As on-demand delivery gets competitive, one start-up goes old school

Source: CNBC

Anita Balakrishnan

21 Jun 2016

While giants like Amazon and Uber are pushing to make delivery instantaneous, one delivery start-up is looking in a completely different direction: mail order.

Alcohol delivery start-up Thirstie announced Tuesday it would keep its 10 urban on-demand markets, but would expand to cover 33 states with a mail-order service.

“Being an on-demand player in 10 cities is great,” said Thirstie CEO Devaraj Southworth. “But we want to be able to reach smaller communities and suburbs. That differentiates us from being just another on-demand company. Moving into the mail-order business makes a lot of sense.”

Thirstie’s move marks a departure from the trend, as on-demand start-ups try to compete with a growing field of rivals by filling more and more orders at a faster pace.

As location-tracking mobile phones became the standard, on-demand delivery became the hot new Silicon Valley trend. Start-ups such as Seamless and Postmates promised to disrupt the take-out and courier industries, and follow-ons like UberEats and Amazon same-day delivery weren’t far behind.

But not every start-up kept up with the breakneck pace. Smaller firms such as SpoonRocket folded in March, their downfall considered by some analysts and investors as a sign of things to come.

“We saw a lot of failures,” Southworth said. “There are challenges for on-demand companies. They get successfully funded and went out of business 12 months later. We weren’t shielded from that.”

Southworth openly admits he’s a contrarian, having pushed back on raising a large funding round, focusing instead on turning a profit early on. And he discovered what he says many other on-demand entrepreneurs are also finding – that on-demand services are costly to scale past the well-heeled consumers in big, progressive cities.

“The funny thing for us is that there were two or three things that venture capitalists who decided to pass on us told us,” Southworth said. “They said you have to get into logistics. I thought, ‘to get an increase of 5 percent in a customer service survey?’ They said raise as much as you can. My answer was, we don’t need that money.”

Thirstie uses a distribution network of local liquor retailers, rather than get licenses and trucks in each locale. Then, the local retailer does things like check the recipient’s ID, something that would be costly for a start-up, or even Amazon, to do, he said. Popular to contrary belief, Southworth said mail order is actually more efficient in many cases.

“We see a future in on-demand. Transportation and food have been successful at certain industries,” Southworth said. “The retail industry needs to catch up to us, though.”

In addition to shifting toward an expanded mail-order service, Thirstie has also invested in building a content team and a “shoppable” platform that releases news and reviews on hard-to-find liquors carried by Thirstie. Thirstie has also introduced scheduled deliveries and “gifting.”

“The fact of the matter is that consumers don’t always demand product delivery in two hours or less, and many of them just really want to discover something exclusive and new,” he said.