[karamanolev]

I work in this exact space (online grocery retailer in Europe). We're profitable and one of the few companies to be so in the sector - many online divisions are losing money and being bankrolled by the parent company with physical stores. Alternatively, burning VC money.

The thing that's wrong with Ocado's technology is that it's ridiculously expensive and tailored for huge FC's (fulfillment centers). The problem with that is that it needs to serve a large population base to be effective and that's hard - in dense metros, the driving times are much longer despite smaller distances. In sparse metros, the distances are just too long. In our experience, the optimal FC size is 5-10K orders/day, maybe up to 20K/day in certain cases, but the core technology should certainly scale down profitably to 3-5K. Ocado solves for scaling up, what needs to be solved is actually scaling down.

There are a lot of logistical challenges outside the FC, especially last mile and you need to see the system as a whole, not just optimize one part to the detriment of all others.

[jon-wood]

I think there's a space for something in between Ocado and Uber Eats, in the 2010s I worked for a startup where you could book an Ocado style delivery slot for the next day from a bunch of different butchers, bakers, etc and then we'd send a van round to collect from all of them and deliver it to you. Annoyingly they ran out of money just a little bit too soon, I'm pretty sure if they'd managed to hold out until 2020 they'd have seen a huge increase in sales as everyone fully got on board with online delivery and been laughing.

I think the big win with that model vs Ocado is that scaling down is fine, you work with whatever shops are in the area and don't need to deal with building fulfilment centres. Maybe you need a car park somewhere to put the vans overnight. Scaling up is a case of moving into different areas, or onboarding new shops. Absolutely agreed that last mile is a nightmare but we mostly had it down I think, the biggest pain there was that we were relying on a bunch of third parties to pack an order, and if any of them got something wrong we ended up with an unhappy customer on the phone and needing to deal with it.

[vector_spaces]

I worked in this business for over 15 years on the tech and business sides and I can say that the traditional VC-funded startup regime is fundamentally incompatible with the basic realities of the food industry. What is sort of funny about it is that in many areas there are local companies that have been around for many years doing this fantastically. As other commenters pointed out, this is essentially the milkman model.

There are a number of extremely difficult problems that are definitionally insurmountable on the timescales that VC operates -- paramount among them being the establishment of trust and mutualistic relationships with your vendors/stores, customers, and employees.

You are right that there is such a space, it just won't happen in the context of a startup taking VC cash.

[mikkupikku]

VC reinvents the milk man (who used to deliver much more than just milk.)

[no_wizard]

>the biggest pain there was that we were relying on a bunch of third parties to pack an order, and if any of them got something wrong we ended up with an unhappy customer on the phone and needing to deal with it.

Why not have drivers verify the order with the store? Like have the store folks walk through the pick ups. It might be slower up front, but it would save lots of time and money for everyone in the long run. One of those slow is smooth and smooth is fast situations. Alternatively, the drivers should have a book they could match pics to items perhaps

The other thing I wonder if it would be possible, would be to reduce revenue share for stores that routinely had issues with accuracy, but that means you'd need leverage, and you simply may not have it.

[karamanolev]

FC's can have very efficient fundamentals if done right. Sharing shops with direct customers is very problematic - while appealing, the scaling just doen't work for them very well. They're also subject to a lot of variability due to contention with said customers.

[simgt]

Where are you operating? I live in a dense European city and I don't know a single person who orders groceries online. Smallish shops with bike racks in front of the door are simply too convenient, seems hard to beat. Next few days shopping can easily be done in 15mn on the way back home.

[roryirvine]

I live in inner London. I have multiple grocery shops around me - within 10 minutes' walk I have a fishmonger, two butchers, two delicatessens, three bakeries, three greengrocers, four mid-sized organic/international grocers, six patisseries, a large Lidl, and a very large Sainsbury's supermarket.

I visit those local shops once or twice almost every day to pick up fresh bits and pieces - but I still get bulky or heavy stuff delivered by Ocado (toilet roll, washing powder, everyday wine, that sort of thing).

[crazygringo]

I find online grocery shopping shines for heavy and bulky things that are a huge pain to schlep home otherwise, especially stuff that lasts a while.

All juices/waters/beers/wines, paper towels, lots of oranges/grapefruits, cleaning products like bleach/detergent, etc. When they carry them up to your fourth-floor door it's just so much easier.

The smallish shops are good for stuff you can then easily carry in a bag by hand -- meat, veg, cheese, fresh bread.

[MEMORYC_RRUPTED]

I live in a dense European city and all I ever do is order groceries online. I can order larger amounts in one go, so, batch order once every two weeks or so.

Instead of having to fight with a machine to give back my empty cans/plastic bottles, I can just give the delivery person a crate and get my money back.

Doesn't capture all my groceries, I love biking or walking to a smaller shop on occasion, or if I have a specific craving, but 90% of my groceries is delivery.

[wiether]

I have this conversation regularly with friends, family, coworkers...

And I've not yet been able to establish the right criteria to guess how a person is buying their groceries.

Location, age, income, number of people in the household, physical ability...

A single guy living in the city center with good income? Takes his car to go in big supermarket outside the city.

A family with four kids living in the suburbs? Goes everyday in the small shops.

[TechnicalVault]

In the London suburbs you see the grocery delivery vans out and about all day every day. It very much depends on the neighbourhood though, mostly the slightly posh mums or elderly ones ordering.

[chickory3]

> I live in a dense European city and I don't know a single person who orders groceries online.

I live in the U.S. and have almost never used a service like Instacart. Also, when I see the item I’m trying to order in Amazon is fulfilled by Whole Foods, I typically don’t buy it, because of the additional cost.

