The following article was written by Chris Walton and originally appeared in Forbes.com on February 14, 2022 and is now available on Omni Talk for free to Omni Talk subscribers.
Instant delivery is everyone’s favorite punching bag of late, especially ever since the WSJ reported recently that losses amongst the early startups within the space are continuing to “mount.”
But of course they are. That is the whole point. To expect anything else is ludicrous.
Instant delivery or ultra-fast delivery, as some like to call it, is the idea that consumers can order goods, especially convenience-based items, for delivery quickly and oftentimes in as little as 15 minutes or less. It is a concept built on the universal truth of speed – the idea that, if given the option, people will always choose to get something as quickly as possible rather than to wait for it.
Not surprisingly then, getting the economics to work on deliveries of that speed is incredibly complicated, so it is easy to see why so many people are skeptical and willing to use the instant delivery craze as their favorite new pundit punching bag on social media.
However, it isn’t the year 2000 anymore, Toto, and this new batch of startups isn’t Kozmo.com, either. There are a number of factors that differentiate this current batch of startups from the early ancestors of 20 some years ago.
#1 – The VCs Understand The Game Better This Time Around
The WSJ reported that investors have put more than $5.5 billion since 2020 into the six main instant delivery startups vying for New York City – a list which includes the likes of Gopuff, Getir, Jokr, Buyk, and others.
If that sounds like an outrageous sum, that’s because it is.
And it should be.
Because the reward payoff for dominating consumer mindshare at scale for quick delivery stands to be enormous. For example, the current mindshare leader in the U.S. for quick delivery is Amazon (albeit, for just a two-day expectation, let alone 15 minutes or less), and Amazon’s market cap currently sits at just over $1.6 trillion dollars.
Should any of these companies gain a sliver of that pie or, dare it be said, disintermediate Amazon at its own game, the resulting gain will more than pay off the already sizable financial outlays mentioned above.
The VCs understand this game, which is why they likely will have the intestinal fortitude this time around to stay in the game for the long haul and to prop up whomever needs the help until the right level of scale efficiency is reached.
#2 – The World Is Now Mobile First
Perhaps the biggest difference going in the favor of today’s instant delivery startups from the failed experiments at the early part of this century is that commerce overall is now mobile first.
Mobile-led commerce opens up entirely new streams of revenue for the delivery providers than ever existed in the past. It allows them to create powerful retail media advertising networks, which is an idea that Microsoft recently listed as one of the top technology trends to expect in 2022.
The idea behind a retail media network is simple.
It is the idea that retailers can create a one-to-one connection or understanding of their consumers through their digital properties. For example, many of these instant delivery startups connect with their consumers through a mobile application. That experience, by way of that mobile interaction, is 100% unique to the individual, and, as a result, the instant delivery players can personalize that experience with advertising to the in-the-moment needs of what their customers want most (and get paid by the brands they carry to do so).
The idea and the technology to do it at scale did not exist 20 years ago, but it does today.
One last point of important reference, too: Amazon just announced that its own retail media network generates just north of $31 billion per year.
Again, just a sliver of that revenue is meaningful.
#3 – Micro Level Warehouse Automation Is A Thing Now
The other ace up the sleeve for the delivery companies now, as opposed to two decades ago, is that the field of micro-warehousing has advanced rapidly.
Flashback to the year 2000, and the phrase “microfulfillment center” sounded more like something out of an Arnold Schwarzenegger movie than as something that would one day be at the forefront of retail innovation.
Every other week, it feels like some retailer is opening up a microwarehouse or a “dark store,” the idea behind which is to use the latest and greatest in automation and robotics to pick and pack orders and to place such warehouses near where consumers live so retailers can save money on last-mile delivery.
Such microwarehouses can exist on their own or be colocated within stores themselves, or, as in the case of Gopuff’s recently announced one in San Francisco, they could also potentially be turned into fully functioning stores that act more like a huge vending machine than as a traditional retail shopping experience.
After all, the word “store” is really just a fancy word for a warehouse anyway, and the reason that last statement is important is because it means that innovation is now creeping in on the edges of how retail has been traditionally done, and, thus, the instant delivery guys now have far more bullets in their collective chambers when it comes to finding the right economies of scale within their business models.
The implications of which are important because ultimately the whole idea of instant delivery comes down to psychology. It is hard to argue against wanting things fast, and once one goes through the experience of ordering something as simple as Advil in NYC and getting it delivered in seven minutes, the bar is forever set to that expectation.
The craving to have things delivered that quickly again is now there. Or said another way, the psychological addiction of knowing something can be had quickly becomes so real that phrases, like “Buyk it” or “Gopuff it,” will soon enter the national lexicon and become as synonymous with instant delivery as Uber or Lyft are with ride hailing.
It is hard to think of a world without Uber or Lyft, and, since the mind goes where the mind wants to go, it is therefore foolish to dismiss the instant delivery craze this early in the game with so many new factors on its side.
Speed is not a fad. It is a truth. And, as a result, instant delivery is more of a question of when as opposed to if.