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Validating a same-day delivery app?

Hi everyone,

I'm in the early stages of working on Instacart for ethnic grocery delivery. As a Taiwanese-American living in San Francisco, I find it hard to find basic ingredients for Chinese cooking and, having spoken to other Chinese, Korean, Indian, Russian friends, etc., am realizing that many others feel the same way. And for my Caucasian friends who enjoy ethnic cooking, I sense that going to Chinatown or an Asian supermarket (i.e. 99 Ranch) can be a confusing and intimidating experience (i.e. labels in other languages, less-than-helpful staff, generally out of the way compared to Safeway/Whole Foods, etc.)

At this point, I'm interested in quickly testing something. What is the best way to size the market and potential for on-demand or same-day delivery type apps in the bootstrapping stage?

14 Replies

Freeman Fan
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Freeman Fan Entrepreneur • Advisor
Entrepreneur
That's an interesting idea Jason. I've been thinking about building something like that, but in the prepared-food space instead of groceries.

A couple of market sizing methods that I found very useful were taking out some Google Adwords or Facebook ads in your target geographies, and then gauge interest by looking at the click-through rate. Even better, build a simple landing page with a sign-up-for-beta form, and gauge the conversion rate.

My worry is that (1) there might not be enough demand and (2) people who shop at ethic supermarkets are less technology savvy. My parents who always shop at Chinese supermarkets find Uber and Instacart difficult to understand, while I (also a first generation immigrant) shop at Ralph's and such way more than at Chinese supermarkets.
Karl Schulmeisters
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Karl Schulmeisters Entrepreneur
CTO ClearRoadmap

Well one thing to look at is all of the 'same day grocery delivery' companies that went bust in the Dot Com bubble burst. Many died because they simply could not generate enough revenues.

And at the same time you have a lot of large grocery chains offering this sort of capability, And an company like QFC or Safeway can easily add the contents you are going to offer. So how are you going to differentiate?

Michael Brill
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Michael Brill Entrepreneur
Technology startup exec focused on AI-driven products
Seems like metro logistics is/is going to be a hyper-competitive space with everything available from everywhere. You're also likely to run into the situation where people need a jar of weird stuff every now and then vs. weekly staples. OTOH, you may have a niche in delivering crab paste and durian... but say goodbye to your dating life.

Not to be officious, but maybe something closer to Freeman's idea... prepared foods or an "ethnic" home meal assembly business... a long tail Hello Fresh / Blue Apron?

You can run tests and convince yourself of a market opportunity with a BS metric ('ooh, look, I have 7 people who want this therefore it's business), but if your core value proposition is moving something from point A to point B, that's a kill zone.



David Fox
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David Fox Entrepreneur
Game Tech & Design Leadership
Hi Jason,

Cool idea. We've built a similar MVP app for other clients which is basically just a well-designed list of items, an admin tool to show and process outstanding orders, and the ability to purchase. For V1 would recommend offloading everything you can:

- Have Google/Apple handle payments... less friction for the user to buy items with an IAP.
- Use another service (many available such as TaskRabbit) for actual delivery and fulfillment.
- And possibly charge equal or even less than supermarkets, at first, so cost isn't an issue.

Then see if you can get customers.

If you figure out the targeting/ad piece, the rest can be optimized later.

Best,
-David
http://www.doublecoconut.com/
Jason Yu
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Jason Yu Entrepreneur
Founder
Hi everyone,

Thanks for the valuable feedback - really appreciate it!
Karl Schulmeisters
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Karl Schulmeisters Entrepreneur
CTO ClearRoadmap

Michael - there is a new startup here in Paris doing kindof what you just suggested https://eatpopchef.com/

They guarantee delivery of a fresh cooked lunch in 15 minutes. They change their meal every day- and now are offering two dishes to choose from. To deal with logistics they are using the ubiquitous Scooter Delivery - IE the Pizza Delivery model

Essentially they (and this business that Jason is looking at) is a Delivery Pizza business. So to be successful you need to look at who is successful in the Pizza Delivery business and how.:

Domino's is probably the biggest. And how do they do it?


  1. Limited menu
  2. fast delivery
  3. limited geographic delivery
  4. scale by franchise.
  5. High margin/low COGS on products offered


The challenge I see for an "ethnic grocery delivery" is that you violate #1- which in turn has impact on #2 (filling the order takes more time the more items you have)

and #3 is challenging because by definition "ethnic grocery" is going to have a smaller market in any given area, than something else. So to get your volume to a sustainable level you either have to

  • expand your offerings - which violates #1
  • expand your geographic reach - which violate #3 and therefore #2

#5 also seems like a challenge - because a lot of the more esoteric items are esoteric precisely because their margins don't justify a large grocery store like Safeway in giving the item any floor space.

