Restaurants and small food shops have always been flustered by delivery. On the one hand they could help customers—and find more of them—if they took orders online and delivered. On the other hand there's the problem of how to price delivery, the logistics of delivery and the problem of setting up an online order system and making sure its inventory is accurate.
In the last year there's been a wave of new Silicon valley start-ups that try to help with the last part—the online order system.
The most prominet are Grubhub and Seamless. They take orders for restaurants. The restaurants figure out how to make the food and deliver it. Grubhub and Seamless take a cut that's probably around 20%. Speaking personally, I've used Seamless a lot in Brooklyn and it's very good. The benefit to a restaurant here is that they only have to figure out the logistics part of delivery. They can put all or just part of their menu online—and make it available at times that make sense to them. Take Prime Meats in my neighborhood, a fancy restaurant that's full almost every night. They are on Seamless but in order to prevent overburdening their kitchen they initially showed up on Seamless only between 5 and 7pm, when they were slow.
In the novelty arena, you can also order pizza on a smartphone, albeit in a ridiculous way. There's a one button app that, when you push it, delivers pizza in 30 minutes. From somewhere. Anywhere.
In a more interesting twist, Square, the payment processing software company, is buying a food delivery company called Caviar. This is the only Silicon Valley firm I know trying to do the delivery part of the delivery business. Presumably the idea here is that a restaurant can buy their POS system from Square and the delivery software—and delivery logistics team—will come along with it.
This is happening with grocery, too. I just spent time at Bi-Rite and talked with the GM Patrick (ex-Zingerman's Deli manager) and learned about Instacart, which Bi-Rite just joined. With Instacart you place your grocery order online and they find someone to go get it from you. It's not an employee of the grocery store, it's not an employee of Instacart, it's just some shmo who signed up to be a grocery store picker. (They call them pickers, just like we do for people who pick items for boxes on our production line). Like with Grubhub and Seamless, Instacart takes a cut.
How these all play out will be interesting. Short-sighted merchants, or ones that do their own order and delivery, may look at the cut these companies take and say they don't need to pay someone else for something they can do on their own. The problem there is they will be shut out of network effects. The more merchants sign on to Seamless the more common it'll be for customers to shop there. If you're a merchant and you're not there, you'll loose out. Merchants will be saving cost to give up sales, which is rarely a good move.
What's the downside for the customer? On the restaurant side there seem to be very few negatives. Seamless doesn't mark up for delivery so why not order online and get the same food you could have driven to pick up brought to you for free? On the grocery side, I can see inventory being a hard nut to crack. Right now Instacart has no database connection between what's for sale online and what's in stock at the merchant. If something is sold out, the merchant has to remember to go to Instacart's website and mark it sold out. Will that happen? Sometimes, but not always. That will mean upset customers. Instacart gives leeway to their pickers to choose subs or call the customer to see what they'd like, but either answer is a flawed fix, one that will frustrate customers and hurt sales.
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