What’s the Point of 15-Minute Grocery Delivery?

A number of VC-backed startups promise to provide ultra-fast grocery delivery without raising prices or hurting workers. Whether it’s possible or will make cities better is still up for debate.

Ralf Wenzel seems to hate grocery shopping. He said to Vice that it used to take him an hour or longer to go to the grocery store across the street from his apartment in Tribeca. And don't get him started on Trader Joe's, which he describes as "physically not the nicest way or the most time-efficient way of doing shopping."

To help others like him who despise grocery shopping but need their oat milk immediately, Wenzel this year founded Jokr, a grocery and delivery platform that promises to deliver groceries in 15 minutes or less without any markup or extra fees.?

The service, intended for busy urban professionals and families, is the logical endpoint of a delivery-speed arms race that began 15 years ago when Amazon Prime guaranteed two-day delivery for millions of items. In the years since online grocery-delivery options like Peapod and Instacart have promised even quicker delivery times. Amazon, which owns Whole Foods, promises the delivery of some items in an hour or less. But a crop of new companies like Getir, Gorillas, and many others hope to make that timeframe look antiquated in the near future.?

Everybody talks about sustainability, what about it?

For example, Wenzel says Jokr offers a more sustainable approach to food waste than the current grocery industry’s status quo, and that certain ideas about how to improve the efficiency of grocery delivery will allow the company to thrive.??

Experts wonder if any innovation could allow a company to turn a healthy profit by delivering food in minutes for no additional cost without making life miserable for workers. But the question of what success would mean is almost as profound. What will a city filled with rapid-delivery grocery startups look like? And, for all the costs, what will we really have gained?

These companies operate only in dense urban neighborhoods where a grocery store is rarely more than a 10-minute walk away. The advertisements for rapid delivery companies plastered all over Manhattan, boast of a convenience that borders on the ridiculous. They speak to the dreams of a certain kind of urban dweller who wishes to live amid a cornucopia of instant gratification, where anything from a bunch of bananas to a can of soda to a carton of oat milk can be quickly delivered by an anonymous low-wage worker with the push of a button, and every spontaneous public interaction is an inefficiency to be solved.?

Wenzel's company is hardly the only one making such promises. A fresh crop of startups believe the time-honored tradition of running to the store is ripe for disruption. Outside of New York, there are companies like GoPuff that cater primarily to college towns and offer delivery of convenience-store items in 30 minutes or less, relying on an exploitative gig worker labor model.?

And in the last year and a half, no fewer than five companies have begun offering "ultra-fast" grocery deliveries in various parts of NYC promising to deliver thousands of items in 15 minutes or less. There's Jokr ("Groceries. In the moment."), Buyk ("You’ve suddenly run out of milk and your morning is about to be ruined? Don’t sweat it, Buyk it!"), 1520 ("Just around the corner"), Gorillas ("Faster than you"), and Fridge No More (apparently no slogan needed).?

Even their websites all feel similar, right down to the fact that many of them feel the need to explain, in one form or another, how they could actually be viable businesses. After all, the promise sounds implausible. Every industry these services overlap with—grocery stores, food delivery services, restaurants, couriers, last-mile transportation—are all famously low-margin businesses. How is it that they can combine all the most difficult, least profitable aspects of each of these industries and charge the same prices?

Then again, it's not clear how much the answer really matters for now. Because venture capitalists are footing the bill.?

Gorillas ($3 Billion valuation) has raised $1.3 billion, including a recent $950 million fresh funding round, and is backed by Delivery Hero now.

Flink recently became a unicorn ($2 billion valuation) with a fresh round with Doordash.

Getir's valuation almost tripled to $7.56 billion in its most recent investment round where they raised over $1 billion.

But where investors see opportunity, skeptics see societal deterioration. "I think this idea of everything being delivered makes the city much more transitory, because we're not experiencing the city, we're not getting out," said David King, an urban planning professor at Arizona State who previously taught at Columbia University for eight years.

The skepticism is especially more and more heated when considering the track records of some of the investors involved, particularly in previous efforts to supposedly improve urban life. Ultra-fast delivery emerged much like dockless bike-share, an industry that popped up out of nowhere in 2017 thanks to a few massive venture capital funds. These companies successfully littered sidewalks around the world with haphazardly discarded bicycles, but they failed to make any money. In the final accounting, they were little more than a tremendously efficient operation at turning billions of dollars into literal piles of junk.

And of course, skepticism is everywhere, ride-hailing industry (Uber, Bolt, Lyft) which disrupted public transportation but started the first battles between corporations and gig works, as well as the food delivery industry and the endless talk on who is killing the restaurants and weather couriers should be hired.

