This company does the little things right, and people notice. I think faster internet + smartphones are necessary but not sufficient in explaining Instacart's success.
I live in a place with an entrance not visible from the street. The first time I ordered, I directed the shopper over the phone. Every subsequent shopper has found the entrance without a problem. I assume the shoppers share accurate notes. Literally every other delivery I get requires a phone call and directions. These little things make a huge difference, and are where similar companies with the same potential technology fall short.
Congrats to the Instacart team! I love what they are doing. Their app has a great user interface and the service is fast and easy to use.
It's definitely interesting to see that the world is finally ready for something like this, because Webvan (I know it's brought up a lot) didn't do so hot back in the day. We obviously have the technology now that we lacked 10 years ago to make something like this a major success.
Unlike Webvan, they rely on contract workers. No need to operate a large fleet of delivery vehicles/drivers, or sink money in warehouse operations. Internet penetration has doubled (~45% then vs almost 90% of US population now). Of course, smartphones everywhere are a big enabler as well.
Is the difference technological or cultural? In other words, what different technology do we have now that would have enabled Webvan to succeed? To me it seems that the most marked difference is the consumer culture and comfort with online buying.
Obviously hard to tell, but you can extrapolate a bit.
At $100mm in revenue, and an assumed $60 order price, you've got 1.6mm orders. Assuming 25% of people pay for faster delivery, you've got gross revenue per order of $4.50, or gross revenue of $7.2mm. If Instavart takes a 30% share (similar-ish to Uber and iTunes), you're looking at $2.2mmin revenue after paying contractors.
So that would leave you with 2.2% of sales as your margin after contractors. This obviously changes if they mark up the groceries or if the assertions are different.
Out of interest, a 15 P/E on 2bb would correspond to a 60x grow in their market (ish). They currently represent about 100mm of Whole Foods 15bb take, or about 0.67%. A 60x increase would take them to managing 40% of Whole Foods orders, given no expansion into other grocery chains.
This is a lot of hand-waving, so please take it with a grain of salt.
They must be including the cost of the groceries in as revenue. However, there's a good question as to whether or not they are allowed to include this as revenue or not, similar to Groupon. Revenue recognition is going to be a tricky one for them, since they are clearly distinguishing themselves as the delivery agent for stores like Whole Foods, Safeway, etc.
This, and the question of whether or not their workers are actually contractors or employees are the two biggest issues that I would be curious about. If history has any bearing, I think Instacart, Uber, etc will face the same outcome that Microsoft did with their "contract" workers, ie. they will be deemed employees and will have to pay up.
As someone moving from the Central Valley in Ca to Portland in the next few months...this is exciting to hear, I've been pretty excited to get to use this service.
Instacart is still fairly expensive here in Portland. If you're living in the city proper you should have a grocery store located < 5 blocks from where you live. Just in the pearl I have walking access to Safeway, whole foods and food front.
[+] [-] abuehrle|11 years ago|reply
I live in a place with an entrance not visible from the street. The first time I ordered, I directed the shopper over the phone. Every subsequent shopper has found the entrance without a problem. I assume the shoppers share accurate notes. Literally every other delivery I get requires a phone call and directions. These little things make a huge difference, and are where similar companies with the same potential technology fall short.
Congrats to the team. Well deserved.
[+] [-] xasos|11 years ago|reply
It's definitely interesting to see that the world is finally ready for something like this, because Webvan (I know it's brought up a lot) didn't do so hot back in the day. We obviously have the technology now that we lacked 10 years ago to make something like this a major success.
[+] [-] mashgin|11 years ago|reply
[+] [-] carbocation|11 years ago|reply
[+] [-] bbcbasic|11 years ago|reply
[+] [-] brandoncarl|11 years ago|reply
At $100mm in revenue, and an assumed $60 order price, you've got 1.6mm orders. Assuming 25% of people pay for faster delivery, you've got gross revenue per order of $4.50, or gross revenue of $7.2mm. If Instavart takes a 30% share (similar-ish to Uber and iTunes), you're looking at $2.2mmin revenue after paying contractors.
So that would leave you with 2.2% of sales as your margin after contractors. This obviously changes if they mark up the groceries or if the assertions are different.
Out of interest, a 15 P/E on 2bb would correspond to a 60x grow in their market (ish). They currently represent about 100mm of Whole Foods 15bb take, or about 0.67%. A 60x increase would take them to managing 40% of Whole Foods orders, given no expansion into other grocery chains.
This is a lot of hand-waving, so please take it with a grain of salt.
[+] [-] steven2012|11 years ago|reply
This, and the question of whether or not their workers are actually contractors or employees are the two biggest issues that I would be curious about. If history has any bearing, I think Instacart, Uber, etc will face the same outcome that Microsoft did with their "contract" workers, ie. they will be deemed employees and will have to pay up.
[+] [-] Implicated|11 years ago|reply
[+] [-] ryanSrich|11 years ago|reply
If you're in the suburbs it might be worth it.
[+] [-] grandalf|11 years ago|reply
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] queryly|11 years ago|reply