With the coronavirus disease pandemic putting a damper on face-to-face transactions since last year, on-demand grocery apps have been making it big worldwide. And Food Rocket is pouncing on the opportunity.
The San Francisco-based startup has recently raised $2 million in funding from AltaIR Capital and Baring Vostok fund. Also in the seed round is the angel investor club Angelsdeck, which includes Russia’s Yandex Philipp Bashyan. Aside from his investment, the co-founder and COO now also serves as an advisor to the startup.
Though Food Rocket is joining the industry besides stable players, the team is confident in its timing and position. Its CEO and co-founder Vitaly Aleksandrov said the level of competition in the U.S. is “still manageable.” And that, Aleksandrov believes, gives them a chance to become an industry leader.
In fact, they don’t only aim to be a conduit between the stores and the shoppers. Instead, the startup aims “to replace brick-and-mortar supermarkets.” How? By changing customers’ current grocery shopping habits.
The app offers options to order fresh groceries, household goods, and ready-to-eat meals. But perhaps what makes it unique is its shorter delivery time of 10 to 15 minutes. In fact, it’s the first startup to offer such a short delivery time within the state.
Following its launch, however, it’s only currently available in limited areas. These regions include SoMa, Mission Bay, South Park, Hayes Valley, and Japantown. Amid its scope at the moment, Food Rocket aims to set up 150 “dark stores” within the West Coast.
The Demand for On-Demand Food and Grocery
The market for on-demand groceries is ripe; there’s no doubt about it. Data says the U.S. food delivery revenue jumped from $22 billion in 2019 to $26.5 billion in 2020. Added to that, the income is projected to climb up to $28 billion by the end of 2021. Then, it might reach $30 billion by next year.
Perhaps the biggest challenge to Food Rocket at this point is not the market size but competition. After all, it would be hard to keep in step – much more to get ahead of – bigger players. For instance, DoorDash, Amazon Fresh, GoPuff, and InstaCart are well-established in the market. These players have joined the game much earlier and have positioned themselves well.
Stats consolidated by Business of Apps tell us that DoorDash leads the service providers in terms of market share in 2020. Uber Eats comes in second, followed by Grubhub and Postmates. It’s not surprising that DoorDash leads the race as it pioneered the platform-to-consumer model in the states. Uber Eats, on the other hand, is the most widely available service of its kind, actively present in six continents.
As for grocery delivery app downloads in 2020, data shows DoorDash still leads the race with around 39 billion downloads. Uber Eats (20 billion) and Grubhub (16 billion) come in second and third.
Can Food Rocket Bring Disruptive Innovation?
How Food Rocket could disrupt the industry remains unclear. But perhaps picking the brain of its founder and CEO would give us a few ideas.
In a recent article for Forbes, Aleksandrov said that despite the rapid growth of the industry, on-demand delivery service remains to be a low-margin business. He says this is due to three reasons. First, clients expect cheap delivery fees. Then, there’s the ubiquity of promos and high labor costs.
To stay afloat in such a cut-throat field, the CEO says he sees a shift to robotization. He believes that to make a profit, there must be tech, huge orders, and correct localized routing. By tech, he meant drones and self-driving cars. It also includes software that can provide delivery times while weighing factors such as traffic.
In relation to the tech mentioned above, he suggests tailoring the finances to allot enough for research and dev. Added to that, he says it’s crucial to keep ads “simple and easy to understand.”
The founder didn’t mention much about his startup in the article. But it’s safe to assume that the ideas he wrote about fall under the same strategies he’s planning to do.
After all, Food Rocket needs to be smart with how it expends its resources while trying to compete with giants. But perhaps, the short delivery time will be a good start.