Like many of those businesses, these 15-minute delivery companies argue they can help solve real issues. For dockless bike-share, it was carbon-free transportation. For Uber and Lyft, it was eliminating the necessity of car ownership, ending traffic, and reducing emissions. Delivery companies promised to save restaurants, not jeopardize their existence.?

And now, Wenzel says Jokr can combat food waste better and more efficiently than what came before.??

Can ultra-fast grocery companies fight food waste?

Like many of those businesses, these 10/15-minute delivery companies argue they can help solve real issues. For dockless bike-share, it was carbon-free transportation. For Uber and Lyft, it was eliminating the necessity of car ownership, ending traffic, and reducing emissions. Delivery companies promise to save restaurants.?And now, Wenzel says Jokr can combat food waste better and more efficiently than what came before.??

One of the great paradoxes of modern global capitalism is that we make enormous amounts of food, ship it all over the world, keep it fresh and edible throughout the entire process, and sell it for remarkably little; and yet, a shocking amount of it gets thrown out while people go hungry just a few miles away.

A perplexing 40 percent of food in the U.S. goes uneaten, according to?the New York City Food Policy Center at Hunter College. Seventy-two billion pounds of food is wasted in the U.S. before even getting into people's homes, 52 billion pounds of which spoils after the food enters the supply chain. In New York City specifically, where?more than a million New Yorkers?experienced what experts call "food insecurity” in 2019, more than two-thirds of food is still edible when it is thrown out.

This process of shipping food from all over the world just to have a huge proportion of it thrown out is not only a social disaster but also an environmental one. The emissions involved to make, transport, and sell food that’s never eaten is massive. Most of that food ends up in landfills, where it then emits methane, a greenhouse gas?about 25 times more heat-trapping?than carbon dioxide. According to?the Department of Agriculture, municipal landfills packed with this waste are the third-largest source of human-related methane emissions.

For Example for Jokr, Ralf Wenzel says the company has three main initiatives that tie into food waste as well as wasteful supply chains in general, all of which are traditionally "invisible to the customer," as he put it.

The first is to use the company's proprietary data and machine-learning algorithms to only order and stock what customers want and when they want it. (Worth noting: Most major grocery stores and retailers have their own “predictive analytics” departments that break down customer habits and desires.)

The second is to use local brands as much as possible, which means the distance goods have to travel from where they are made to where they’re sold is much shorter.

And the third is that Jokr procures food directly from farms and small businesses whenever possible, not using the wholesalers and middlemen grocery stores use, which Wenzel says reduces the company's carbon footprint. (And yes, the company also uses bikes to deliver and has reusable packaging, though these are of positive but "negligible" impact, as Wenzel put it, compared to the supply chain issues.)

All of these have the added benefit of saving money, which is how Wenzel says Jokr can sell similar—or, in many cases, the same—goods as the local grocery store for about the same price without delivery fees. Wenzel says all of this is driven by the company's technology to predict what people want and when they want it.?It’s a process Wenzel summarized, in perfect Silicon Valley parlance, as "driving relevance."

Wenzel claims the data-based approach to predicting what people want and when they want it is already working. He says the company is "cash flow–positive in some of the first neighborhoods" the company entered "on a food cost basis."

Not everyone is convinced.?

"There's a lot of weak points in the context of delivery" in any industry, but especially food delivery, said King, the Arizona State urban planning professor, who ran a restaurant for a decade prior to his academic career. He said the company's rhetoric is awfully close to the narrative that says various societal problems can be solved with an algorithm and "all the other fancy words that people talk about." Such promises rarely deliver, King added.

The company's entire business model depends on those algorithms working psychological magic. Grocery stores make money by selling you not just the things on your shopping list but all the things that?aren't?on your list—that bag of chocolate chip cookies you can’t resist, or that ready-to-eat rotisserie chicken that sure would make an easier dinner than the recipe you had planned.

Grocery stores already have an efficient way of presenting these items to prospective buyers: shelves. That's?why the milk is in the back of the store. Companies like Jokr need to be no different, a taller task in app form, because apps don't have shelves, so they need algorithms. The algorithm has to be so great that it surfaces those cookies you secretly want, while not presenting you with hundreds of items you'll hate, like grocery shelves do. It's a fine line to walk, and a line that will shift hour by hour, day by day, week by week, month by month, person to person, as Wenzel put it.

Then there's the great financial problem of delivery economics. "There's no natural economies of scale that come with delivery," King said. By comparison, a traditional store is?remarkably efficient because customers do much of the labor for them. Items have to be stocked, but then customers pick them off the shelves, bring them to the register, sometimes even scan and pay and bag on their own, and then bring the items to their home themselves. With an app, you do almost nothing, and that work is transferred to a paid employee.?

