When people think of the dot-com bubble of 2000, they often think of Webvan. The grocery delivery service blew through $800 million, went public and then spectacularly imploded with a forced asset sale. But nearly 20 years later, food delivery has reached new levels of creativity, showing that even when technology companies fail, they still leave a legacy that can lead to success.
Today’s delivery services have used Webvan as a cautionary tale, avoiding the mistakes that brought it down. Webvan tried to sell high-quality foods at “Safeway prices.” Today’s delivery services are either crystal clear about what they’re delivering (think Blue Apron) or they let people choose their own level of price and quality by delivering directly from existing stores and restaurants (think Postmates).
Consumers now can buy virtually anything, from raw ingredients to six-course restaurant fare, with just a few taps on their smartphones. At the same time, the importance Americans put on convenience versus price has grown, and millennials are demanding round-the-clock delivery options. Then there are the new studies linking increased happiness to spending money to save time.
But for some consumers, access to fast, inexpensive delivery has become a quality-of-life issue. In Canada, remote villages depend on Amazon Prime for nonperishable food items. One Native group relies so heavily on Amazon Prime that they claim their village would fall into “pandemonium” if Amazon withdrew the service.
That’s also true of American communities that are underserved by grocery stores and restaurants. In fact, recognizing that online stores can be less expensive and easier to access, the USDA in January announced a pilot program to allow retail food stores to accept SNAP benefits (Supplemental Nutrition Assistance Program) through online transactions. That program should go live in seven states early next year.
Amazon eagerly volunteered to participate in the pilot program, and went a step further. Earlier this year, the behemoth started offering its Prime service at a moderate discount to customers receiving certain types of government aid. Prime membership usually costs $99 annually. But for low-income households, the service can be accessed for $5.99 a month — a $27 savings. Smartly, Walmart wants in on the delivery action — and the more the merrier, as increased competition in the marketplace will produce decidedly pro-consumer effects. (Ironically, Amazon’s grocery delivery service grew out of the ashes of Webvan.)
There’s still plenty of room for this market to grow. Experts peg online penetration of food delivery at roughly 1% despite more than a billion dollars in VC investments.
And the kinds of jobs these companies are creating pay better than any retail or restaurant jobs they might replace. According to a study by the Progressive Policy Institute, the e-commerce sector is growing faster than the retail sector is shrinking. And hourly wages in the digital sector are roughly 29% higher than wages in the physical sector.
The trajectory from Webvan’s demise to the excitement of today’s marketplace shows just how technology is changing our lives in unexpected ways. We need to continue to encourage tech entrepreneurs to start new businesses that can evolve and thrive. Because even when their ideas go bust, they can often lead to real changes that help make the world a better place.