Instacart enters my pantheon of Imploded Stocks.
By Wolf Richter for WOLF STREET.
Instacart – whose official name is Maplebear [CART] – is an app that pays a bunch of people to pick merchandise at grocery stores and at other retailers, and deliver the stuff to the person that ordered it on the app. You’ve seen these frazzled guys, smartphones in hand, trying to find stuff in a store they aren’t familiar with; you’ve seen them at the checkout with two separate orders that have to be rung up separately.
With the money the company raised from venture investors, it bought some other companies, and added some other activities, but that’s largely it. It’s not rocket science, but it can be profitable as long as someone is willing to pay for the service, and as long as it can find people willing to do the picking and delivering for what must be relatively little pay.
Picking stuff at stores and delivering it was a hot thing during the pandemic. All startups were hot during the pandemic. Anything was hot. And valuations soared.
And so at its last round of funding in March 2021 – following that infamous February when the whole hype-and-hoopla bubble started to come apart – Instacart raised $265 million from existing VC investors including Andreessen Horowitz, Sequoia, and D1 Capital, and from existing institutional investors including Fidelity and T. Rowe Price. They invested at $125 a share, per PitchBook data.
It’s even worse for investors in the secondary market where private-company shares are actively traded before their IPOs. In the secondary market in 2021, shares traded as high as $133, according to PitchBook, citing data from secondaries platform Zanbato.
But then, the SPAC bubble collapsed and the IPO bubble collapsed with it, and valuations went to heck, and lots of those companies, after they went public via IPO, direct listing, or merger with a SPAC, then ended up in my pantheon of Imploded Stocks.
Then we had the magnificent rally in the stock market this year into July – with so much hype and hoopla especially about AI swirling around that the EPA was forced to issue an air pollution warning. And so it was deemed that the shuttered IPO window had reopened. And the company had its IPO on September 19, with an IPO price of $30 a share. When trading began, it opened at $42 and then plunged. Today, it trades at around $30.
So the shares, at today’s price, have already plunged by 76% from the share price at the last round of funding. And they have plunged by 77% from the peak prices in the private companies secondary market.
This plunge in share price makes the company eligible for inclusion in my Imploded Stocks pantheon (to be eligible, it must have dropped by 70% or more from the peak).
Those losses weren’t taken by regular retail investors at least not directly – except those few if any that bought the $42 pop at the open.
Those losses were taken by the smart money: VC firms and institutional investors that invested in the company at $125 a share, possibly falling for their own hype and hoopla or simply sticking to the normally very profitable business of counting on the greater fool out there to buy at an even higher price, and that greater fool tends to be retail investors.
So that’s Andreessen Horowitz, Sequoia, D1 Capital, Fidelity, T. Rowe Price, et al that took those losses, at least on paper.
And the losses were also taken by more smart money: Investors buying Instacart’s shares in the private-companies secondary market. They’re hedge funds, family offices, funds that specialize in private companies’ shares, and retail investors with access to private-companies trading platforms.
Even in the months before the IPO, Instacart’s shares in the secondary market already traded down at around $30 a share, according to Zanbato’s data, cited by PtichBook. By then, the big losses were had already been taken – which also explains the IPO prices, because that’s where the market was.
If those investors – including those that invested in the later venture rounds – haven’t sold yet, they’re sitting on deep unrealized losses. And there are lots of companies out there in a similar predicament.
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Never could see the value in letting someone else pick my apples for me. Nice to see the common retail person sees it the same.
I meet a guy years ago, who worked as grocery executive his entire life, he laughed at delivery saying every so often it comes up, everyone says they want it but the margins are too thin to make it work.
I think one of the hallmarks of the tech world is they never listen to those who know and have to discover everything all over again.
But it’s a new paradigm!
It’s as old a paradigm as the daily milkman of the 1920s.
“Once I built a railroad,
Made it run,
Made it race against time!
Once I built a railroad,
Now it’s done!
Brother…can you paradigm?!”
(As sung by the South Park Underpants Gnome Men’s Choir)
Old paradigm for sure.
The local store would write down orders and once or twice a week pick, pack and deliver the goods. Worked fifty years ago, still works.
From what I heard from my friends from Moscow, Russia, grocery delivery services there work flawlessly (at least, in big cities) and became yet another convenience in life along with car sharing services.
