Photo: Mark Coggins. Source: Wikimedia
The now-defunct grocery-delivery service has become an example of some of the excesses of the dot-com era. Executives with no experience in the grocery business were going to undercut and revolutionize how we buy groceries by offering consumers a check-the-box website and home delivery. The company was founded in 1996, went public in 1999, and declared bankruptcy in 2001. At its peak, they employed 4,400 people, had $180 million in sales, and served ten major metropolitan areas.
They failed because they spent too much too fast and went after the wrong market, a mass market that was too price sensitive. They understood algorithms and the web, but not groceries. So, they made huge capital expenditures but couldn’t scale up fast enough to become cash-flow positive. When they needed to raise more money, the bottom had fallen out of the dot-com boom.
But the idea of home delivery didn’t die. It just needed better execution. Enter Kroger, the largest supermarket chain in the US, with 2,800 stores in 35 states. They’ve recently partnered with Nuro.ai, an autonomous vehicle company founded by two Google Waymo engineers – folks who know sensors and AI and algos. Nuro is building a fleet of driverless carts that can deliver groceries while you track them on a smart-phone app, like Uber. And Kroger announced last month they’re also taking a minority stake in the UK web-shopping firm Ocado, which has awesome automated warehouses.
The delivery pods are about half the size of a compact car, and look like a lunchbox on wheels, or a character from the Brave Little Toaster. They can deliver pizza, prescriptions, flowers, and all kinds of other merchandise. Just not people. And robotics and inventory management will continue to make home delivery quicker, simpler, and cheaper.
Using self-driving carts for distribution makes a lot of sense. They’re a lot more practical than drones, and it’s not like grocery shopping is our favorite thing to do. But delivering fresh meat and produce and dairy is technically challenging, and a perfect task for new and more powerful software.
This is how the future arrives: one gallon of milk at a time.
Douglas R. Tengdin, CFA
Charter Trust Company
“The Best Trust Company in New England”