Uber announced on its blog today that it is launching a test of a new delivery service called Cornerstore. Uber users in the Washington, DC area will see an option in their app to order from a list of 100 household items. If an Uber driver is available, the goods will be picked up and delivered to their door. There is no charge, no expectation of a tip, and no minimum purchase. It's one of many ambitious delivery services from tech companies big and small that have come online in the last few years, all of which seem, on the face of things, too good to be true.
It all sounds too good to be true
Uber is careful to stress that the Cornerstore operation its launching in DC is just a test. But the company and its investors have been openly discussing for some time Uber's ambition to use its fleet of drivers for more than just ferrying people between point A and point B. Benchmark's Bill Gurley, who sits on Uber's board, suggested in a recent blog post that Uber might replace not just taxis and car services, but delivery companies like UPS, car-rental incumbents like Hertz, and even the concept of car ownership entirely. It sounds like Silicon Valley Kool-Aid, of course, but as Gurley points out, Uber is already larger in many markets than earlier estimates of the size of the entire industry, and that's while they're taking just a slice of the pie.
Amazon is the current king of speedy delivery, with millions using its Prime subscription service. For same-day stuff, Amazon currently operates in 12 cities, and is working on rolling out a grocery service that would offer a similar array of household items as Uber, along with more perishable fare. Google has its Shopping Express service, which is currently available in a few California cities and the island of Manhattan. Smaller startups like Instacart and WunWun are available in more locations, but also charge a fee for certain deliveries, something the larger players have so far tried to avoid.
This didn't end well the first time around
Where is this all headed? The dot-com boom of the 1990s saw a slew of companies rise and fall, including the infamous Webvan and Kozmo.com. I still have fond memories of ordering a can of Coke or pack of gum and having a breathless courier deliver it to my door for no charge. This time around things are a bit different, with most of the big companies involved having significant alternative revenue streams. And the startups that are delivery-only have adopted a freelancer or contractor model, allowing them to operate with far less overhead. Kozmo was even brought back from the dead to give the idea another spin.
Many tech investors aren't convinced that this kind of delivery service can survive as as standalone business, but it might make a lot of sense as a method of customer acquisition, along the lines of offering free streaming music or on-demand videos. "[Delivery] didn’t work then, and it won’t work now, unless you’re a tech giant who doesn’t mind losing money to win over consumers," says Rick Heitzmann, a tech investor with FirtMark Capital and backer of Zipments. "But for them it's not about making money on the delivery service. It’s about getting people’s payment info into their system so that shopping with them will be seamless in the future."