Also, anecdotally, most folks who work as delivery drivers (often on scooters or just walking a few blocks) are extremely low-skilled immigrants from former USSR countries that probably work for mere pennies.
I assume as long as you have someone to do the delivery for a very low price, the service can theoretically be sustainable.
“I assume as long as you have someone to do the delivery for a very low price, the service can theoretically be sustainable.”
Or have enough wealthy people willing to pay the premium, either or is good, my younger sibling did instacart deliveries in between her main job for various reasons not long ago. Her take home was just a bit more than minimum wage in Toronto after transport fees. Though I don’t think she considered other costs/risks like insurance and if she got into an accident etc.. I think you also have to pay taxes as a “self employed” person which I doubt happened 😆. So I guess there are other requirements for it to work, like a tough job market, high cost of living and enough people who can’t account for costs properly to figure out they’re probably not making what they think they’re making 😂.
We have people pouring over our border every day. But congress won’t let them work.
During the pandemic, Insta’s total markups were in the 15%-20% range.
Maybe worth it for certain times and for certain customers (middle class seniors with mobility issues, etc).
Walmart (low price leader in groceries) also has a similar in-house service with a fairly low monthly fee and reasonable minimum order size.
(If it proves sustainable long term, I am going to start doubting supermarkets’ perpetual bitching about their “tiny margins” – Walmart’s delivery services are being subsidized from *somewhere* and WM has long significantly underpriced those whiny supermarkets).
Moscow traffic low labor costs and oligarchs. Having lived there yes the model can work. Cairo has a great delivery system as well McDonald’s burger and a coke for less than 50 cents. Teenagers were the predominate delivery drivers because of poverty and unemployment
I actually think the tech guys went into this with their eyes wide open. In fact I think everyone involved know that they will be playing a game of hot potato, it’s just that some of them never imagined that it might be them holding that hot potato.
The United States IPO is filled with scams, and it’s not a new thing.
$265 million is 🥜 for Andreessen, or Sequoia. But the conclusion still holds all of these start-ups were free money scams from the era of ZIRP and QE4evar. Still, I fear that fiscal spending might be even worse 😬
What’s stopping someone from doing exactly what Instacart is?
This is just classic tech disruption of existing industries.
Inserting themselves and their private equity backing to frack our wallets.
The small Toyota $20k
Small Tesla $40k
They accomplish the same task. One costs double…
Exactly it’s not about a business but finding a bag holder
“..but the margins are too thin to make it work.”
The buisness model is not to make it work. The buisness model is to make IPO.
I wonder if snake oil actually had any snake oil in it.
Exactly
+ 1
I personally find grocery delivery useful… except for picking apples. Fresh produce is a huge gamble, and the main reason I’ll ever regret an order. But still do anyways for the inconvenience.
They’ll pick items I’m surprised the grocery store even had out for sale, like a bag of brown cut lettuce lettuce most recently. Sometimes the they’ll seemingly drop the bag in the parking lot to damage it more, as it’s the only explanation for 3 of 4 bruised oranges.
Things like dairy or meat can be a pain too, they never look for older expiration dates, so sometimes you’ll get something that expires tomorrow, but much less frequent of an issue.
FWIW, I use H-E-B’s in house grocery picking / delivery, not specifically Instacart. I have used Instacart many years ago, and it felt similar.
“Never could see the value in letting someone else pick my apples for me. Nice to see the common retail person sees it the same.”
The value of delivery services is your time.
Go to store, walk around, be subjected to merchandising that makes it time consuming to pick what you want from all over the store, wait in line, transportation home. Assuming you can earn reasonable income with the same time, it’s worth it to do something productive during that time and pay for delivery. Supposedly you can save a few bucks by shopping in store- if the savings is greater than the value of your productivity, probably need to increase your productivity.
I have tried all the delivery services, my favorites are 1) send wife alone*, who loves to spend hours a week in grocery stores 2) Costco delivery 3) Walmart delivery.
I tried Instacart, don’t remember why I didn’t like it.
I will NEVER physically go into a grocery store unless someone threatens me or a family member with great bodily harm
*send wife alone is 1000X as expensive than instacart
GREAT final comment RT!!!
Except in some cases such as mine, where sending me to store is at least that if not more!!!