"If every item in your shop needs somebody to deliver it to its final consumer, that's just not gonna work," King said. "There's just no way around this being an extraordinarily expensive way to do this."

History seems to back up King’s point. Jokr’s general concept has been tried before. One of the hottest startups during the dot-com era was a business called Kozmo, based in New York City, which promised to deliver products like books, coffee, DVDs, and soft drinks in one hour or less with no delivery fees or surcharges. It raised $250 million but had just $3.5 million in revenue in 1999. In 2000,?an analyst said of the company, "The current business model, selling low-margin goods and delivering them for free, is not viable for the long term… I don't think they have a model for profitability right now." In 2001, the company shut down. (In 2018, the grocery delivery company Yummy.com?bought the Kozmo domain and trademark?and relaunched the brand as an ultra-fast grocery delivery service. Unlike its new competitors, Kozmo charges five dollars per delivery and has a minimum order of $25.)

The prospects of such an enterprise might have been improved by the COVID-19 pandemic, which proved to be a boon for delivery services as families stayed inside to avoid the coronavirus. But even if 15-minute delivery managed to snap up 20 percent of the grocery market, it would be unlikely to make "a material difference in the problems with food waste," said Charles Platkin, executive director of the Hunter College New York City Food Policy Center. While he appreciates that these companies are thinking about food waste and that the solutions have to start somewhere, he suggested their rhetoric did not show sufficient appreciation for the fact that people are going hungry just a few miles from where these services operate, low-income areas where fresh food is hard to come by and quick, fresh-food delivery could be genuinely helpful. The point is to get discarded food to the people who need it. None of these new companies do that.?

"You know, you could say anything you want. It's a free country," Platkin said. But, he added, what these companies are doing, waving the banner of food waste without actually helping provide food to the needy could be "considered slightly irresponsible."

Not every company needs a social mission. But the ones that don't typically provide a desirable service or product that doesn't need a supporting story or feel-good narrative.

The question for ultra-fast delivery companies is: How fast is fast enough???

In 2005, Amazon debuted Prime with free two-day delivery on millions of items, an almost unimaginably-fast delivery time back then. In 2014, it launched Amazon Now with free two-hour delivery on select items. Same-day delivery is now frequently available for Prime members, a benchmark other companies are racing to keep up with. Jokr and the like are promising 15 minutes. Gorillas has already upped the ante, vowing delivery in 10 minutes. Foodpanda promised 7 minutes.

What's next, and who will it be for? Does anyone really want this?

When Aaron Gordon asked Wenzel how he came up with the idea for this company, he didn't tell some founder's epiphany tale. He didn’t say this was something he’d personally wanted in his life.

Instead, he said that he triangulated the concept after working at Delivery Hero and Softbank, using data to conclude people were using apps for everything else, so they should use it for this, too. Or, as he put it, "There was a growing gap between where consumer behavior was developing towards and where most other internet or marketplace-type of companies get stuck in terms of their development." To that point, Wenzel said he personally finds Jokr useful now because he's very busy.

But King thinks these 15-minute services are missing something important about what cities are and why people like living in them. It's a point he thinks many other tech companies have missed too. When King taught at Columbia, he lived across the street from the Appletree grocery store in Morningside Heights. He would go two or three times a day, because each trip took five minutes. Ten, tops. Which, to him, was plenty efficient to begin with.

"All these industry types are all focused on the wrong metrics of what people value," King said. "All these companies are pushing this optimization scheme as though optimizing and efficiency are what people want.

“One of the reasons that people like to live in Manhattan is because you like to get out of the house,” he continued. “You like to walk around, you like to go to the bodega. Interesting things happen when you leave the house."

King knows not everyone is like that. Some city people will want their fruit delivered now. But to him, these are not the services that make cities worth living in.?

"A lot of these firms and a lot of this technological push over the last decade-plus has been all on engineering and optimization terms," King said. "What we like about cities are the frictions. It's the frictions that make cities economically robust. The frictions that make cities fun to be in. Any of us, when we go out, and something interesting happens to us out of the house, that becomes cocktail party fodder for years just because something interesting happened to us. We keep talking about it. Those are the types of things that people like to have. It's not about just having your oat milk delivered in ten minutes."

It is getting more and more excited for me personally!

Stay tuned!

Credits: Aaron Gordon

https://www-vice-com.cdn.ampproject.org/c/s/www.vice.com/amp/en/article/k78mkv/whats-the-point-of-15-minute-grocery-delivery