Jan 2, 2019 · 12m · a16z
a16z Podcast | People Marketplaces Take On One of the Last Great E-Commerce Opportunities: Groceries
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of the a16z Podcast, host Michael Copeland talks with Andreessen Horowitz's Jeff Jordan and Sam Gerstenzhang about how 'people marketplaces' and asset-light mobile technology are revolutionizing online grocery delivery.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The host as informed peer 2.2 Guest teaching 4.3 Guest disagreement 0.3 The host pushing back 0.0
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 3:55 Sam identifies smartphone premise as a red herring
Sam Gerstenzhang mildly pushes back on the conventional framing that smartphones enabled these services simply by existing, noting the key dynamic is workers bringing independently purchased devices to the platform.
Hardest push from the host ▶ 1:54 Host presses beyond simple transportation examplesMichael Copeland prompts the guest to move past obvious examples like Lyft to explain how marketplace dynamics handle more nuanced sectors like home cleaning and food delivery.
Biggest teaching moment ▶ 4:46 Jeff explains Webvan's asset-heavy failureJeff Jordan provides a detailed breakdown of how Webvan burned $1.2 billion building parallel supply chains, contrasting it with Instacart's virtual model that leverages existing store inventory.
The host holds their own ▶ 3:18 Host synthesizes logistics model as FedEx without jetsMichael Copeland demonstrates sharp industry insight by framing DoorDash and Caviar's complex algorithms as operating like FedEx logistics without needing expensive physical vehicles or airplanes.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Defining People Marketplaces and Service Networks | 2 | 3 | 0 | 0 | Host Michael Copeland introduces the topic and asks foundational questions defining people marketplaces. Guest Jeff Jordan educates the host by drawing parallels to eBay and detailing how smartphones enabled service marketplaces. | |
| Restaurant Delivery Logistics and Infrastructure | 3 | 4 | 1 | 0 | Host offers a solid synthesis comparing restaurant delivery platforms to FedEx without jet planes. Guest Sam Gerstenzhang mildly reframes the smartphone narrative by noting drivers buy devices for personal use, creating a bring-your-own-device infrastructure. | |
| Instacart and the Virtual Grocery Model | 3 | 5 | 0 | 0 | Host prompts the discussion on online grocery and brings up Amazon Fresh and Webvan. Guest Jeff Jordan thoroughly educates on Webvan's $1.2B failure due to parallel supply chain costs versus Instacart's virtual approach. | |
| Why Brick-and-Mortar Grocers Partner with Instacart | 2 | 4 | 0 | 0 | Host asks why traditional supermarkets would partner with Instacart and why online grocery works now versus 2001. Guests explain tech deficits in grocery chains and expanding consumer expectations. | |
| Comparing Instacart with Amazon Fresh | 2 | 5 | 1 | 0 | Jeff Jordan breaks down three major structural advantages of Instacart over Amazon Fresh, joking lightly about breaking his own rule against competing with Amazon. Host passively listens and agrees. | |
| Vertical Specialization in Marketplace Business Models | 1 | 5 | 0 | 0 | Host asks a general concluding question about the future reach of people marketplaces. Guest Jeff Jordan explains why horizontal platforms like TaskRabbit struggled while vertical-focused marketplaces succeed. |
Statements from this episode (14)
eBay empowered up to one million people to earn a living
“EBay, when I worked there was empower economically empowering literally hundreds of thousands or even a million people to earn part or all of their living selling on eBay.”
Mobile phones enable independent contractor service marketplaces
“With the advent of mobile phones, it's now possible for those same armies of people to earn a living doing services. And you know, that's what I refer to as a people marketplace. They're service marketplaces build up around independent contractors.”
Delivery marketplace profitability depends on hourly capacity utilization
“So the efficiency and profitability of these marketplaces are typically around capacity utilization. How many deliveries can they fit into say an hour?”
Consumer-owned smartphones serve as zero-cost infrastructure for gig marketplaces
“The interesting part is that each of these drivers on DoorDash or Instacart or elsewhere, they bought a smartphone for themselves, play games or do other things, and now suddenly this becomes this tool that allows them to tap in to this network. And it allows …”
Grocery remains almost completely untapped by e-commerce
“Grocery is one of the last categories standing for the analog you know, brick and mortar business. Grocery has been almost Completely untapped by the digital revolution in commerce.”
Webvan destroyed $1.2 billion of investor capital during the dot-com era
“I believe Webvan, you know, 1.2 billion dollars of investor capital disappeared with the disappearance of Webvan in the day.”
Instacart's capital expenditures are servers, not warehouses or delivery trucks
“The Instacart CapEx, instead of building warehouses distribution centers, buying trucks, you know, inventorying them. They literally are buying servers. I mean, that's their capex, because the employees bring their own mini computers, smartphones, they bring t…”
OpenTable invested a century of person-years into its reservation software
“We, you know, we had a man century of development into our reservation system.”
Grocers offering Instacart delivery gain market share without extra physical capex
“The grocery store who is providing Affordable delivery in a very timely way, instead of cart, you can get groceries as quickly as within an hour take share. And so the grocery store on the same physical capex is getting more business, and as a result, you get …”
Less than 1% of U.S. groceries are delivered online
“And I think so today, less than one percent of the U S market Have their groceries delivered online”
Investing in Instacart violates Jordan's rule against competing with Amazon
“So, so I'm violating one of my hard and fast rules in the sense of card investment, which is don't compete with Amazon.”
Amazon will spend billions on Amazon Fresh and expand slowly
“Amazon will have to spend billions of dollars to roll out fresh. That means it will be rolled out slowly.”
Vertical marketplaces outperform horizontal ones by optimizing for specific use cases
“Early in people marketplaces, you had the horizontals of TaskRabbit or Zarli, where you could ask people to do anything, and the paradox of choice and the lack of optimization against specific verticals, no one knew what to do with it, so they really didn't do…”