Of course, my purchases tend toward ”THE best wines in the place, ditto steaks, etc.,” Wife does the basics and knows better than to ”send” me… LOL
Thanks for the belly laugh,,, best laugh today, so far,
We always think that these people ( aka smart money ) are really smart and they make no mistake.
We all are humans and very difficult to avoid the herd mentality and greed hits all of us equally.
No. Greed does not “hit all of us equally”. Some people are endowed with massive amounts of it.
Yes, you are right. I stand corrected!
Jon-
“… greed hits all of us…”
Great point.
Many assume that everyone who is “rich” stays rich, and that none who are poor move become rich at some point in their life.
Avarice is one negative aspect of wealth attainment. But let’s not forget some of the positive contributors to wealth attainment: perseverance, education, inventiveness, a strong desire to provide for one’s loved ones, and providing valued products and services to other (e.g. Steve Jobs). I could expand that short list.
Most of the readers of this site, I presume, would like to increase their wealth. “Greedy?”
“Greed,” like wealth and freedom, is both relative and complex.
…hmm, what turns the source for the old term ‘…enlightened self-interest…’ (…or, even, ‘noblesse oblige’) off or on?
may we all find a better day.
Peter Theil has said he invests in 200 companies expecting to lose money on 180, break even on 10, make a small profit on 8 and make a billion on 2.
Instacart has a lot of problems. I use Instacart. They have to rely on individual contractors to be shoppers and deliverers. Some are good, some are bad. With multiple orders, items are often missing which I paid for, or I get items I did not pay for (can’t return them once they have been delivered). Some stores raise their prices when on Instacart. Instacart’s web site shows an item that I want, but it turns out to be not in stock. This happens way too often. Still it is easier than driving, shopping in some crowded store, waiting in line, and inhaling who knows what disease. I dislike shopping, it is a waste of time in my mind. I have noticed they are gradually increasing their “service fee”, which means shoppers will be getting fewer tips. Customers will be dropping them. I wonder how many of their shoppers will start working for Uber, DoorDash, Amazon, or other delivery businesses.
On the plus side, they have signed up just about every store (except Trader Joes). But basically they are for groceries. Everything else I get from Amazon, or Walmart if a name brand. Shopping is always a kind of a crap shoot in terms of quality, but it would be pretty much the same if I was physically at the store.
I just got an invitation from Amazon to sign up for Grubhub for free delivery of takeout as a Prime member. While this looks awesome for me, I’m not sure how this works out for Grubhub unless Amazon is subsidizing the company or looking to acquire them.
You will still pay a service fee, plus a tip. I have a similar deal with Instacart (free delivery), but I have an Instacart credit card which gives 5% cash back, which almost pays for the service fee. They make their money on the service fee, which they can increase anytime and they will not tell you why.
Remember the Resturants charge 30% more for grubhub/ubereats than if you just drive your hungry self down there and pay the nice lady running their clover POS.
I heard one example of a lunch order coming to $120 for 3 staffers. They called the restaurant and their to go menu for the same items was $80. This is before the tip.
$40 an hour to drive there and back. Count me in.
@728…Amazon bought an equity “stake” in Grubhub, helping establish a valuation for them, in return Grubhub showed love to prime.
Some grocery stores (also Target etc) have a curbside pickup option. You’ll likely have fewer errors on your order when the picking is done by a store employee.
Safeway had their own delivery sevice that worked like swiss clock. I used it for 3-4 years. Service fee was $3 if you order couple if days in advance, plus I would give few bucks tip to the delivery person (same guy ussualy). That was great service, especially for heavy or bulky items (bottled water, paper towels, tp, etc). They discontinued that service.
“Still it is easier than driving, shopping in some crowded store, waiting in line, and inhaling who knows what disease”
I think we just found the one person on whom that pitch still works in 2023.
Yawn. Try harder. Not everybody is like you.
They’re actually not very crowded on week days! :)
I’m with Leake on this one. Diseases or not, hell is still other people. Introverts unite!!! Just not in the same place.
Of course there are people who have mobility issues, but for normal people I’ve never understood the appeal of online grocery shopping. Rather than picking through hundreds of pictures of items from an app on a screen and hanging around waiting for delivery, at the if the day it’s far less hassle just to go to the store yourself.
Gordon,
80% of people buy 80% identical items over and over again. Once your buying list is in the system, you never have to assemble it again.
Online delivery has its issues, but not that one.
