Grocery Delivery Site Instacart.
What to say about a grown man who clearly has no interest in food shopping, barely knew what he wanted or how to even find it, let alone that the experience was in Whole Foods, a grocery chain humorously called "Whole Paycheck." So many things wrong with this I am not even go to bother. But enjoy.
Then we have the next one - Shyp - the pack and ship app. Maybe you have been in a cave but there are more pack and ship outlets than you can swing an Etsy or Ebay account at. This is not new, not interesting nor even useful. But hey when you need to re-invent the wheel for rich dumb asses with more money then sense this is a good way to do so.
After I stopped laughing I knew that the e-bomb is coming. The current layoffs are in all areas of tech and climbing. H-P is announcing changes, then add conventional retail such as Sears, Penny's and Gap which are announcing losses. So of course when one reads of such e-sites as Fab, Social Living and others are doing the same the bubble is just still high but moving into bust-o-sphere. Add to that the investigations and issues surrounding Air BnB and the Attorney General of New York looking into their books, does not bode well for the 'sharing economy' set.
And there is much more bounce back as other Cities look into Lyft, Uber and other shared business models and their long term affects on the local economy. Eventually taxes must be collected and paid.
But what is really tragic is that the idea of a market, target audience and overall business plan simply focuses on the MEopic generation. Young lazy kids whose oblivion to the real burdens of doing actual laundry, shopping, cooking said shopping, actually trying to figure out how to get somewhere affordably and easily is not something they seem aware of or even interested in. They all live in work in cocoons of some type where helicopter parenting has translated into sheltered living and working. It is the new GEN APP Generation.
No one in their right mind is going to add 20% markup on top of already over priced food. Well the 1% and good luck with that as they pay people already to do it and why they would hire a part time college kid or housewife to do it and deal with that is beyond my grasp. This is where I know they are not 1% but aspirants whose families lived in a gated world of faux middle class and perhaps still do. I watch the Real Housewives...
Then we have the idea of insurance, licensing, taxes, and other fees. Apparently none of them have thought of that or care to. Wait til that one comes down when a Taskrabbit gets hit by a bus and their car is destroyed and the Government finds out that they have not been paying taxes on those 1099 earnings. Will Ashton Kutcher be my friend and help me out there?
The bomb is falling, or the sky, or the house Dorothy. Get ready for it's a coming.
But to the tech sector they see nothing bur roses and sunshine. This disturbing but telling article demonstrates the hubris, arrogance, and its accompanying dance partner, ignorance, with regards to where they think all this will lead
As far as economic cycle of boon and bust, one article I read said that if this does occur it will have a much smaller scale affect. As in this decade cycle (they are almost all now cyclical by decade) it will be confined to the much narrower VC and Tech sector with some adjacent communities possibly getting fallout with regards to mortgages and other anciliary investments. San Francisco and New York come to mind as both have given immense tax breaks to generate the e-trade business but even Detroit has done the same and that is one city that cannot take much more.
The article below is from New York Magazine and you can see that in fact major investors are in fact engaged and involved in many of these sharing businesses. And in turn they will be affected in the same manner as they were in 2008 with the mortgage losses. These are not high flying Google glss wearing entreprenuers.
What I don't see are any supposed Activist investors such as the Leopold and Loeb twins that are busy with Soethby's, Almgen and Herbalife involved in the tech field at all. And if they were such activists concerned about the long term growth and viability of select companies of which they have invested, then where are the usual suspects? Even they seem to not be a knocking.
The Problem With Profitless Start-ups
By Kevin Roose
Yesterday, I ordered lunch from a gourmet meal-delivery start-up called SpoonRocket – a takeout container of sirloin au poivre and roasted cauliflower that was shuttled to my door in exactly 11 minutes, costing me $8. I then took an UberX car to a meeting across town, paying roughly $10 for a 15-minute ride. On my way, I pulled out my phone to see about getting my broken dryer fixed through Handybook, which provides on-demand repairs in the Bay Area for less than a local handyman would charge.
There are dozens more services like these operating in and around San Francisco – Homejoy for cleaning, BloomThat for flowers, Postmates for courier service, and on and on. Most of them provide cheap, convenient amenities at the tap of a smartphone app. Few of them are profitable on a corporate level. And together, they’ve formed the backbone of a strange urban economy: one in which massive venture-capital injections allow money-losing start-ups to flourish, while providing services that no traditional, unsubsidized business can match. It’s an economy built on patience, and the hope that someday, after the land grab is over and the dust has settled, a better business model will emerge.
