I'm hoping service succeeds also - its an awesome value proposition for consumers. However, I've built a few real-time delivery businesses, and I'm pessimistic.
Real-time operations are costly to manage even though the software has become easier to build. Not being Amazon and not being able to control inventory, and access to that inventory, hurts. However, probably a bigger issue is establishing consumer habit - triggering that need to order at the moment the user wants it. This comes down to establishing a brand (expensive) and also evolving consumer behavior (more expensive). And, these consumers will have to be in the < 200 geographical regions of the US that are dense enough to facilitate < 4hr delivery profitably (its probably less than 50 regions where you could fulfill on 1-hr delivery profitably at any substantial volume).
You could say Uber is a counter example of succeeding in this space. I would argue that they replaced an existing consumer habit with a better one. I don't see that in the same-day delivery space - thus the need for education.
There have been a few generations of these services (Webvan / Kozmo; Licketyship; Ecourier / Shutl; Postmates). Eventually, the cost of tapping into consumer habit vs the small margins of brokering a delivery will create an amazing opportunity. In the meantime, the cost of educating and acquiring users is a big deterrent and if you can build the kind of company innovative enough to solve this problem, its likely you have a prohibitively high opportunity cost.
I think the main problem is sourcing. If sourcing can be done locally, then delivery costs will automatically plummet. Take vegetables for example. The actual cost of growing the vegetables is negligible compared to the transportation costs of delivering and storing to the end consumer. There is also the added cost of storing. Companies are doing a lot to address the transportation and storage but not doing much to address the sourcing issue. I think one startup in NYC is doing some sort of urban warehouse farming to tackle the sourcing issue.
Actually I think this business model works better in big and dense Asian cities. There are a few things going for them:
1. cheaper labor: that drives down delivery costs
2. low credit card penetration is a business advantage: the drivers (or bicycle riders :), can collect COD. That saves card transaction fee too ...
3. buying habit: I know for certain that many Asians still shop groceries daily. This, together with a very busy, growing, new middle class, provides for a big and fast growing market
Not sure if the market is big enough, but there could also be an opportunity for servicing foreigners in those countries fearful of being quoted a 'tourist price'. e.g., you're in Xian and are going hiking at Huashan the next day. You'd like to have a package of supplies (drinks, snacks, packed lunch) delivered in the evening so you're ready to go in the morning. Some of things would be trivial to organise with a walk around the block, but others might be difficult because of the potential language barrier.
Real-time operations are costly to manage even though the software has become easier to build. Not being Amazon and not being able to control inventory, and access to that inventory, hurts. However, probably a bigger issue is establishing consumer habit - triggering that need to order at the moment the user wants it. This comes down to establishing a brand (expensive) and also evolving consumer behavior (more expensive). And, these consumers will have to be in the < 200 geographical regions of the US that are dense enough to facilitate < 4hr delivery profitably (its probably less than 50 regions where you could fulfill on 1-hr delivery profitably at any substantial volume).
You could say Uber is a counter example of succeeding in this space. I would argue that they replaced an existing consumer habit with a better one. I don't see that in the same-day delivery space - thus the need for education.
There have been a few generations of these services (Webvan / Kozmo; Licketyship; Ecourier / Shutl; Postmates). Eventually, the cost of tapping into consumer habit vs the small margins of brokering a delivery will create an amazing opportunity. In the meantime, the cost of educating and acquiring users is a big deterrent and if you can build the kind of company innovative enough to solve this problem, its likely you have a prohibitively high opportunity cost.