I order on Uber when they have promotions (like 40%-50% off). I order staples (e.g. aluminum foil, or olive oil) from a store with better prices than local store, and get discount, and free delivery. You can also specify replacement items if the ones you want are not in stock.
And it’s exercise. We all need more of that.
Walking to your car. Walking into the store. Pushing the cart. Grabbing the items. U scanning all your items. Walking to your car. Loading the bags into the car. Cart return. Carrying all the groceries inside.
These are all very helpful movements and calorie burning. It adds up if you do it a few times a week. Rather just blobbing in your auto.
I’d rather replace the time spent in the store, and in the car to/from the store with an actual exercise in my home gym, Peloton, or a nice long jog.
…ANYTHING to avoid encountering the great unwashed? (Makes one think about the ‘United’ moniker of the nation, here and abroad…).
may we all find a better day.
1st Cav.
I usually do a cursory pit check and add deodorant when necessary!
Lol
Had wayyy too many gym coaches in school yell at our classes about this.
From friends with children, I’ve met some that love it and I can understand why. Shopping with kids can be harder. I think a lot of people who use it have kids (and have a higher income).
For me personally it’s a different reason. I actually enjoy grocery shopping, but convenience wise it’s nice to have delivery. One notable reason for this is I work from home, so don’t drive much. I live in a downtown urban area and walk or bike a lot when I do go out. I can easily go a week without driving at all. Getting in my car to drive to get groceries and drive back home (vs stopping by on a drive back home after work from an office) just feels like a waste of time for me usually.
Fun Instacart story: The one and only time I used Instacart, I was ordering a few things for a male friend that I was interested in. We had plans (along with other friends) to go cycling, but he had taken ill. He had an out of town girlfriend so I was straddling that line of being friendly but respectful. I ordered chicken noodle soup, tea, bananas, and coconut water from Whole Foods to be delivered to him (around ~$20 worth of groceries). The next day, he messaged to thank me for the items and to say that he didn’t realize how much he actually liked apples. I was surprised since I didn’t order him apples, but figured they must have been out of bananas and replaced the item without checking in with me first? After a few more texts, it became clear that Instacart messed up the deliveries and delivered him $250 worth of groceries from Whole Foods. Like someone’s full groceries for a week or so – foods that don’t even particularly make sense together like sliced meat but no vehicle for them, etc. I was obviously mortified and called Instacart to tell them they could have ruined my chances with this man as sending $250 worth of groceries to a friend who has a gf, is a bit coo coo for cocoa puffs. They ended up refunding me and, obviously, he got to keep the groceries as well. Fortunately, there was a happy ending as he is now my husband since 5 years. :-)
That is by far the sweetest thing I have heard all day. Really.
Good story, thank you for sharing, I enjoyed it. The order that went wrong helped lead to the relationship that went right. Cheers.
Great story. Congratulations on your happy marriage!
There might have been several pounds of pepper bacon in there, which definitely would have sealed the deal for you.
There are no friends in the “friend zone.”
Two things.1) The flight from the office effect …meaning a lot of people are working from home and need to get out.2) It’s natural for humans to hunt and gather. Been doing it for millions of years. They still like to do it today
Dang you insta swooped!
I bet you check the doorstep before he wakes up… you never know…
Maybe I am reading it wrong, but people are congratulating you in what is supposedly a “heartwarming story”, yet you say “to a friend who has a gf”.
I hope you didn’t pick up someone who was already attached, because if he’ll leave someone to be with you, he’ll leave you to be with someone else…
To quote a very wise sage: He who panics first, panics best.
Howdy Folks. Its AOK to save $$ and earn some interest again. Folks that tell you differently are just gamblers…..A squirrels life aint so bad….
Wolf,
Instacart was nothing but a scam to enrich the insiders. They never had a unique business model since grocery stores deliver too, but they capitalized on the the pyramid scheme that the stock market has become.
There are lots of comments on Reddit and elsewhere from Instacart shoppers who lose money on their deliveries if the customer does not tip them. This comment on Reddit summarizes it perfectly:
“Batch pay is going down to $4? Am I reading this correctly? I cannot believe this. We make so little and now batch pay is going to go down for small orders.”
This is an amazing story of our modern capitalism where the entire pyramid was based on exploiting the little people (shoppers) who spend hours on finding products and delivering them to customers.
