9 Evolving Formats of Home Delivery
By Angel Abcede on Jun. 09, 2016C-stores one of 9 types of emerging home-delivery companies
OAKBROOK TERRACE, Ill. -- As convenience for many U.S. consumers starts to include home delivery, c-store retailers are evaluating the fast-moving landscape of “last mile” service, watching 7-Eleven and Casey’s General Stores boldly enter the game while startups such as goPuff declare themselves a direct threat.
A recent study by Marketdata Enterprises focusing on merely a portion of that quickly evolving market—home-meal delivery—valued that format at $3.2 billion in 2015, up from $2.2 billion in 2012. Officials with Tampa, Fla.-based Marketdata Enterprises expect a 19% gain to $3.8 billion this year and forecasts an 11.6% average yearly growth into 2020, reaching $5.56 billion.
The scope beyond home-meal delivery is only growing and getting more complex. From old-school frozen-meat clubs to tech-centric startups, a wide array of players are battling for both dominance and profitability in this ever-changing space. Here’s a list of the kinds of business models trying to become the next UPS.
Convenience Stores
Irving, Texas-based 7-Eleven Inc. has partnered with several startups to offer customers home delivery. Back in September, 7-Eleven began partnerships with DoorDash and Postmates, both out of San Francisco, to start home delivery in over a dozen cities, including Boston, Chicago, Los Angeles, New York and Washington, D.C. At press time, 7-Eleven did not respond to an update request. The offers were to include cleverly titled convenience packages, such as the $15 “Hangover Pack” that includes 7-Select extra-strength Acetaminophen, a 29-ounce Gatorade, a large pepperoni pizza and a smoked turkey and pepper-jack sandwich.
During its latest investor call, Ankeny, Iowa-based Casey’s General Stores said it plans to convert 100 stores in its upcoming fiscal year to the pizza-delivery format, having completed conversion of its online-ordering program to include its mobile app. Bill Walljasper, senior vice president and CFO for Casey’s, said they typically experience a 20% to 30% increase in prepared-food sales upon the rollout of pizza delivery to a store in the first 12 months. The chain has seen more than 400,000 downloads of its app, officials said.
Amazon
Seattle-based Amazon and its Prime membership is probably the most visible threat to the convenience model as it stands today. Its $99 yearly subscription comes with two-hour delivery for most items. On its list of Prime options—in addition to its streaming-video content—are Prime Pantry, which offers low-cost grocery, household and pet-card items; its “Dash” program, which uses brand-labeled buttons affixed on refrigerators and laundry rooms to automatically trigger reorders; and just recently in Miami, food orders from about 60 area restaurants. Its AmazonFresh subsidiary also offers same-day and early next-day grocery delivery.
Food-Delivery Companies
Activity in the online and mobile-based food-delivery space seems to be hitting a feverish pitch. A couple of companies appear to be targeting the convenience space: Boston-based Drizly, which delivers wine, beer and alcohol in an hour; and Philadelphia-based goPuff, which offers c-store items.
“In today’s world, convenience is king,” goPuff said on its website. “With goPuff you carry a sleek and effortless convenience store, smoke shop, and mini-mart right in your pocket [using the mobile app].”
Others are food-based, such as Chicago-based GrubHub, which focus on online and app-based ordering from established restaurants. In addition to ties with restaurants, some of these tech firms, such as DoorDash and Postmates, which are both headquartered in San Francisco, are partnering with grocers and convenience stores. Other tech firms, such as New York-based Blue Apron, deliver meal kits where people prepare a basket of ingredients, while others, such as San Francisco-based Sprig, deliver prepared meals without having a brick-and-mortar restaurant.
Big-Box Retailers
Bentonville, Ark.-based Wal-Mart and Minneapolis-based Target both are moving toward home delivery, with the former taking active steps to challenge Amazon and its two-day delivery model.
Earlier this year, Wal-Mart announced a home-delivery pilot that uses the passenger-travel companies Uber and Lyft, both based in San Francisco, and crowd-sourcing delivery firm Deliv, Menlo Park, Calif.
Quick-Service, Local Restaurants
For years, home delivery has been part of the restaurant business, from pizza joints such as Ann Arbor, Mich.-based Domino’s to the local Chinese takeout and delivery place. For many of these chains and mom-and-pops, the logistics of getting hot food from the kitchen to customers’ homes has been a fundamental part of their profit-and-loss equation.
Domino’s recently made headlines by testing driverless delivery vehicles and cars that had built-in warming ovens.
Supermarkets and Grocery-Delivery Firms
With the albatross of Webvan, a dot-com bust that burned through millions in seed funding only to close after three years, online-grocery delivery has a checkered but solid past with companies such as Skokie, Ill.-based Peapod, which is still in business after its founding in 1989.
Now enter Instacart, a San Francisco-based startup that hopes to succeed where others have failed. One of its grocer partners is Austin, Texas-based Whole Foods Markets.
Passenger-Travel Companies
San Francisco-based Uber established UberEATS, which lets Uber users order restaurant food that gets delivered to them via its taxi-style network of vehicles. Like Uber, San Francisco-based Lyft is also working with retailers like Walmart to deliver goods to customers.
Fuel-Delivery Companies
About a half dozen on-demand fueling apps have popped up across the United States over the past year, promising a fill-up when and where you want it. All of them, inclusive of Palo Alto, Calif.-based Filld, Seattle-based Booster Fuels and Los Angeles-based Purple, offer drivers the convenience of skipping a trip to the local gas station. Most operate via an Uber model, where a customer orders a fuel-up via an app, providing the position of their vehicle and a preferred fill-up time.
Traditional Home-Delivery Companies
Don’t forget the folks that these home-delivery networks and startups are trying to put out of business, namely traditional shipping stalwarts such as the U.S. Postal Service, Washington, D.C.; FedEx, Memphis, Tenn.; and the United Parcel Service (UPS), Atlanta.