The same-day grocery delivery business has been incredibly difficult to perfect. Several businesses have tried, and nearly all have failed – certainly none have been able to gain mainstream success in the American market, let alone the rest of the world.
Amazon is attempting to recapture the potential in this market through its relatively new venture, Amazon Fresh, which is starting in New York this week.
According to Re/Code, the service is starting out in one neighbourhood and then will expand elsewhere, although specific plans haven’t been detailed yet. Amazon Fresh already operates in other cities including Seattle, Los Angeles and San Francisco.
Grocery delivery is simply an extension of the logistics problems facing all businesses – and one that has been given a significant amount of attention and investment, at least in Australia. The creation of parcel lockers through Australia Post and other third-parties is a symptom of this issue, and overflowing parcel centres have been well-documented.
In the United States, Amazon isn’t the only business to have expanded into same-day delivery – eBay has done the same with its courier business, eBay Now, which has also expanded into multiple cities.
As this piece on The Verge points out, the main problem limiting these businesses is geography, which obviously limits scale. Services such as those offered by delivery businesses, including smaller efforts such as Postmates and Zipments, may not make it to rural areas as quickly as residents in those areas would hope.
FreshDirect, another delivery business, has made a name for itself in New York, providing Amazon with immediate competition.
Groceries are an even more challenging prospect, given the limited amount of time with which they can be delivered. Amazon is hoping to get around this with using local warehouses, along with partnerships with local restaurants.
What should be expected of the new wave of grocery businesses, then? Are they due for the same fate as the early businesses, which suffered from a lack of scalability – alongside a collective disinterest in tech-based companies? Or has the Silicon Valley resurgence in logistics technology allowed delivery businesses to flourish?
The answer, as always, is likely somewhere in middle. The past decade since the dot-com boom has allowed Amazon and eBay to grow to massive scale, allowing the introduction of such services as a loss leader. The growth of same-day delivery will no doubt expand to other products. For smaller businesses, however, the challenge will be in matching the logistics and warehousing capabilities of larger retailers – a challenge that, given the huge advances in the relevant tech, may not be as difficult as it seems. The same-day delivery market looks set to have more entrants for some time to come.