The online grocery market is poised to get a little more crowded in the next several months, with the launch of a startup led by a veteran founder who has taken big hits from Amazon in the past, but now hopes to come back swinging with the help of an army of robots.
Home Delivery Services, a delivery startup founded by Louis Borders that plans to sell groceries and general merchandise online using a massive, automated system to power the fulfillment and logistics, is today announcing funding of $3 million to finalize the finishing touches on an AI-based robotic demonstration center outside of Indianapolis.
The plan is for the center to showcase the technology that HDS Global has been building over the last several years (plans first emerged as long ago as 2014), robots and other automation under the name RoboFS, that will power a wide fulfillment system extending from stocking, sorting and picking items that will then be delivered, mostly by humans, to consumers, to take on what Borders describes as a $1 trillion grocery market in the U.S.
"The $1 trillion grocery in the U.S. is not well penetrated," he said, comparing the opportunity to the one that Walmart seized 20 years ago in physical stores. "We want to offer a complete selection of groceries and general merchandise in one order." The idea is to build warehouses that cover some 150,000 square feet to do $200 million in revenue over millions of SKUs for one-hour deliveries.
A funding round of $3 million -- which is coming from Bob DiRumualdo, the chairman of Ulta and CEO of Naples Ventures -- might sound a little modest, especially considering the hundreds of millions of dollars that have been collectively raised by online grocery players in the last several months -- all of them racing to scale up their businesses in the wake of huge consumer demand for online shopping alternatives to visiting stores in person in the wake of the COVID-19 pandemic.
Borders said in an interview that this small round is primarily to kick off the demo center to show off RoboFS to help bring on new investors and new partners with the proof of concept. It already has a few investor partners (Ingram Micro and Toyota), and the idea will be to add more.
And he confirmed that HDS -- which will unveil a different name when it launches commercially, he added -- is also working on a much bigger round of funding, likely to close in the next 15 months, to fuel that wider commercial launch. It has raised $38 million to date, he said.
Borders' name will ring a bell to many in the worlds of retail and technology: He was the founder and head of the Borders book superstores and later started Webvan, a very early mover in the world of online grocery ordering and delivery. Both companies crashed hard in their times and became case studies, and more specifically cautionary tales, around how to build businesses in the digital era: Beware the specter of Amazon, of innovating too early or too late, of being less agile, too inefficient and of not correctly identifying where the puck was going and skating to it.
This time around, the idea is that he's focusing first and foremost on technology to try to head off those problems in ways that his previous ventures did not. This is one reason why HDS has spent so many years on building the technology: automation, specifically in areas like picking groceries, is one area that has foxed a lot of companies to date -- Amazon continues to work on this, and Ocado, a leader in the space, has yet to launch robotic picking, although it says this is coming soon. Borders estimates that bringing in automation can bring down the cost of labor by two-thirds, with people instead focused on delivering and selling at people's doors.
"When we went out to buy the tech we didn’t see what we wanted," Borders said. "We're trying to be smart about technology but the tech was just not there when we decided to build this five years ago. So we started with building that system. This became our opportunity."
The interesting opportunity is not just to build services that don't quite exist yet, but to provide a set of infrastructure that can be a viable alternative and supply chain to Amazon -- a common goal that brings together players from a lot of disparate yet interconnected areas in the grocery value chain. This is one reason why companies like Toyota and Ingram have come on board to work with the startup.
Given that it's been so many years in the making and has yet to see the proof of concept, there will continue to be a lot of factors that could not come together, but it's a play that HDS, Borders and their partners are willing to make.
“Ecommerce has become an essential component in people’s daily lives but what many don’t realize is that it can be exponentially better than what is offered today,” said DiRumualdo in a statement. “I was attracted to working with Louis again and to the company’s big idea approach – an all-new robotic fulfillment system purpose-built for ecommerce – which can deliver a vastly improved experience at lower cost. I am excited to be a part of bringing this vision to life.”