Seems to me a very challenging business to be in

Michael Brill
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Michael Brill Entrepreneur
Technology startup exec focused on AI-driven products
Karl, this model (home meal assembly) has really taken off in the US with companies like Blue Apron at > $100M annual revenue. One thing you see here is that services are increasingly bundling up, say, 4 meals in one shipment which materially lowers the delivery costs and logistics complexity (now you have a few days to deliver instead of 15 minutes).

But that's a different offering from Jason's original idea which more of an Instacart model which really isn't so dependent on a small number of SKUs. His point is that there are plenty of people who shop at Asian markets for most of their groceries (markets like 88 Ranch are bigger than a typical French supermarche) and that they want convenience just like people who shop at Safeway. Seems logical that there would be, but it also seems that it's quite small and that their demo is older and less likely to avail themselves of a delivery service (especially with a higher proportion of fresh ingredients where human judgment comes into play for selection). *Probably* younger people (Asian heritage or not) just need a jar of fermented squid eyes that Safeway doesn't sell... the problem then is that you're in the business of delivering condiments and lack the volume of products necessary to justify this model. Even if you could figure something out, you'll be crushed by a horizontal metro logistics service company... maybe even Uber. ;-)

There is plenty of room to innovate in food with this as the problem statement: http://theoatmeal.com/comics/cook_home



Jason Yu
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Jason Yu Entrepreneur
Founder
Right - Instacart is very popular at least in SF and valued at well over $1b now.

Part of my question is whether an on-demand service for ethnic grocery items, in particular Asian/Indian, would make those ingredients more accessible to a younger and wider audience, thus encouraging them to order from this kind of service even if they hadn't ever thought of going to a 99 ranch or small mom and pop shop in Chinatown before.

The app would include whole recipes (similar to Instacart), where you can order all the ingredients you need to make something with a single click. Again, at least in SF, I feel like people of all backgrounds are more open to adventurous eating than ever before, but when it comes to big box grocery stores you're limited to a pretty sad "ethnic" aisle that consists of some top ramen and Sriracha sauce.

So an on-demand service would solve 3 big problems in this area. 1) Inconvenience. Ethnic grocery stores are few and far between and much harder to get to than a Whole Foods. If people are too lazy to buy regular groceries in their local neighborhood, why would they bother driving miles to a store that's likely miles away in an minority-dominant neighborhood (Sunset, Richmond, Chinatown). 2) Confusion. These stores can be confusing. Things are labeled in other languages. Even if you think you know exactly what you're looking for, unless you can read that language you might not even know what the right item is even if you're staring at it. 3) Context. If you want to start cooking different cuisines, but have no idea where to start, a service like this with whole recipes where you can add all the ingredients you need and have it delivered solves that problem. We could add rich descriptions of each item for sale, describing exactly what it can be used for and show you relevant recipes using that item.

Michael Brill
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Michael Brill Entrepreneur
Technology startup exec focused on AI-driven products
Double down on #3. Make that easy and fun and creative... then you figure out what ingredients they need and then how to get it to them in the *quantities that make sense*. Assuming you are not going after Chinese grandmothers, then I see an "ethnic" Blue Apron as a very viable option (sign me up!)... much more so than a grocery delivery service where you just aren't going to get big enough orders to matter.




Karl Schulmeisters
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Karl Schulmeisters Entrepreneur
CTO ClearRoadmap

InstaCart is delivering groceries IN GENERAL... that is a broader market than Ethnic - which means you don't have to go as far to serve the same number of customers. So dramatic COGS reductions over Jason's plan. Secondly they are doing it only in very wealthy areas. And while wealthy areas like ethnic food, the main ingredients of even an "ethnic" meal are available from Whole Foods. So think it through.

If I am making Tandoori Marinated lamb... and making the curry from scratch. What percent of the meal do I order through InstaCart (or already have on hand)..things like onions, tomatoes, lamb. And what am I buying from you (blackned cumin seeds, Asafoetida, ajawin)?

So the very reason ethnic groceries are less convenient (ie fewer on the ground) is why you have to deliver over a larger area and hence drive up your costs dramatically.

Yes there is an element of labeling confusion, but adding that translation service means you are adding labor costs to your product AS WELL AS rejection costs (ie one of your workers confused the label for Asofoetida and fenugreek thus ruining $100 worth of your customer's hand rubbed beef).

Now an ethnic Blue Apron - maybe - but look at the Blue Apron site.

  • They have 9 items on their menu - 4 of which are ingredient paired (ie you make two different dishes with different mixes of the same ingredients) So really that's 7.

    Dominos has 10 categories of items and shares ingredients across all of them
  • PopChef here in Paris is starting with 3.


Now - given the expectations of the SFO area and the fact that you are competing with all sorts of ethnic takeout - how many dishes does your ethnic Blue Apron have to carry?

I'm fairly certain you can make a go of it. but frankly you'd do better starting an ethnic food truck, building a reputation and THEN branching into delivery

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