Before the IPO many shoppers were leaving the business since they were losing money on gas and wear and tear on their cars, and when gas prices rose many simply quit (but I bet Instacart did not disclose this to investors). Contrast the comment from a shopper above to how a former founder made out like a bandit right after IPO:
“Now, Mehta is fully cut loose from firm leadership but still holds on to a store of company stock larger than the entirety of what the firm put on the open market Tuesday. Mehta has 28,280,677 shares — at $30 a piece, which Instacart hovered around midday Wednesday, that’s a holding of around $850 million.”
PS. The company employees who also were promised a big payout will never make much money on the IPO, so it only leaves a handful of people.
Webvan. 1999 disaster. Bankrupt. Good service, but no margins. Same story.
LOL… when I was teaching Marketing at the undergraduate level from 2001 to 2005 the textbook my university used was FULL of Webvan examples of how successful Marketing is supposed to work.
Yes, do people not have memory of even 20 years ago?
Not only that Congress could never force these clowns to make their employees actual employees. They are 1099 workers.
Yet the app tells you when and where you have to work. The company dictates and tracks you. Classic employer employee relationship. The need to be paying half of Fica. As do all the app services exploiting workers.
sufferin’ – bullseye.
may we all find a better day.
Instacart will be filing for bankruptcy as the business model is not sustainable. It was a fad from the pandemic which has outlived its usefulness. I couldn’t care less. Never used them and never will.
The fact that the business even exists is fascinating to me. How tough is it to spend 10 minutes at the grocery store on your way home? You get better picking if you do it yourself.
Well we had 2 kids in 2 years so all of a sudden going to a store was really tough. I ended up doing grocery delivery consistently as it ends up saving 1-2 hours all in and costs maybe $10-15.
Joe,
One of my daughters-in-law does the same thing for the same reasons. She is pretty frugal so it must make financial sense to do so!
Also lately I’ve read a lot of Instacart workers will sub out more expensive items or 2 smaller items rather than the larger (cheaper) one you specified. This makes the total larger, so more tip and Instacart pay for them.
And I agree DIY to save.
I can do 3-4 days of grocery shopping in 30 mins. I mostly hit the sales and use the coupon/cash back apps.
I worked in the same building where Instacart started. They started way before pandemic. Mostly empty office way before empty offices were a thing. Once in a while they would have trainings for prospective employees I guess. You should have seen this audience.
Wolf, do we know that the series D1 investors did not have any protection structuring such as ratchets?
Late stage institutional investors in Box were issued more shares when the IPO was priced below the private round.
Excellent catch.
The surface details on investment deals are often very misleading…ratchets are just one example.
Investment agreements are just contracts (long, long, long contracts) and they can be customized almost infinitely – subject only to government laws and regs (and sometimes…)
When I was a kid I remember talking to a butcher that owned a small high end grocery store on the SF Peninsula and asked “why don’t you deliver” (after my Mom sent me down on my bike to get something).
He said “you can’t make money delivering groceries” He told me that lots of people have tried in both the US and Europe over the past 100 years and people will never pay enough to cover the real cost of delivery (and dealing with delivery mix ups). He then told me how his boss as a young butcher in Italy tried and failed and how he personally tried and failed after he first come to the US thinking American born Italians in North Beach that had more money than the people back home in the “old country” would be different (but they were not)…
About 20 years later I was talking to a stock analyst friend and based on that conversation predicted Webvan would fail (and it soon did fail losing ~$800 million when they went BK).
I read a week ago that the Instacart guy “personally” walked away with $800 million after the Instacart IPO:
Yes, the sure way to make money in food delivery is to walk away with a $1 billion in equity during the hype-and-hoopla era. Mehta became a billionaire with this.
I wonder if he will find investors foolish enough to pay him 1 billion for his shares. After the IPO collapse I doubt it.
He might end up like the paper billionaires in the last bubble.
Fair point…
1) Insiders have to wait out the shortish lock-up period,
2) They have to find enough suckers for huge slugs of shares,
3) But…your friendly NYC investment banks specialize in roping rich suckers and hedging insider exposures.
4) But those paper billions often turn out to be somewhat less. If you can’t fully liquidate your holdings, you aren’t as rich as you appear.
@Cas127, he might no longer be an insider. He resigned his position as Chairman of the board right after the IPO.
