Convenience as a Service (“CaaS”)

Convenience as a Service (“CaaS”)

We recently published an article entitled “The Now Economy and Workplace Implications“. Sticking with this theme and on the heels of Walmart’s latest salvo in the “Walmart vs. Amazon Food Delivery War”, we have published a list of food delivery services. We also share our thoughts as to how this game may play out – particularly for Walmart and Amazon. (Hint: we favor Amazon.)

Food Delivery Services

There are two food delivery varieties. The first is the vertically-integrated approach offered by Amazon, Target and Walmart. The second is the “delivery-only” approach of firms such as Uber, Instacart and GrubHub. After the break we dive a bit deeper into the former model which of the two, is the more strategic approach and will ultimately boil down to Amazon and Walmart. Amazon Go will play a significant role (video after the break).

  • Walmart “Delivery Unlimited” (tkr: WMT): $98/year to shop for Walmart groceries online (or via the app), select a delivery time (no restrictions) and finito! Learn more here.
  • Target same day delivery (tkr: TGT): Shoppers may have 65,000 items delivered to their door in as soon as one hour. Learn more here.
  • Amazon PrimeNow (tkr: AMZN): Amazon’s $119/year direct competitor to Walmart’s Delivery Unlimited service. Learn more here.
  • Instacart (private): Instacart delivers food orders from participating retailers for $3.99 per order. Instacart charges $99 per year for its Express subscription. Learn more here.
  • Uber Eats (tkr: UBER): Uber charges a food delivery fee that varies based on the distance between the restaurant where the order was placed and the delivery point. Learn more here.
  • GrubHub (tkr: GRUB): food delivery service that competes with Uber Eats. Learn more here.

It Pays to Control Distribution

There are a number of other restaurant delivery services that compete with Uber Eats and GrubHub. However, the more interesting, differentiated and scalable business model is the one offered by Walmart, Amazon and Target where the respective company owns the inventory and controls the delivery experience. There is something to be said for vertical integration.

If the endgame is same day delivery of an enormous selection of goods (groceries and otherwise), only Walmart and Amazon have the scale to compete. Walmart is busy building out its e-commerce capability, this effort sees Walmart eCommerce CEO (and founder) Marc Lore consolidating power. Amazon meanwhile is building out its offline infrastructure through a combination of new distribution centers, acquisitions (Whole Foods & PillPack), and new retail brands such as Amazon Go (Amazon opened its second Amazon Go location in Manhattan last week on Park Ave).

Optimizing the “Omnichannel” Retail Experience. Amazon Go Holds the Key

The company that does the best job of optimizing and blending the physical retail experience with the eCommerce experience ought to win. Amazon Go holds the key. That key is Amazon Go’s proprietary checkout technology which enables shoppers to grab items from shelves and immediately leave the store. No checkout required. Items are charged to shoppers’ Amazon accounts when shoppers remove items from shelves. I don’t suspect that Amazon will license this technology to competitors. Walmart’s answer was to partner with Microsoft on a failed “scan and go” checkout process.