It’s hard to know which of today’s new start-ups are unprofitable. But in some cases, losing money is kind of the point. I have no inside information on SpoonRocket's financials, for example, but I imagine that the company books a loss of a few cents every time I click the order button. (There’s just no way, short of a supply-chain miracle, that my $8 covers the cost of preparing a gourmet lunch, driving it to my house, and paying all the drivers and cooks and engineers and assorted other costs associated with running their business.) But SpoonRocket doesn’t have to make money, because it’s just raised $10 million in venture capital expressly so it can keep its prices low. The metric its investors care about right now is user growth, not profits. And if, indeed, the company is selling meals for less than they cost to make, those investors are willing to fill the gap.
This business model is great for consumers. As a result of start-ups’ willingness to lose money for months or years at a time, I get cheap, fast services that come with an effective subsidy that can add up to thousands of dollars a year. But they're problematic for the businesses themselves. Unlike Amazon or Google (which have profitable core operations that subsidize the money-losing services elsewhere in their business), or Uber (which uses the profits from its high-margin Uber Black and Uber SUV lines to subsidize its low-margin UberX service), many of today’s start-ups have no profitable parent company pouring in money. They’re simply taking millions of dollars in venture capital with the hope of keeping prices low, pushing rivals out of the market, and eventually finding a way to turn a profit.
There are several worrying things about this new, profitless-on-purpose way of doing business.
First is that the while some of the money used to fund money-losing start-ups comes from rich Silicon Valley investors, some large amount of it comes from public pensions, college endowments, and other, more modest sources. Lyft backer Andreessen Horowitz, for example, has gotten investments from the Imperial County, California, Employee Retirement System and the University of Michigan; the Tennessee Consolidated Retirement System invests money with SpoonRocket backer General Catalyst. If you asked them, I'm sure that firefighters in Memphis and public schoolteachers in El Centro would have no idea that their retirement funds are being used to lower the price of my delivery lunches and rides across town. But that’s exactly what’s happening. And when these venture-backed price wars happen in dozens of high-end service sectors all at once, you have a strange cultural phenomenon in which Main Street dollars are being used to finance the lifestyles of cosmopolitan yuppies.
The second issue with the venture-backed service economy is the Amazon problem – specifically, the practice of selling goods at or near a loss creates a deeply unfair competitive terrain for regular businesses. A start-up can sell a $10 lunch for $8 because it has money in the bank and investors who will rush in with more when the supply runs low. But if my local sandwich shop tries to do the same thing, it won’t make next month’s rent. The same goes with non-retail service businesses. Taxi companies had a decent chance of competing with UberX in its early days. But now that UberX and Lyft are both slashing prices to the bone with the assistance of millions of dollars in venture capital, the fight simply isn’t fair.
In the context of international trade, this kind of predatory pricing (selling goods at or below cost in order to drive out rivals) is often illegal. There’s a reason why it should trouble us domestically, too – trying to compete in the VC-backed economy as a profit-conscious business is like running a triathlon with ankle weights.
The third problem is that, as companies like Kozmo and Webvan learned in the first dot-com crash, the music stops eventually. At some point, investor patience wears thin, and the businesses that are still losing money on a per-unit basis tend to shrivel and die. When that happens, what’s left? A hole in the local economy where the local sandwich shop used to be, and nothing to fill the void. Given enough time and enough venture-backed land grabs, we could end up with an oddly configured service sector that contains a fraction of the jobs and utility it did before the subsidized prospectors moved in.
Cushions for emerging business models aren't all bad – not every company should be forced to make a pretty P&L right out of the gate, and without patient investors and other forms of subsidy, we wouldn't have companies like Twitter or Amazon, or things like electric cars and solar panels. And, as I said, the venture-backed economy is amazing for the people who live in it. In the history of the world, there’s never been a better time to be a consumer in San Francisco or New York than today, what with our cornucopia of cheap, on-demand services. I would miss my cut-rate sirloin and cheap Ubers to the airport if a regulatory authority or a market crash took them away.
But you can see how, on a grand scale, the existing model could become problematic. The only way the loss-making venture-backed economy can keep chugging along is if there is a constant supply of new money coming in at ever-higher valuations, subsidizing low prices and making earlier investors whole. Eventually, as in Amazon's case, the public markets may have to bear some of the subsidy. It’s a kind of benevolent Ponzi scheme, one that results in a lot of very cool services being provided at or below cost to a select group of urban consumers, and a lot of traditional businesses being forced to paddle hard to stay afloat. The profitless start-up model should worry us about the future of commerce and competition, even as we take advantage of its gifts.