Refusing to burn money, fresh distribution relies on smartphones to rise again

In the last round of the dotcom bust, George Shahin (George Shaheen) created one of the biggest bubbles. But 15 years later, he once again became a faithful believer.

Sahin has served as chief executive of the online grocery retailer Webvan. As a star Internet company at the end of last century, Webvan "burned" more than 800 million dollars in less than three years. The company first chose to go public and filed a bankruptcy petition for protection after spending all the money it had raised. Eventually, Webvan terminated operations.

Now, another group is betting on placing eggs, cold cuts and milk in front of consumers ' doorstep. Sahin, who has retired, said: "This is a service where someone can come up with a solution." No one really wants to drive to the store and then buy necessities in the grocery store. This can save time for people. ”

Many are now hopeful about San Francisco's innovation company, Instacart. If only soaring revenue figures and valuations, Instacart is not hard to recall Webvan.

The Instacart, which was set up only two years ago, is expected to announce a new round of funding in Tuesday to raise 220 million dollars from venture capitalists. The Instacart's valuation reached about $2 billion trillion, much higher than the company's valuation of $400 million last June, sources said. Instacart said the company's 2014 revenue is expected to break 100 million dollars, about 10 times times a year ago. But even so, Instacart still failed to make a profit.

Webvan grew faster than Instacart. In the second year of 2000, when Webvan was in operation, the company's revenues had reached $178.5 million trillion. Shortly after the initial public offering in November 1999, Webvan's market value swelled to $8 billion trillion.

But Instacart and the webvan of that year have very big difference. Driven by the rise of smartphones, online businesses have undergone an entire generation of evolution. And like many online companies today, Instacart has struggled to cut spending and control risk.

Sahin said Webvan's net loss in 2000 amounted to $453.3 million trillion, which was mainly associated with the company's large investment in a refrigerated storage centre, which was then transported to a large lorry via a transport belt. Webvan to invest 30 million dollars to 40 million dollars for each storage center.

Instacart took a completely different approach. The company took advantage of the health food supermarket Whole Foods or the retail giant Safeway existing retail outlets and dispatched couriers to deliver the goods within 1 hours. These couriers are independent contractors, meaning that Instacart does not need to provide them with remuneration or benefits. Sequoia Capital of venture capital company has invested in both Instacart and Webvan. Michael Moritz, the company's partner, said Instacart the practice would allow the company to avoid Webvan "ruinous cost structures" (Michael Moritz).

Instacart a delivery fee of USD 3.99 to 5.99 U.S. dollars per delivery, and collect revenue by repackaging and raising the price of the product. For example, the 1-gallon Safeway brand's organic milk is priced at $5.99 in Safeway retail outlets, but Instacart is priced at $7.39. Instacart usually pays a minimum of 10 dollars per delivery to the courier, and then pays for the size and speed of the order. Couriers said they would also accept consumer spending, which would also boost their income.

Instacart also does not have his own team-both courier and contract workers, using their own cars and buying their own petrol. In addition, unlike Webvan or physical retail outlets, Instacart does not need to buy goods in advance.

The source said Instacart has not yet made a profit, and that not all of the company's orders will be able to bring profits to the company. The Wall Street Journal analyses the price of 15 ordinary items, such as frozen peas, milk, oatmeal and fresh fruit, from a retail store in Safeway, San Francisco, at about $68. If consumers buy the same items from Instacart, Instacart can earn about 1.50 dollars in profits. If orders are merely reduced by 1 cans of 28 ounces

Peanut butter, Instacart can only Bao. If you reduce one item, the Instacart will have a deficit.

As we all know, grocery business has long been a small profits and quick turnover type. Food Marketing Cato, a trade organization, expects retail sales in the US to be as high as $620 billion trillion in 2013, but only a meager 1.3% of the net profit.

But the data did not prevent venture capitalists like Moritz from trying again. Moritz, who has entered the Instacart board, said, "We have once again decided to invest in the grocery sector, drawing on the experience we have learned from Webvan." Our main concern now is whether there is a convenient and credible way to order groceries from home and whether the demand will expand further. ”

It is not instacart a company that competes in the grocery field. Amazon, fresh electricity trader fresh Direct, organic food Express eggs all hope to be able to make a difference in this area, there is no mention of Wal-Mart, Safeway and other traditional retail giants. Google's recent grocery delivery service in the US Bay Area will make the company a Instacart competitor. At present, in San Francisco alone, there are at least 6 companies offering similar services.

Sahin said the biggest bottleneck at the time was the limited speed of the Webvan, which was much slower than today's broadband connection. Today, consumers use Instacart applications to place orders anytime, anywhere, and courier can navigate to the nearest consumer home by using GPS. All of this, Sahin says, makes today's grocery online business more appealing than the heyday of Webvan.

Because Instacart chose to make alliances with grocery retailers, and the latter saw Instacart as a way to bring new customers to their own, Instacart did not need to worry about the day-to-day operational risks such as the tomato spoilage. But this over-reliance on grocery retailers is also one of the biggest risk factors for Instacart. Appa Mehta Apoorva Mehta, co-founder and chief executive of Instacart, said Instacart's secret weapon was the company's dispatch software and its exclusive agreement with grocery retailers.

Fairway, a grocery chain in the New York region, says the company has added a lot of customers after 8 months of allied with Instacart. Jackie Donovan, vice president of Fairway Marketing, said, "Our goal is to increase sales by Jackie Donovan shoppers in our stores." Instacart us that it can increase sales by 50% for each retail store. We have seen this. ”

But not everyone is bullish on Instacart. When the company tried to ally Juno Joe in 2013 in an expansion in Chicago, the grocery store rejected Instacart's proposals for cooperation. As of now, Instacart still does not sell Juno Joe's merchandise.

Today, Instacart has been operating in 15 big cities in the United States, a lot more than Webvan in its heyday. Like the Webvan of the year, Instacart's ambitions are not confined to the grocery business. Mehta, the company's chief executive, said Instacart's business would be extended to new categories of goods on the premise of guaranteeing a 1-hour courier. This also lets Instacart and Postmates, Wunwun and so on 1 hour Express company launches more direct confrontation. Mehta said in this regard, express grocery and other goods no difference. "Although the groceries are more than enough for us, why are we so short-sighted?" ”