Scaling Coffee Delivery

May 15, 2015
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A scalable business needs two financial mechanisms: self-sustenance and self-growth. Self-sustenance is when the revenue of transactions covers the cost of transactions at steady state. Self-growth is when the profit of customers covers the cost of acquiring customers and the cost of building infrastructure.

Without self-sustenance, the business would run out of cash. Without self-growth, the business would not grow fast enough, leaving room for competitors. But with both, the business would grow exponentially to cover the entire market demand.

Under this framework, there are three uses for funding. Initial funding gives founders time to develop the two mechanisms. Once developed, funding helps the business grow to steady state for self-sustenance. And funding helps the business reach new markets without waiting for the self-sustenance profits, giving an initial boost for self-growth.

For coffee delivery, there are difficulties on both mechanisms. For self-sustenance, the cost of delivery drivers is high compared to the delivery fees customers are willing to pay. For self-growth, profit margins are low as a result, so the marketing cost is difficult to cover.

We are making progress on both fronts. We are increasing the number of deliveries per hour. And we are exploring lower-cost marketing strategies. We’d greatly appreciate your thoughts and feedback.

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Our Competition is Not Each Other

January 20, 2015
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There is the classic view of competition, where businesses go after each other. They try to out-price each other, out-deliver each other, out-perform each other. This is a limited view, however, because businesses end up comparing themselves against other businesses. This only leads to small incremental improvements.

Our competition is instead the randomness of the world. When you want coffee in the morning, the coffee is far out of your reach at your local coffee shop. You have to drive over to get the coffee. This is randomness: things aren’t where they need to be when you want them. Our goal is to organize the world a little better, so that the coffee is within reach when you want it.

We do not compare ourselves against other coffee shops. Instead, we compare ourselves against what the world could be one day. We are adapting the world a little more for human living. The other coffee shops are not our competitors. We are all in this together.

Competing against randomness is hard. It uses new business models, where the economics may not work out. But the world would be better if it could be done. This is why we should work with each other rather than against each other. If you ever need help, send us an email, we’d be happy to lend a hand. Let's make the world amazing, together.

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The Feasibility of Coffee Delivery

January 17, 2015
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Today, consumers are comfortable using the internet for everything from managing their bank accounts to ordering food for delivery. Smartphones allow them to maintain immediate always-on connections with service providers and friends. The smartphones’ real-time location tracking also allows delivery networks to grow in complexity and efficiency. With these behavior shifts and new advents, delivery logistics systems not possible in the past may now have workable economics.

We believe coffee is a great candidate for a delivery system. First, most coffee orders are take out orders. Second, the coffee line and wait is around 10 minutes during the morning rush. A small delivery fee to save 10 minutes is worth it for most people. Third, customers order the same drinks as each other allowing for economies of scale. Fourth, K-cups and home-brew alternatives are lower quality, noticeable to everyday coffee drinkers.

There are challenges with coffee delivery though. First, coffee is more difficult to deliver than other items, because it loses heat, it spills, and delicate drinks like cappuccinos lose their foam. Second, coffee is low-cost, so tacking a delivery fee on top would almost double its cost. Third, customers may not be able to answer the door as they prepare to go to work, and deliveries to work places are more difficult than deliveries to homes. Fourth, there are a lot of alternatives within a few blocks for most people.

Fetch Coffee will see if a market exists despite these challenges. There are a lot of dimensions to tweak and lessons to learn. We would love to hear your thoughts, as many of you have more experience than us in the coffee and delivery industries. We’d really appreciate it!

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