SoCal,
Interesting point…but I don’t think you can get around share lock ups by ceasing insider role (my recollection is that the restrictions formally attach to the actual shares, not the person – weird but how the agreements/laws are structured).
And even if you could, it doesn’t solve the “scarcity of suckers” problem.
IPOs are carefully stage-managed events that sell a smallish number of outstanding shares (10%-20%) in order to maximize the PR grabbing “price pop” (used to lure in more suckers). But at the end of the day, it is *hard* to offload huge slugs of insider shares at prices/valuations near manipulated “market” – as prices go up and up, by definition fewer and fewer potential buyers agree with goofy valuations.
And people are wary as hell when somebody tries to dump 10-40% of all shares out of their personal stash (“What does this insider know that I don’t?”).
If it were easy to liquidate huge slugs of shares, you would be seeing sales of 60%-80% at or near IPO, instead of 10%-20%…and lock-ups wouldn’t exist.
As with “market cap”, the reality of the “billionaires’ IPO” is somewhat less than the hype. Insiders still make a ton of money…but not the theoretical maximum…at least not quickly.
Are you stating that Mehta sold $800 million of his shares in the IPO?
It doesn’t matter whether he sold or not. Wealth is wealth.
But I said, “walk away with $1 billion in equity,” — “equity” not “cash” — which implies that he still has the shares or some of the shares. But he “walked away,” meaning he’s outa there.
It is infuriating to see that Fed policies inflated tech bubble 2.0, with double hot air! Almost 30 years of Fed bubbles, starting with LTCM and the Greenspan put!
Personally worked in a small family owned food store circa 1958, and was tasked with delivery with my bike that was already set up with baskets front and sides for delivery of newspapers in early AM.
Got tips from every delivery that made it worthwhile for me…
Grocer owner/boss would pick stuff to be the best available for his best customers…
NO problems,,, and tips, similar to papers, were the best for me at age 14-15.
In the very old days, it was common to have your groceries delivered to your home.
VVNV/WL – and yet, like dairy, full-service gas stations and home newspaper delivery (let alone newspapers, themselves!) by our youth, they have all but vanished…
Makes me think of mebbe another factor at play, here, that being the appeal of the sheer amount of retail selection (now incredibly, and worldwide, amped by our digital age). Recall an article, long ago when the first Soviet emigres arrived here, and their utter wonder at the amount of stock and choices on U.S. store shelves (given their prior lives in an essentially-rationed society) (…we’ll continue to overlook our own consumers’ less-dire retail situation and response during the pandemic, for the nonce…).
may we all find a better day.
Instacart is a fundamentally flawed model because 3rd party pickers will never be as efficient as pickers who work at a particular store. Its a lot easier to memorize one store than a whole bunch of them.
My spouce often uses Target’s curbside pickup feature – seems to work well and doesn’t cost extra. This is the better way to do it: use in-house employees (who know their own store) do the picking.
That said, I’m not sure how that would translate over to a delivery service.
I noticed that many of the stores that embraced curb-side-pickup during covid have really de-emphasized it now. The big pet food stores and Home Depot especially. I think that they have found the extra labor for this service not really worth it, as well as the loss of impulse buying.
I love parking in the “pickup” parking spots as they are always empty and always very close to the store entrance. Been doing so for 2 years now.
Our Kroger affiliate here in Colorado has greatly increased the pickup service. They’ve remodeled our local store to give more space for the pickers. No additional cost for the service or for delivery. It seems to have reduced the number of customers in the store at the time I shop, but at the expense of having numerous pickers driving huge carts around the store. It’s convenient to use but the pickers aren’t as picky as I am about quality produce and undented cans so I mostly shop myself.
Smart money?
I heard Instacart’s plan is to offer the service below cost so they can make money off user data to generate advertising revenue, like an Amazon, Google or Facebook model. Problem is, the core service isn’t in high demand and doesn’t have great growth potential.
“Where did you find your plumber and electric service guy Hal?”
“Instacart Ads!”
“Of course! I knew you were surfing Instacart ads, you said so during golf last week.”
Wholesome ;)
During the pandemic SPAC and startup boom everyone was like, “There’s free money forever!” due to ZIRP blowing everyone’s valuations out of the water because valuations supposedly include future gains as well as future cash flows of the company into the foreseeable future. (Or some argument of the same type.)
It might be interesting to normalize these types of losses to the big present value losses on the long dated Treasuries bought during the same time under ZIRP since expectations are similar in duration.
