Startups battle for Bay Area on-demand delivery

From the crowd of e-commerce and Internet companies pursuing retail delivery services, two startups are pulling ahead with aggressive plans to deliver — faster than ever — online purchases to Bay Area consumers.

The first is Instacart, a San Francisco-based grocery delivery startup, which last week rolled out a subscription service that lets customers get free deliveries with a $99 — a nod to Amazon Prime.  Members pay $99 per year to receive free same-day delivery on grocery orders of $35 or more; without the subscription, deliveries are about $4.

The timing of Instacart’s new Amazon-like subscription comes on the heels of reports last month that Amazon is preparing to bring its grocery delivery service, which has been operating in its hometown Seattle, to San Francisco this year.

Instacart founder and CEO Apoorva Mehta is an Amazon veteran. He left his engineering job at the e-commerce giant to start Instacart out of his apartment. He said Instacart is prevailing where so many others have failed — Webvan and Kozmo are some of the more memorable delivery disasters — because the company doesn’t make or store its own food, which keeps costs down. Customers fill out their grocery list online and Instacart personal shoppers pick up at Safeway, Trader Joe’s, Whole Foods and Costco and deliver within the hour or at a scheduled time.

Instacart is one of the few that promises on-demand and one-hour delivery from multiple stores. LolaBee’s Harvest, an Oakland-based online grocery service, delivers local farm-raised food on scheduled days. NatureBox, a startup in San Carlos, sends monthly packages of healthy snacks to customers across the country, but doesn’t dabble in perishables. But analysts say these startup experiments likely aren’t scalable — Instacart would have to invest in refrigerated vehicles to transport frozen foods, and there are huge risks of produce becoming bruised or overripe in transit, and of meat and dairy products spoiling and posing health risks.

UK-based Shutl landed in San Francisco in March and is promising on-demand delivery to local residents by the end of the year. Shutl partners with retailers and local couriers to deliver online purchases in 90 minutes. It boasts its fastest delivery is under 15 minutes, and will deliver 24 hours a day, seven days a week.

Shult announced today it has snagged two high-level executives from New York courier company Urban Express and online dating service eHarmony in Santa Monica. The new appointments — Mike Fiorito, ex-CEO of Urban Express, and Sean Cornwell, former eHarmony vice president — signal that Shutl is building out its San Francisco headquarters and is close to launching its North American operations. A spokeswoman also said that Shutl is finalizing partnerships with retailers, although she declined to say which stores.

Fiorito brings to Shutl the experience of watching a dot-com era courier service crash and burn. He worked for New York-based Urbanfetch until it went bust in 2000, blowing through millions in investments. From the wreckage he helped created Urban Express, which employs bicycle messengers, foot messengers, dispatchers and truck drivers.

Will Shutl be another Urbanfetch, or a leader in the race for same-day delivery victory? It’s too early to tell, most analysts say. Same-day delivery is wide-open space with few head-to-head competitors, and no one is choosing winners yet. But Shutl’s recent funding — about $10 million after a few rounds — gives it the cash to expand aggressively into the Bay Area, and maybe even enough left over to recover from the mistakes it, and all delivery companies, will make.

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  • UberOnTime

    Los Angeles is the first to get on-demand postman