I’d rather suffer a small amount of inconvenience to save several dollars on groceries, and often it may mean that I may need to order a different brand to pick up a similar item at a local store.

However, I’ll gladly pay a little additional money for Amazon for many other items, because it’s convenient, shipping is included in Prime, and because I can get what I want.

I make the majority of my retail purchases at a supermarket, followed by Amazon online (Prime only), then a very small percentage in-person at Target, Walmart, or a hardware/home supplies store or some random online retailer.

The best I can do to “shop local” is to use a supermarket chain; there is no mom-and-pop to support that isn’t a chain unless it’s a restaurant. I don’t pretend that this is actually “shopping locally”.

I’ve only participated in a boycott once or twice, because there is typically a practical reason for shopping when and where I do- either I need to shop then because I don’t get out much, or there’s a sale with actually lower prices, rather than the frequent “increase the price just to cut it to get you to order more” thing, which I also get sucked into, because I don’t have time to price shop, unless it’s with camelcamelcamel for Amazon.

[dottjt]

Maybe it's different in Europe, but at least in Australia you end up paying more at smaller shops, so I tend to avoid them. Is this the case in Europe as well?

[tpm]

I live in a not-so-dense European city (Bratislava) and several our neighbours here in the extended city centre order groceries online, although we have a small shop within 100m and supermarkets within 2km of driving. It's very convenient for parents staying at home, for example.

[rsynnott]

I live literally five minutes walk from a decently sized supermarket, ten minutes from another, and ten minutes on the bus from a great big one. One of my neighbours still gets supermarket delivery. There seems to be some sort of market for it, anyway...

[Mars008]

There are old, disabled, sick who rather by online than walk. Normally I walk about a mile to grocery store several times a week. But when sick Amazon fresh or whole food is the best price/quality/time option.

[istinetz]

judging by his name, he is perhaps in Sofia. I am also living here, and can confirm that many middle class people order groceries online.

[ekianjo]

> Smallish shops with bike racks in front of the door are simply too convenient

Most people don't live in city centers. Because they are the most expensive places to live in.

[danielbln]

Berlin here, people order from bike delivery grocery stores all the time. Not necessarily to do your weekend shopping, but still.

[PeterStuer]

I've done a few projects in (traditional, not pure ecommerce) retail, and in my experience it is a very low margin business.

This contrasts sharply with being an innovator in the robotics space, which typically is extremely capital intensive with very long ROI trajectories.

[karamanolev]

We're proving that automation can happen in that space profitably if done right - carefully, surgically and with a small, focused team. There's Autostore in that space and that system has a massively different economics than Ocado's solution, despite the similarities.

[nrhrjrjrjtntbt]

Does low margin matter? If you are replacing paid people, arent you trying to replace that cost part of the equation?

[ErroneousBosh]

I see Ocado vans driving up to deliver on the Isle of Skye, which I guess must come from either Fort William or Inverness.

I can't imagine it's especially profitable to deliver a bag of food in a refrigerated van to somewhere that's nearly four hours driving each way.

[rsynnott]

I'd guess that they make a loss on this, but that they accept some losses in exchange for being able to say "we cover the whole country!" This is the case for pretty much any delivery business.

[algo_trader]

> FC size is 5-10K orders/day, maybe up to 20K/day in certain cases, but the core technology should certainly scale down profitably to 3-5K.

deja-vu from the e-scooter business. even with a good product, its just not profitable/scalable enough

[karamanolev]

Ours is profitable enough. And it can scale but covering more area with FC's of a profitable size. Additionally, market penetration of online grocery shopping is growing rapidly and has no reasons (that we see) to stop growing (as a % of all grocery shopping).

[bob1029]

The grocery business has razor thin margins. There is no dry sponge remaining to absorb this kind of massive fixed cost. The business is highly variable.

I think scaling up would be the only way out of this problem. Scaling down only makes it worse.

[karamanolev]

No true for us at least. Well kind of - the scale I'm mentioning is required if you're doing your own tech like we do. We develop all our core tech - the website, the logistics operation automation, the last mile app and scheduling. If we can do that profitably, what do you think will happen a company like our develops a few FC's of similar scale using the same technology?

The margins are thin, but not as razor thin as you might think. The grocery stores have a lot of overhead that we don't. Additionally, people realize that not only is that the case, but they also save from their own costs - just driving to the store is not free, let alone the time you spend, which is massively cut down.

[criddell]

Or you sell every bit of data you collect.

[mikaoj85]

> Ocado solves for scaling up, what needs to be solved is actually scaling down.

This has been solved by Pio (by AutoStore)

[karamanolev]

Autostore is great, but it's a small component for a business to be profitable end-to-end. Maybe 20% of the whole thing.

[didntknowyou]

love ocado purely for the reason it's cheaper than other services. i suspect they are subsidising each order to build long term customer behaviour but it's a gamble when customers can eadily switch as the moat is purely pricing

[Onavo]

So who's their target customer? Are we talking about Amazon/Temu scale here?

[karamanolev]

Seems so, but the economics for groceries don't work like that since you don't ship a slice of meat and a bottle of milk like you ship a 512GB SD card or a smartphone.

[NicoJuicy]

They literally copied their supplier ( autostore ).

Unfortunately, auto.ol shared secrets with them, Ocado abused that in court.

Literally, Fuck Ocado. I wouldn't trust them.

[bitdivision]

Some context: https://archive.ph/Apfdv

Autostore ended up paying Ocado? How did Ocado abuse them?