It was a calculated risk. They were just really bad at math.
These delivery apps charge an arm & leg for convenience. Possible fees include
– a built-in markup on menu prices vs. actually in-restaurant/in-store prices (business owners say this is to compensate for the commissions that delivery apps charge)
– a service charge
– a delivery fee
– a “driver benefits” fee for California “due to Proposition 22” (of course this charge is passed on to consumers)
– driver tips
Often times the bill is 70-100% in excess of simply going to the restaurant or grocer yourself & cutting out the middleman. And these delivery companies are still barely breaking even, if not losing money.
Food delivery companies were also founded during the first internet bubble & it was established back then that the economics didn’t work out.
The only people willing to pay for this kind of convenience on a regular basis, especially now that COVID has died down, are the upper-middle class & above.
Restaurant delivery is a different beastie, but my pandemic Instacart supermarket orders were only marked-up 15%-20% all-in (I closely examined the bills for product level mark-ups…they were rare-ish, then at least)
I mean california is pretty smart there.
They won’t let these app service company have a free lunch off the workers in their state.
App services take that half of fica savings and pocket it. Meanwhile the state and federal gov is saddled with the future cost of employees being taken advantage of.
It is the proper course of action. Imo
Some of these delivery dudes are so rude they drive at double the speed limit on residential streets to make time, endangering the lives of children. Others look like they were just released from the bighouse. I wonder if they are bonded and insured. Probably not.
You entirely missed the reason the existing investors invested in the last round. They HAD to. The company was out of cash and if they didn’t invest, it was over… and no PE company wants to print a loss in this market.
No, they didn’t HAVE to. Lots of startups – thousands – are not getting more funding from existing investors, and many of them have already shut down, and others are in the process of shutting down.
That last round of funding in March 2021 was during or just after the peak of the startup bubble. Investors were EAGER to fund this stuff.
Another option, if they didn’t feel like the company was worth $125 a share, would have been a down-round at $30 a share or something. That wasn’t even on the table. They upped the ante instead.
Every time I hear about something like thiscompany I think back to an article by John McNellis on this site in 2019. He totally lays out why this NEW kind of Silicon Valley “unicorn” is always destined to fail. One snippet…
What do DoorDash, GrubHub, Postmates and Uber Eats have in common with Lassie? Nothing. They’re dogs; Lassie’s a superstar.
Here is another…
Here’s the rub: You can scale intellectual property, you can’t scale labor. Your millionth pizza costs as much to deliver as your first.
The whole thing is both funny and insanely informative. I urge everyone to read it.
https://wolfstreet.com/2019/11/16/meals-on-broken-wheels-uber-eats-grubhub-doordash-postmates/
Is it possible to get a list of stores that DON’T subscribe to InstaCart? Because that’s where I want to shop—without the frenzied aisle maniacs and checkout sorting delays.
Delivery can make sense in certain settings. The Whole Foods near the Symphony in Boston would deliver groceries within a certain radius if the customer ordered over $100 worth of goods. A friend of mine in the South End didn’t have a car and used that service regularly as it made shopping so convenient for him. But he had to go to the store and shop first. So no pickers and sorters, just a few delivery people to run the orders out at the end of the day. I’m guessing it was profitable, unlike what Amazon is doing with Whole Goods these days.
“Delivery can make sense in certain settings”
On the Greek island of Skiathos, and I’m sure many others, the groceries came by a sixteen foot boat propelled by a Mosquito outboard motor. Twice a week the”shopper” would fill orders in the town and then circle the island, delivering to beachfront rental villas and tavernas. It was a godsend, as there wasn’t any mechanized transport on Skiathos at the time other than buses and a few taxis that were hogged by German and South African tourists. Island anything is always going to be more expensive, but the prices were reasonable. And you paid in drachmas at a favourable exchange rate.
It’s hard to imagine that the insurance companies are happy with their “personal use” quotes on policies for delivery drivers and their vehicles. When an accident occurs during a delivery, presumably it pushes the liability onto some miserable little guy scratching for his crust, and his misinformed insurance provider, who then has to spend more money trying to disentangle themselves from this mess. Few insurance companies are not chiseling scum(see Katrina), but even they don’t deserve this.
The biggest problem with delivery in that part of town is the parking. I’m sure you see all the delivery drivers that park illegally, leaving their cars in the street, to go pickup orders.
