How robotic delivery will disrupt the grocery industry
Groceries is a $650 billion market in the U.S., which is not surprising because people need food. This probably won’t change. But what may change is how you get your groceries. Currently, if you are an average consumer, you go to the supermarket around 1.6 times per week and each time you spend on average around $32, or $51.20 per week.
If each trip takes 30 minutes, you incur an opportunity cost of 0.8 times your hourly wage per week (the median hourly wage for people with a Bachelor’s degree or more is currently approximately $24 in the U.S.), which means you essentially pay a 37.5 percent markup on the groceries you buy for going shopping yourself.
Given these numbers, and given how boring and repetitive grocery shopping can be, it’s no surprise grocery delivery startups like Instacart have achieved $2 billion+ valuations. Grocery delivery startups are so popular, there are other startups that help you bootstrap your own grocery-shopping-as-a-service startup. All of this is good news because it means you won’t have to go shopping yourself anymore. But these services also have downsides: You no longer control when you receive your food, and these services usually have minimum order sizes, making them impractical when you have a specific craving for ice cream right now.
But what if you could get groceries in less than two minutes without even leaving your apartment? Another beer? This time try an amber rather than the lager you just had? Think guacamole would go extremely well with those Doritos you just opened? Missing an egg for Sunday morning pancakes? In other words, what if you could get groceries quickly delivered to your door with the click of a button or by saying, “Alexa, get me a beer”?
This and a lot more will be possible in the next five years as robots become more reliable, inexpensive, and efficient. In-door delivery robots could remove items from refrigerated shelves in the basement and ferry them upstairs to apartment dwellers. The automated “bot-marts” could be operated by grocery retailers or residential property management companies. Together with RFID-based payment systems, loading and unloading mechanisms to and from the fridge, and AI algorithms to optimize inventory and restocking management, delivery bots could autonomously supply a building’s residents with groceries. (Full disclosure: I work for a robot-delivery company. While we have an offering for apartment buildings, we don’t handle groceries, and we don’t offer automated refrigeration or restocking.)
Because software could track the demand for specific items, these mini-marts could automatically order supplies as needed, eliminating waste. Since most consumers actually don’t change their grocery purchasing habits all that much each week, such a system could rather quickly learn what its residents like to eat and drink and make sure to always stock those items. This means you could have a never-empty fridge without ever having to go to the grocery store again.
Once such a system is in place, there’s no reason automation couldn’t expand to restaurant delivery or on-demand, automated cooking. For instance, autonomous cooking robots can already prepare specific meals autonomously, including burgers, pizza, sandwiches, and coffee. There are even attempts to create general cooking robots that learn from human chefs to cook just about anything. Integrated with the bot-mart, these robots could provide residents with hot meal options.
Perhaps the only question remaining is whether there is a business case for this. The main cost driver would be restocking the on-site shelves, and revenue could come from a monthly flat service fee for residents. Given the opportunity cost of going shopping, one could charge up to $20 per week per resident! ($24 hourly wage times 0.8 hours spent on going shopping per week.) In a 20-story high-rise with four units per floor, this would mean $1,600 of revenue per week. And this still leaves a lot of upside with higher-income residents who will value this service even more.
Initially, this may only be profitable for high-rises that are big enough, but over time, automated grocery delivery could be expanded to single-family homes. That will require secured outdoor delivery robots that can deliver from automated fridges spread across neighborhoods; and self-driving cars and trucks will help further automate the restocking process to where even the cost of that can be reduced to a minimum. Eventually, robotic grocery shopping will not only be more convenient but also cheaper than going shopping yourself.