Google Express latest entrant to on-demand groceries

Ronny Kerr · February 17, 2016 · Short URL:

Entering a market bursting with competition, Google Express to face off with Instacart, Amazon Fresh

As if the market weren’t already overcrowded.

Google Express, the Mountain View company’s on-demand delivery service for local stores, just launched same-day delivery for groceries in San Francisco and Los Angeles.

Based on where you’re hoping to get groceries delivered, Google Express can bring you items from Costco, Smart & Final, Vicente (in Los Angeles), and Whole Foods Market. Other stores that have been previously available through the service (in San Francisco, as an example) are BevMo!, Guitar Center, Kohl's, REI, Staples, Target, and many others.

Google offers all new members to Express a free three-month trial, after which the membership fee is $10 per month or $95 per year. For members, the delivery fee is just $3 (unless you meet a store minimum), while non-members pay a delivery fee starting at $5.

The new offering is just the latest in a long line of companies large and small seeking to capitalize on consumers’ new demand for same-day delivery of… pretty much anything.

The big name in the grocery delivery space is Instacart, a San Francisco-based company that has raised nearly $300 million since its founding in 2012. Backed by three of Silicon Valley's biggest name investors—Andreessen Horowitz, Kleiner Perkins Caufield & Byers, and Sequoia Capital—Instacart was last given a valuation of $2 billion, making it the most valuable on-demand unicorn in the world not in the ridesharing space.

Competition in the grocery delivery space has grown fierce in the past couple years, however, with Amazon Fresh, Good Eggs, and supermarket chains (Mollie Stone's, Safeway, etc.) each offering their own spin on grocery delivery. And that’s leaving out general purpose on-demand services like Postmates and TaskRabbit, whose agents can also be hired for grocery delivery.

All this competition has forced companies to aggressively lower prices while also making sure to pay out couriers in order to keep them happy, meaning that the only way to survive in this market right now is by having a big store of cash. At the end of 2015, Instacart reportedly laid off a dozen recruiters to cope with slowing growth.

Though Google Express is a new entrant to this area of service, the global trend for on-demand deliveries appears to be going toward cost-cutting and consolidation—both direct consequences of the competition mentioned above.

Though a restaurant delivery service (not grocery delivery), DoorDash has reportedly seen a reduction in its valuation for an upcoming funding round from $1 billion to $700 million. Not only does the news provide more evidence of a slowing, more conservative financial environment, but it also highlights how that sluggish growth is exacerbated in a tech sector that has been bloated with VC cash and startups.

It will be interesting to see how Google’s entrance shapes the market.

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