When I did DoorDash and Postmates in the bean, I used a motor scooter instead of my car – much easier to navigate city traffic and it costs less to operate. But, I could only accept orders that were physically small enough to fit on the bike.
My theory is that it is that Peloton owners who order their groceries to be chosen and delivered by someone else. So we get Instacart, a nice add on service to save time that can be devoted to riding a Peloton bike.
How’s this for a conspiracty theory? Peloton devotees ride, ride, ride, faster and faster, burning calories while being berated by a guy in tights and a head set. More calories burnt, more need for food, less time to get food, so need Instacart to get it and deliver it. More time to ride the Peloton bike, and round and round it all goes.
Wolf is onto something with his Imploded Stocks. More than just financially. Maybe they are all related in some societal way.
Always look forward to the next installment of the Imploded Stocks saga. Great work!!
MW: Jamie Dimon on interest rates – ‘I am not sure the world is prepared for 7%’
Yes, 7% would be a tough nut to crack. But we’re not there yet. We’re not even at 6%.
There is a LOT more of this type of BS still left to shake out. The age of financialization has destroyed this country and made the “club members” very wealthy. However, these Harvard and Stanford business grads have circled their wagons and bought congress (one reason no one went to prison during the MBS fraud) so I doubt they will ever give back their ill-gotten gains and the only true solution would be “heads on pikes”. Again, something that I don’t see happening, if simply because the average American is an unmotivated idiot.
Yes, a bit cynical, but it is what it is…
“Not Retail Investors” -WR
“[Rickert]This is Brownfield Fund. I want to unload my credit default swaps.
All right. What you got?
[Rickert]Twenty AA tranches of A.B.S. CDOs.
A.B.S.? Are these…These are pretty bad?
[Rickert]Absolutely. They’re complete shit.”
–The Big Short(Film), 2015
MW: JPMorgan boss Jamie Dimon warns 7% interest rates would cripple the global economy as the Fed holds the line at 5.5%: ‘You find out who is swimming naked when that tide goes out’
Jamie Dimon of JPMorgan Chase warned the pain of another jump to 7% would be worse than the rise from 3 to 5%. ‘You find out who is swimming naked when the tide goes out,’ he said.
MW: CVS says it will close NINE HUNDRED stores by the end of 2024 – 10% of all its shops – as it moves to online strategy amid rampant increase in shoplifting
CVS is set to close hundreds of stores across the country – as more stores move towards online sellers amid increases in crime .
CVS has been closing stores for years, as has Walgreens. It’s the Brick-and-Mortar Meltdown, as I have called since 2016. Now pharmacy sales have gone ecommerce, directly from the healthcare providers’ own online pharmacies to the patient’s mailbox, and there’s no reason to go to a CVS. Their whole business model is kaput, similar to department stores, but lagging department stores by a few years. And they’re blaming shoplifting, LOL? They now try to pivot to offering primary-care clinics in their remaining stores, with a doctor and a nurse, or whatever. This may or may not work either.
Ya know, you have a point on the brick and mortar drug stores. My local CVS has expanded its isle widths and the products, fewer in number, on the shelves, are widely spaced. The place has seemed devoid of customers too. One maybe two in there at at time when I’ve visited, looking for a box of Bandaids.
Having read all the comments, it seems if your time is valuable, dislike shopping, and have the bucks, then grocery delivery services are useful. If your time is not particularly valuable, enjoy shopping, or are relatively poor, then you will not likely use grocery delivery services.
As I mentioned, in the distant pre-internet past, it was common to have groceries delivered. The only cost was a tip to the kid doing the delivery.
As for grocery stores that do not have some sort of delivery option nowadays, I can only think of Trader Joes. But even there, when I used to shop there, I recall seeing people on phones obviously talking and shopping for someone else.
Anecdotal:
In downtown Toronto, you’ll see dozens of young guys, mainly international students, congregating near the 24H McDonalds and other fast food restaurants to deliver them to the nearby condo dwellers.
Right now the interest rates are set to go higher due to bond yields, so I’m keeping an eye out on whether the number of delivery persons are increasing or decreasing.
Isn’t Instacart and most of the other “implodors” the result of undisciplined investment that results from too much money sloshing around, with a large side dish of inflation just to make it worse?
If so, will QT eventually bring this madness to an end?