopping from a list in a store you might be unfamiliar with)
Let's say $300 shopping list (and cost of transport is 0):
Grocery store profit: $6.00
Time to shop for $300 of groceries: 40 mins.
Dollars/hour/40mins: ?
Where is the profit here? $10/mo subscription does not cover it. Ads, coupons?
That's not how Google Express works. Do you live in the bay area? You have to see the ops yourself.
Membership is $95/yr, $35 min, $3-5 for rush delivery.
They get the same data feed as anyone else, just check Curbside's website and see how their Target product listings are the exact same items and same pricing.
Most of the available items are only pantry stuff, cans, jars, boxes. You can splurge but it's gonna be rare to hit $300 buying $2 to $8 items to get there.
Costco has the ball most together. They've carved out a section just for Express deliveries. Boxes, tapes, most of the common items are already stocked. Costco employees are assigned to Express duty, pick, pack, and leave it for the Express drivers to pick up. Easy peazy.
Local delivery is commoditizing to about $5 per delivery, Postmates just dropped to about $5, DoorDash is about $5, whoever's dispatch makes their vig of a few percents just by matching demand to supply. Google's strategy is just dominating by putting the big capital investments into the fleet whereas the other guys have to rely on iffy relationships with 1099 contractors.
How is this different from Webvan?
Lots and lots. The unit economics are there.
Will this work?
Yes. But only when you have the money to wait and last it out and have an automated car trick up your sleeve.
- Less stores needed, just distribution centers. You could have your suppliers deliver in shipping containers and have your order picking robots (in a few years) pick straight from the containers. All you'd need is a big-ass warehouse with loading docks and a few cranes.
- Customer targeting and upselling. I'd spend more of my money in a store that would know my food preferences, family makeup, habits and that would advise me on what to cook. I'd even pay for a service that would let me pick, say on Sunday, what to eat for the rest of the week (guided by good suggestion algos of course) and would then deliver the groceries for that in one or more deliveries over the week. But even without paying for that service, it would let a supermarket get near 100% of a certain customer's total spending on groceries.
USPS is not allowed by congress to compete in those markets. Their charter and monopoly is quite narrow. It is definitely not the unions, a lot of republicans in congress want to see it die (e.g. By requiring very aggressive leech ding of pensions).
Another issue that's not been mentioned is Google's concerns over ad revenue. Consumers are increasingly searching directly in Amazon versus in Google for product purchases, which is a significant worry to the Google ad revenue model. By participating more directly in the shopping experience Google can hope to stem some of these traffic losses. Doing it in groceries, which is such a regular purchase, they might believe they can change habits more quickly. And at least charging margins for convenience versus pure grocery retail, which as others have mentioned, are brutal.
In Kitchener-Waterloo there's two different online grocery stores, Grocery Gateway (which has been operating since the '90s) and Grocera (which is very new). I've been using the former for a long time. I checked out the latter (which is backed by Google) and the markup was too high on the items I checked over Grocery Gateway. Tofu was $4.99 vs. $2.49 and soy milk was over a dollar more (I have health-related dietary restrictions). Grocery Gateway is operated by a store chain, Grocera picks them up from local stores.
Services which do this by sending people to retail stores suffer from out-of-stock problems. They don't have inventory information. So you tend to get orders with missing items. Amazon, which has its own automated warehouses, knows what it has in stock when it accepts the order, and can tell you at ordering time what's out of stock.
Google is doing an Uber-like job here - they just run the shopping cart program. Others do all the work.
I still own a Webvan share certificate to remind me of stupid things I did during the last bubble. Anyway... Does Google Express have an API? I'd be great if I could a) automate my repeat orders and b) be a bit opportunistic for non-perishable promo items. That's what I do in store - I buy either Evian or San Pelegrino depending in promos.
How does this "organize the world’s information and make it universally accessible and useful"?
I'll be disappointed if there isn't some ulterior motive at play. Some in this thread have pointed out they stand the collect more customer information or they may potentially have a use-case for drones.
Subscription for perishables i.e bread, meat, eggs, fruits and veggies - You shouldn't actually buy things you buy every week, you should just get them shipped!
Grocery delivery is extremely important for people with disabilities, people without cars, and people who are otherwise not able to burn an hour or two going to buy groceries. It's not just something for rich programmers.
When I order groceries from Safeway the extra fee on top is pretty small and their employee brings it up on a cart and carries it all inside. This means that it's much easier to buy a bunch of groceries in bulk, which means less trips to the grocery store and less orders, helping make the fee amortize out a bit more.
Safeway's service actually offers more fresh stuff than I can find if I visit a local store. The Safeway closest to me is space-constrained (downtown San Jose) so in practice they only stock around half of the things I can get via the delivery service.
Attaching "lifestyle" as you have used it imply that it is a choice for Aspergers. For many, this is simply not the case. As a dad with two Asperger sons, somedays I wished that it was a choice and can be consciously switched off.
The joke wasn't on people with Asperger's. It was on people who don't, but prefer to reduce interaction with others (which they often deem inferior, maybe?) and who decided to appropriate the Asperger label. I hoped the sarcasm would come through. Sorry.
This should not be a Google product, they have Google Ventures to support somebody else to do it. Google has a trillion of rotting product they keep pushing out and then killing.
Problem with any of these Google side projects is that they come in with a huge cash reserve so they are not playing on a level field with other companies that would like to do something similar. Then, when they leave, it leaves us with a barren ecosystem and takes time for other players to come in. My favourite example is Google Reader which practically killed RSS services for years.
This is an added feature for Google Express, which is an established Google offering.
Google Express was an outgrowth of Google Shopping (originally, it was "Google Shopping Express"), which was an established Google offering.
Google Shopping was an outgrowth of Google Search, which is the most core Google offering there is.
Why, again, should this not be a Google product?
> Problem with any of these Google side projects is that they come in with a huge cash reserve so they are not playing on a level field with other companies that would like to do something similar.
Um. Too bad? (And, really, that's not all that different to VC backed startups position. So, if your complaint is that VC backed startups shouldn't be allowed to compete with, e.g., bootstrapped small businesses, well, at least that would consistently applying the principal that is implied in your complaint. But I still think that's a bit silly, even then.)
VC backed companies usually have one offering and they have a huge motivation to succeed. Google's reaction to a failed project is a simple "meh". I would compare this more to a government subsidised production that would obliterate competition. And no competition = bad thing. This is why we have anti-trust laws.
I think it isn't cool considering even that. It certainly feels like the holding company strategy was done to embark on more traditional run-of-the-mill pursuits, while avoiding obvious questions like how on Earth does it make any sense for Google to do this?!
Pretty crazy. I was unsurprised they'd use Costco and Whole Foods while targeting two areas that already pay too much for stuff. Love to see them try that in my area where people go for whatever costs the least most of the time. Lots of true premium services have gone out of business with what's left being those that approximate premium with right compromises to keep cost down. That's probably true across most of the States.
The biggest flaw in all this is what these companies keep ignoring: impulse buying. The big stores put what you need as far away from you as possible. Then, you have to exert physical effort to get to good deals while seeing, at arms reach, all kinds of profitable items. This is a hard to quantify, but big, chunk of grocery revenues. So, these companies doing online deliveries or personal shoppers have to make more money than the competition while leaving out one of most powerful techniques for making money.
Always operating at a disadvantage, there. So, we're not going to see such things proliferate. Those with the most capital, negotiating power with manufacturers, and proven techniques win here. Almost always.